Today I’d like to go a little bit deeper with you on the topic of Background and Foreground Intellectual Property, and pay particular attention to the scope of licenses after the contract ends.
Definitions. When two parties enter a contract to make a new product, at least one of them, usually at least the supplier, will come to the deal with some background knowledge of how to build the product. That background knowledge can have intellectual property (“IP”) in it. The IP in the background knowledge is known as “Background Intellectual Property” or “Background IP.”
Typical Transaction. In a typical transaction parties do not sell their Background IP. Rather, any Background IP implemented in the new product will be licensed to the customer, along with any new IP that is created while developing the new product. That new IP created while developing the new product is called “Foreground IP.” It is not uncommon for Foreground IP to be sold to a customer as a “work for hire” if the customer is willing to pay for exclusive use of it, but it is usually less expensive for the customer to license it.
Now licensing Background and Foreground IP is not really a problem during the life of the contract, or as long as the customer does not think of a way to change the IP, but things can get tricky when the contract ends or the customer wants to build upon the IP.
In the most basic contracts where IP is handled as a subsection, there will be language that seeks to share some of the supplier’s common law IP rights in developing the IP. It will define IP and say (“grant”) the customer a “royalty free, irrevocable, perpetual, world-wide, non-exclusive license” to the IP. While this is better than nothing, it exhibits a lack of thought on the matter.
If your IP is valuable to you, here is how to make it better:
Assignment. Consider a paragraph that warrants that the supplier’s employees have assigned their rights in the IP to the supplier as a “work for hire.” In some broad common law right countries, like France, this is important so that a disgruntled employee does not hang-up your IP rights, especially in copyright.
Work for Hire. Are you buying the IP outright? If you are, you will need language stating that the supplier is performing a “work for hire” for you, the customer, and is assigning all of its and its employees’ rights in the IP to the customer. The customer will need related language about the supplier assisting the customer with paperwork to make sure the IP is assigned to the customer.
Be Specific About Licenses. What are you licensing? You need to state whether the license runs with the product. For example, can the customer can use the IP as it exists in the product, but not separate from it? Make this clear. A perfect example is Background IP vs. Foreground IP. The license to Background IP is almost always limited to use in the product. The customer cannot reverse engineer it , or otherwise use it separately.
However, Foreground IP may be different. Be clear about whether the customer can use the Foreground IP independently of the supplier. A customer may have a strong interest in using the Foreground IP in another product that the supplier is not involved in. That is perfectly legitimate if the customer paid for the non-exclusive license such that both the supplier and the customer can use the IP as they wish.
If you are the customer, you should consider having language in your contract which clarifies that you have given consideration for this non-exclusive license. Perhaps consider deleting the standard “royalty-free” term, and instead say a one-time, lump sum fully paid-up royalty has been paid for the IP as part of the purchase price of the product.
Time Limitations. Related, the default language noted above gives a “perpetual” license. You may want to reconsider this. As a supplier, you may want to clarify that there is no “perpetual” license to Background IP. Licenses to Background IP expire with the termination of the contract. Further, if your Foreground IP license is tied closely to use in the product, you may want to limit the license in Foreground IP to the length of the contract.
The foregoing limitations are even more relevant when your product is information itself, like marketing data. Does the customer have a right to use the data once the contract ends? This raises really interesting issues in the area of copyright.
Copyright. Copyrights can be parsed a thousand ways. You can limit how the data is accessed. For example, can the data be accessed online through the supplier’s servers? Can it be downloaded or printed? Think of YouTube. You have a license to view the copyrighted material only on the medium of the YouTube website. You have no rights to transfer the material, or any part of it (like just the audio) to another medium, such as saving it to disk.
So let’s say you have a perpetual, non-exclusive, worldwide license to some Foreground IP in your contract, and the Foreground IP is copyright, but there is no provision for the supplier to provide it to you on disk. Where are you? There is law that says you are limited to the product itself, or by whatever method the supplier provides it, because you did not license a right to independently access it on disk. For example, in the US, 17 U.S.C. §1201 states if digital material is protected by a technology that controls access to the resource, you cannot legally bypass the access control mechanism, even to preserve it. So in your contracts, have you inadvertently (or intentionally) limited the medium?
Further, you can limit what part of a copyrighted material can be used. You see this on iTunes and Amazon where you can only listen to part of a song prior to buying it, or movie trailers where you can only watch part of the movie.
In perhaps a more usable example, if the supplier is providing software that includes both Background and Foreground IP, is the customer limited to using the Foreground IP independently of the product? If you are the customer, what good is the Foreground IP without the Background IP? Back to the previous example, what good is the Foreground IP if you don’t have it saved in a format where it can be used?
So you may want to consider carefully limiting, or de-limiting the medium you can save and use the IP on, otherwise you may not be able to access the IP in a useful manner and your perpetual license is useless.
Sublicenses, Derivatives & Privacy. If you have a perpetual license to IP that is not tied to use in the supplier’s product, presumably you have this free-standing IP that you can do what you want with, right? Maybe not.
Does your license include an express right to sublicense the IP? If it does not then you cannot go to another manufacturer because that manufacturer is a third party that you are subcontracting with. If you do not have a right to sublicense, then the manufacturer does not have a right to practice the IP. If you need the help of a third party to use the IP, then the IP is useless to you.
Related, does your license to the IP give you the right to make derivative works? If it does not, you may not be permitted to adapt it to new products or other uses. Arguably, you have paid the supplier to take the product to the next level by adding new IP to it, but now you are prevented from adding on to that new IP and taking your product in a new direction. If you are a supplier, this is another way to limit the use of the IP to the specific product you are providing.
Confidentiality issues arise here as well. What if the licensed IP contains confidential information limited by contract or privacy law? There are a couple issues to consider here. If the IP is in the trade secret category of confidentiality, then the express right to sublicense is critical, but if you have the right, then you should be okay.
The trickier question is privacy law. What if you are an insurance company who has contracted for a product with a hospital or a university that includes medical data.
In general, data gathered from dozens, hundreds or thousands of people will not run afoul of privacy laws if the personal identifying information is stripped out of the data in compliance with the law. A good example would be medical statistics where names and other identifying features are not disclosed, like, “In a study of 1,000 pregnancies 33% suffered morning sickness.”
In the US this is what is known as a “limited data set.” 45 C.F.R. § 164.514(e). See also 45 C.F.R. §164.512(i),and 45 CFR §164.514(e). In the UK this concept is put into practice with the Clinical Practice Research Database, and although I am not an Australian solicitor, Australia’s efforts to reduce these concepts to plain English are worth a note, such as Australia’s Privacy in the Private Health Sector (November 2001) §A3,which states, “The NPPs (National Privacy Principles) do not apply to de-identified information or statistical data sets, which would not allow individuals to be identified.” [Obligatory Disclaimer: Please do not take this as Australian legal advice. Consult an Australian attorney. In fact, don’t take any of this as legal advice. You must consult with an attorney.]
However, sometimes data without personal identification is not useful. For example, some issues need to be tracked and followed-up on. In these situations, the front line of this issue is the hospital or university needs to have acquired good patient releases consenting to the customer’s intended use of the information. A customer can craft contract terms that require the supplier’s compliance with applicable laws like HIPAA in the US, the Data Protection Act 1998 in the UK, and Australia’s Privacy Act 1998 and its amendment Privacy in the Private Health Sector (November 2001). For example, in the US it is expressly permitted by law to condition treatment upon the patient’s consent to disclosure. 45 C.F.R. §508(b)(4). Of course, care still needs to be taken to strictly comply with the law.
In sum, private data can only be used or disclosed in special circumstances, such as with the individual’s consent, or for some health/safety or law enforcement reason, but it must be voluntary and informed.
In your agreements, I would suggest the citation of precise statutes a customer demands compliance with in the jurisdiction you intend to operate, and indemnity obligations on the part of the supplier should there be a claim that these laws were not followed.
For more information, in the US please see the NIH’s publication of “Protecting Personal Health Information in Research: Understanding the HIPAA Privacy Rule,” and in Australia please see” Information Sheet 9 – 2001 Handling Health Information for Research and Management.”
The Government. Finally, a word needs to be given to certain rights of governments to use this data. This is especially true if the customer is the government. Health information is highly valuable for many reasons, most importantly for an individual’s on-going health care, but sometimes also for wider public health and safety reasons. For example, in the US, public health or safety may permit disclosure of unredacted dated. 45 C.F.R. § 164.512(j &k) 45 C.F.R. § 164.512(k). See also, Australia’s Privacy in the Private Health Sector (November 2001) §4.2 and Information Privacy Principles 8-11.
Privacy laws are not the only governmental rights. Many governments have broad power to take IP from suppliers and use it how they please. At the extreme end, it can be taken for national defense and safety. However, most often it will be a contractual duty either expressly stating the government’s unlimited rights, or hidden in a citation to a law that gives the government that right. For example, in the US, §52.227 of the Federal Acquisition Regulations and §252.227 of the Defense Federal Acquisition Regulations give sweeping rights to the US government and its contractors. When contracting with the government, or one of its contractors, often times there will be a paragraph in the agreement that simply states these sections apply. In reality, some are mandatory, and some are not, so it is worthwhile to discern the two.
If you work for the government, you need to have a firm grasp of how these laws can help you, and if you contract with the government, you need to understand what may be asked of you.
In conclusion, your IP agreements may not need all of the provisions discussed here, but you very well may want to build on the minimalist boilerplate language of a “royalty free, irrevocable, perpetual, world-wide, non-exclusive license” so that you have a clear understanding of what your rights to the IP are, and in particular, what you can and cannot do with the IP after the contract ends.
There is a split in the US Appellate Courts about the application of the Computer Fraud and Abuse Act (CFAA). 18 USC §1030. The CFAA creates civil and criminal penalties for accessing a computer “without authorization,” or “exceeding authorized access.” When Congress enacted this law in 1984, it intended to apply the CFAA to computer hackers. Penalties can be a fine, or even jail time. 18 USC 1030(c). For example, in the case of United States v. Morris, 928 F.2d 504 (1991), Robert Morris created a “worm” that could slow down a computer once infected. He was sentenced to three years of probation, 400 hours of community service, a fine of $10,050, and the cost of his supervision.
However, employers have tried to apply it to its employees who allegedly misuse proprietary information. In essence, arguing that although they had authorized access to the information, that the employee’s use of that information exceeded the scope of the authorization.
The result is that there is a split in the US Courts. The First, Fifth, Seventh and Eleventh Circuit Courts of Appeals which cover Maine, Massachusetts, New Hampshire and Road Island; Lousianna, Mississippi and Texas; Illinois, Indiana and Wisconsin; and Alabama, Florida and Georgia, respectively, have held that employers can bring civil suits against their former employees under the CFAA. For examples, see United States v. John, 597 F.3d 263 (5th Cir. 2010), Int’l Airport Ctrs., LLC v. Citrin, 440 F.3d 418 (7th Cir. 2006), and United States v. Rodriguez, 628 F.3d 1258 (11th Cir. 2010).
However, the Fourth Circuit (Virginia, West Virginia, Maryland, North Carolina, and South Carolina) and Ninth Circuit (California, Oregon, Washington, Arizona, Montana, Hawaii, Idaho, Alaska, Nevada, Guam & Northern Mariana Islands) Courts of Appeals disagree holding that such an employee may be misusing the information, but nonetheless had authorized access to it, and as a result the CFAA does not apply. For examples, see United States v. Nosal, 676 F.3d 854 (9th Cir. 2012) and WEC Carolina Energy Solutions, LLC v Miller, et al., Case No.11-1201 (4th Cir. 2012).
The result is either Congress will need to amend the law again, or the US Supreme Court will need to take a case clarifying the matter. This is of importance because all employers and employees are affected by it, and there is potential criminal liability. Also, Bradley Manning has been indicted for violations of the CFAA (among other things). So there could be a very interesting showdown between the well-reasoned, compassionate positions of the Fourth and Ninth Circuits versus the perceived desire of the government to throw the book at Bradley Manning.
For now, however, whether you live in those Circuits applying CFAA to employees or not, it is much wiser to simply have a good employee contract and/or confidentiality agreement that prohibits misuse of proprietary information.
Customers often negotiate for IP Escrow Agreements from their Suppliers. This is how an IP Escrow Agreement works: The Customer wants to have a reliable source for products. Therefore, the Customer asks its Supplier to put all of the IP required to manufacture the Supplier’s product into an escrow account with an Escrow Company. The Escrow Company holds the IP and agrees to only release it to the Customer under certain circumstances. These circumstances are usually something drastic, like the Supplier going out of business.
The trouble is that it may not be enforceable. If the Supplier goes into bankruptcy (US) (“administration” in the UK), that IP is an asset that the Bankruptcy court will want to sell to help pay off the Supplier’s creditors. This creates several problems for the Customer. If the Customer has not provided real consideration for the IP, the Bankruptcy court will want that consideration. A non-exclusive license could cost more than the Customer anticipated. Worse still, if the Customer wants an exclusive license, then the Customer will likely have to buy the IP outright (if the Supplier is to be liquidated), and that could be very expensive. If the Customer does not want to buy the IP, the Bankruptcy court will sell it to a third party, who will want to block the Supplier from using it. All the time and money the Customer spent in the IP Escrow, will have been money wasted.
A perfect example of this is the controversial decision in Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985). In that case, the Bankruptcy court rejected the Customer’s license and the Customer lost the right to use the IP pursuant to 11 U.S.C. §365(a). The result was so controversial, that three years later, Congress amended the Bankruptcy Code, adding §365(n) which allows licensees to continue using the IP after rejection, provided it the license meets certain conditions, the main two of which are 1) it can only be used as long as the original contract was to run; and 2) the licensee continues to make royalty payments.
This creates a few problems for the Customer, however, because 1) often the Customer’s contract is open ended in which case it could be terminated at the end of the current logical interval (and that could be as short as fulfilling the most recent purchase order); 2) often the Customer is not paying a separate royalty, and could thus fail this part of the test; and 3) the Bankruptcy Code does not include “trademarks” in its defined list of “Intellectual Property” protected by this section.
As a result, some courts have been willing to step in and save the agreements, but others have not. A good example is the case of Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, Case No. 11-3920 (7th Cir., decided July 9, 2012) In this case, the court saves the contract, and is critical of the Lubrizol decision. It highlights the split between the US Circuit Courts on this issue.
So this is a serious trap that varies from court to court. Your contracts that create an IP Escrow arrangement need to include at a minimum:
1) IP licensing principles;
2) A clear discussion of the consideration in terms of a royalty, or analogous to a royalty; and
3) How long the contract will run.
All contracts are a bit different, so the foregoing terms may not be all you need. You will likely need bespoke terms as well. So if it is worth it to you to get IP escrow, it would behoove you to speak to an experienced attorney to help you craft the terms correctly. Otherwise, after all that effort requiring your Supplier to put its IP into escrow, checking to make sure it is complete and paying for the escrow account, you may have just engaged in expensive folly.
The USPTO issued its new Reexam statistics last month.
Ex Parte can be found here:
and Inter Partes can be found here:
On December 19, 2011, the mobile telephone maker, HTC, lost an action to Apple in the International Trade Commission (“ITC”). ITC Investigation No. 337-TA-710. Apple’s original Complaint was substantially pared down by the ITC so that in the end it only covered Claims 1 and 8 of US Patent Number 5,946,647 for a function where your phone can identify and highlight things like email addresses, phone numbers or websites, and then you can click on that highlighted text and your phone automatically dials the number or takes you to that website, etc.
As a result, this would be a simple work around for HTC to build into its new phones – simply eliminate that function. HTC prepared for this result and its new phones supposedly don’t have it. Unfortunately, HTC’s new phones have been held up in US Customs until it can be verified. You would think this would be a relatively simple process, but it is taking some time and costing HTC a lot of money in lost sales and legal fees.
So that raises the bigger question about the enforceability of ITC exclusion orders in general, and the process involved.
When an exclusion order is issued, the real work for US Customs begins. First, US Customs Border Protection (“CBP”) officials have to train the field agents on what to exclude. In addition to the actual study of the ITC’s §337 Investigation and Exclusion Order, CBP works with the parties separately, or ex parte, to identify the products to be excluded.
During this consultation, the Respondent, i.e. the party in HTC’s position, will not only try to narrowly tailor the scope of the Exclusion Order, but it will also attempt to show the CBP that the Order does not apply to its new products. HTC will further be attempting to persuade Apple that the Order does not apply to its new products because if Apple stipulates, then it speeds up the importation of the new products.
Of course, the Complainant, in this example Apple, will want the broadest possible interpretation of the Exclusion Order. Moreover, given the litigious and competitive nature of the market, it is unlikely Apple will agree to stipulate, as the speedy resolution of this issue is not in Apple’s best commercial interests.
If either party is not satisfied with the CBP’s interpretation of the Order, they both have remedies they can pursue. Pursuant to 19 CFR §210.75(a), Apple can commence informal proceedings in the ITC through the Office of Unfair Import Investigations for an Enforcement Proceeding, and if the result of this Motion is not to its liking, it can commence formal proceedings entitled an Enforcement Complaint pursuant to 19 CFR §210.75(b). This proceeding can also result in the amendment of the Order to catch any issues/product aspects that may have been omitted in the original Order. In addition, Apple can seek civil penalties for a violation of the Order.
On the other side, if HTC believes the CBP’s enforcement is overreaching, catching products that are not in violation of the Order, HTC can file a petition under 19 CFR §171, subpart B to get the goods released.
However, this procedure only works where the parties and goods are well defined. Many exclusion orders go unenforced because the CBP is not capable of identifying all of the goods that should be excluded. For example, portable DVD players are imported into the US from many different sources. An exclusion order for a feature that is not obvious without operating the device, such as the one Apple complains of, can easily go undetected by US Customs field agents. They simply don’t have the resources to open the thousands of imports from hundreds of manufacturers and test if the feature is present. In fact, the Complainant may not even know all the companies that are importing infringing goods that should be excluded. Further, if sales are over the internet and shipped directly to the end-user it easily avoids detection. Moreover, if the exclusion order is “limited,” as it is in the Apple-HTC case, then it is “limited” to the Respondent(s), and does not prevent downstream customers from importing it. Under these circumstances, the exclusion order is not effective.
ITC cases are labor intensive, and therefore very expensive. Moreover, once a complainant has won an exclusion order there remains a great deal of work to do in order to enforce it – at great expense. As a result, parties considering this remedy should carefully weigh the costs involved against the ability to enforce the exclusion order before heading down this path.
You may have not have noticed it, but in the top right side of this blog’s screen is the service mark “IP2U.” I am happy to announce that on February 21, 2012, the IP2U mark was successfully registered with the USPTO to Witten Law, Ltd.
The following table illustrates some differences in patent litigation between the US, the UK and the EU.
|Court||Federal Court||England & Wales have special Patent Courts at the County and High Court level||European Commission and/or as proscribed by the member state’s national court system. For example, Germany has 4 special patent courts in Manheim, Dusseldorf, Munich and Hamburg.|
|Lawyers||All attorneys can argue before the court||Only barristers are allowed to argue. Not solicitors.||In most countries (but not for example in England or Wales), all attorneys can argue before the court in the country the attorney is licensed to practice|
|Claim Construction||Markman hearing for claim construction in the middle of pretrial litigation.||Conducted at trial as part of liability phase. Catnic Components Ltd. v. Hill & South Ltd. (1981) FSR 60,||Conducted at trial as part of liability phase. Article 69 European Patent Convention and related Protocol.|
|Validity & Infringement||These issues are usually heard together in the same court.||These issues are usually heard together in the same court.||In Germany, 2 different courts hear these. 1 hears Validity arguments, and another hears Infringement arguments.|
|Preliminary Injunctions on manufacture, offer for sale & sales||Very difficult to get. Cannot get if you don’t practice the patent.||Less difficult to obtain in cases where generic pharmaceutical could impact patent holder.||Germany: Still difficult to get, but getting a bit easier as long as equivalents are not invoked. Often applied for during industry shows to disgrace a competitor. France also permits. “Saisie-contrefaçon” orders.|
|Freezing Injunctions||Not heard of in patent cases.||Also known as Mareva injunctions, assets can be frozen so that they can’t be moved or hidden. See also Intellectual Property (Enforcement, etc.) Regulations 2006.||Permitted in some countries. EC: Article 9(2) of the Information Society Directive; France: “décret 2008-624″ of June 27, 2008.|
|Search Warrant||Unheard of in patent cases.||Can be obtained to prevent infringing goods and important documents from being hidden or destroyed. CPR 25.1(1)(h).||Germany they are permitted, and often used in conjunction with a preliminary injuction at industry shows to disgrace a competitor.|
|Discovery||Very extensive. Methods include: Initial disclosures; Multiple Requests for Interrogatories, Document Production, Product Inspection and Admissions that do not require application to the court; and Depositions of fact and expert witnesses||Less extensive. Discovery must be proportionate to the case. Rule 1.1(2)(c). Initial Disclosures meant to cover most of discovery; A party must apply to the court for further interrogatories, documents, and product inspection. CPR 18.1 & 25||Less extensive. Discovery must be proportionate to the case. Initial Disclosures meant to cover most of discovery; A party must apply to the court for further interrogatories, documents, and product inspection. Reg 2004/48/EC.|
|Witnesses||There is no duty to disclose exactly what a witness will testify to. It is up to the opposing party to depose the witness.||Complete witness statements must be submitted to the Court. CPR 32-34. Witnesses cannot testify in court as to what is already in their statements.||Complete witness statements must be submitted to the Court. Witnesses cannot testify in court as to what is already in their statements. For example, in Germany, usually only experts are cross-examined.|
|Doctrine of Equivalents||Available to argue and often prevails.||Not permitted, but the court can view the language of the patent through the perspective of one skilled in the art to see if it covers the alleged infringing activity.||Available, but very difficult to prove.|
|Damages||Lost profits or Reasonable Royalty. Can’t have both. Treble damages, which are arguably punitive/exemplary, are allowed in exceptional cases of infringement||Mix of Lost Profits, Royalty, Increased Royalty, and Springboard, but no punitive or exemplary damages. Capped at £500k in County Court.||Mix of Lost Profits, Royalty, Increased Royalty, and Springboard, but no punitive or exemplary damages.|
|Attorneys’ Fees||Only awarded in exceptional cases of blatant infringement||Always awarded. Capped at £50k in County Court.||Always awarded. Fees are expected to be far less than US counterparts because litigation is more limited than in the US. For Example, in Germany, Fees should not run more than 3% of the value of the litigation.|
|Trial||Jury available; Damages are usually not bifurcated from the liability trial||No Jury; Damages are bifurcated from the liability trial||No Jury; Damages are bifurcated from the liability trial|
This article focuses on what to do if you have been sued and dispute the claim and/or the amount claimed to be owed. Please note that you should contact an attorney/solicitor if you have been sued. There are numerous intracacies that you should not attempt to navigate on your own. This article will describe a few of the normal paths, but it does not catch everything. Rather, this should give you an idea of the issues to discuss with your attorney.
First off, until you are served with the papers that start the lawsuit proceedings, generally a “summons” served along with a “complaint” (US) or “claim form” (UK), then the court does not have any power over you. However, once you have been served you must respond to the proceedings within the following time:
How do you respond? You file what is called an “Answer” in the US, or a “Defence” in the UK. The Answer is governed by Federal Rule of Civil Procedure 12 in US Federal Courts, and the Defence is governed by Rule 16 of UK Civil Procedure Rules (“CPR”). Each US State Court has its own code section for the response. In California it is Code of Civil Procedure §431.30.
In US Federal Court and UK Court you must state whether you dispute each claim made, and you must set forth the legal concepts supporting your defenses (called “affirmative defenses”). For example, you must deny the paragraph in the Complaint that says you infringe the patent, and you must state the related legal defense theory of “non-infringement.” Affirmative defenses do not require the pleading of specific facts that support the theories. You only have to tell the other side what theories you have a good faith belief apply.
In contrast, in California State Court, you only have to state a general denial of all claims of the Complaint and your affirmative defenses. You do not have to affirm or deny each paragraph of the Complaint.
Filing your Defence/Answer is not your only option, however. Before filing the Defence/Answer you could do the following:
The foregoing are the most typical responses to a lawsuit from the defensive perspective, but if you want to sue your opponent you may also want to, or be required to, file your own pleading setting forth your grievance against them at the time you file the Answer or Defence. This is called a Counterclaim (UK & US Federal Court) or Cross-complaint (California). There are variations on this for suing a co-defendant (Cross-claim), or suing a third party (Third Party Complaint). Thus, at the outset of the case, you don’t have to be relegated to being on the defensive. You can also sue back.
In sum, at the outset of a case, you should consider what type of response is appropriate for you, and how it fits into your litigation strategy.
So someone has wronged you. Maybe they have infringed your intellectual property, breached a licensing agreement with you, or stolen your tradesecret. You have written them, and maybe even threatened them with legal action, but they refuse to make things right. You realize that you must sue them, but how do you start?
In the US you file what is called a “Complaint.” At the Federal level, it is governed by the Federal Rules of Civil Procedure (“FRCP”) Rule 3, and at the State level, in California, it is governed by California Civil Code of Procedure (“CCP”) starting at §420. Pursuant to FRCP Rule 8 and CCP §§422.30-425.10, the Complaint alleges why the court has jurisdiction over the case and the parties, a basic description of why you are suing, and what you want from your opponent, the “Defendant” (i.e. your damages).
In the UK, first you have to follow a pre-claim protocol which is essentially writing your opponent regarding your grievance and giving them a chance to fix the problem before you sue. Once you have done that, pursuant to UK Civil Procedure Rules (“CPR”) starting with Part 7, you do basically the same thing as in the US by filing what is called a “Claim Form,” and within 14 days of that you have to file your “Particulars of Claim” which gives the same kind of details you see in a Complaint.
There are two things that must be paid very close attention to when preparing the Complaint, and its equivalent in the UK: 1) Jurisdiction over the case and the parties; and 2) The “Elements” of the “Claim” or “Cause of Action”.
Jurisdiction breaks into 2 parts – subject matter jurisdiction and personal jurisdiction. Subject matter jurisdiction has to do with the type of wrong you want addressed. For example, in the US, there are some questions of Federal law, like patent infringement, that cannot be heard in State courts. You can only file them in Federal courts. Also, in both the US and the UK, different courts hear different cases depending on the amount of money at stake. For example, in California, you have 3 different levels: “small claims” for matters with under $5,000 at stake (CCP §116.220), “Economic (or Limited) Litigation” for cases between $5,000-$25,000, and “Unlimited” for cases over $25,000. Similarly, in the UK the High Court does not hear cases under £25,000 that could otherwise be heard by County Court, and the County Court has a small claims system for cases under £5,000. See the Practice Directions to CPR Part 7. Personal jurisdiction covers whether the court you have filed in has power over the parties to the case. To put it simply, a person or company has to reside or do business in the court’s jurisdiction in order for the court to have any power over him.
Only after the court has personal and subject matter jurisdiction, will it address the “Claim” in your Complaint. Your “Claim,” can also be known as a “Cause of Action.” There are causes of action for every known wrong that may be legally addressed. Every cause of action has certain facts that must exist in order for you to prosecute it. These are called “elements.” They are like the ingredients for your lawsuit.
For example, in the US for infringement of a Federally registered Trademark under the Lanham Act there are 3 basic elements you must allege in the Complaint for the cause of action: 1) You (the “Plaintiff”) possess a mark, or are licensed to enforce a mark, that is valid and protectable under the Lanham Act; 2) The Defendant used the mark in commerce in connection with any goods or services without the consent of the Plaintiff; and 3) The Defendant’s use of the mark is likely to cause consumer confusion concerning the origin or sponsorship of the goods or services. People for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359, 364 (4th Cir. 2001); Fisons Horticulture v. Vigoro Indus., 30 F.3d 466, 472 (3d Cir. 1994); Brookfield Communications v. West Coast Entertainment Corp., 174 F.3d 1036, 1051 (9th Cir. 1999).
Your cause of action should not read like a novel. It needs to be concise. While some causes of action, like fraud, have to be written with a certain degree of detail, for most causes of action, you simply state the minimum facts to support the elements. FRCP Rule 8; CPR Part 16.2&4. Using the Trademark example, for the first cause of action, it would be helpful to put the Trademark’s Federal Registration Number to show that it is enforceable under the Lanham Act.
The Complaint is the core of your initiation of your lawsuit, but it usually has to be filed with a Summons, a Civil Case Cover Sheet ticking boxes for the court clerk, and related documents. Most US and UK courts have what are called “Service Packs” available on their web sites that have all the forms you have to fill out, file and serve on the Defendant. Please be advised that these forms have to be filled out accurately, so if you’re engaged in anything more than a small claims case, it is probably worth it to seek the counsel of an attorney.
Once your Complaint and related documents are filed with the Court, then you serve them on the Defendant and start the litigation process, which usually begins with the Defendant’s response to the Complaint and the Court sending you a list of deadlines.