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Gray areas: Emerging technologies cause headaches for corporate counsel

Back view of stressed young businessman on blackboard background. Stress concept

Back view of stressed young businessman on blackboard background. Stress concept

ST. LOUIS — From big-data analytics to artificial intelligence, enterprises must be more creative and diligent than ever before when seeking the best ways to protect their rights in a world where technology IP claims are becoming harder to uphold.

“It is not as easy to get a patent on software — which is what drives much of the new technology — as it used to be,” said J. Bennett “Ben” Clark of Bryan Cave Leighton Paisner in St. Louis, who focuses much of his practice on intellectual property lawsuits, including patent, false advertising, trademark, unfair competition, copyright and trade secrets.

That fact comes largely thanks to the aftershocks of Alice Corp. v. CLS Bank International, a 2014 case in which the Supreme Court unanimously invalidated a plaintiff’s patent under Section 101 of Title 35 U.S.C. which covers “abstract ideas” as a non-protectable exception.

Mark E. Stallion, intellectual property group chair at Greensfelder, Hemker & Gale in St. Louis, said that such exceptions were once quite rare.

“Since the Alice decision, it has become much more prevalent,” he said. “These 101 rejections are being handed out like candy for software-based technologies and in the life sciences space as well.”

With a growing market for innovations in artificial intelligence seeping into everything from vehicles to power grids to health care, the implications could be enormous. Bioengineering by seed producers might be particularly vulnerable because “laws of nature” cannot be patented.

“If something has been genetically modified, is that genetic modification significant enough or does it rise to a level where it is something beyond what is naturally occurring?” Stallion said.

But the rocky new world of IP doesn’t require the complexities of a genetics lab to run into trouble. Simple data processing and storage isn’t what it used to be, either.

Questions of who owns the data and what can be done with it are advancing with alarming frequency. The recently enacted General Data Protection Regulation initiative in the European Union has roiled legal waters worldwide due to its heavy emphasis on consumer rights, extensive requirements for data security and hefty penalties for violating either one.

“The question is, ‘Does the United States follow suit in that regard?’” Stallion said. “That is very much in parallel with the intellectual property space as far as data rights.”

One of the larger IP gray areas during the coming decade may be found in the phenomenon of blockchain.

While mostly associated with cryptocurrency such as Bitcoin, the technology actually has wide-reaching applications, according to Keith J. Bae, a Kansas City-based partner at Shook, Hardy & Bacon who advises on such complex technologies as artificial intelligence, immersive environments, virtual and augmented reality, natural language processing and distributed ledger technologies such as blockchain.

Often, enterprises become involved in consortia to create and manage the technology, Bae said. But it is important for participants to answer basic questions that could become legal issues down the road. Who owns the technology? If you improve it, do you have rights to that? Will those improvements need to be shared with the group?

“Because blockchain requires a large number of parties to work properly, it is essential for one to understand their rights and obligations under these agreements,” Bae said.

Much of the technology underlying blockchain may be open-source and could contain licensing provisions which prevent patenting improvements, he said. Other problems can arise as well.

“Particularly where you’ve got various competitors who are working together to maintain this blockchain, there are some antitrust issues that come into play with regards to the sharing and use of information among competing parties in a common enterprise,” he said.

Bae said that smart devices, from buildings to cars, also could exert a sizable impact on the future legal landscape. Even “smart contracts” now are emerging in which provisions are triggered by code which executes automatically when certain conditions are met.

“Smart contracts are essentially little programs that can be stored on a blockchain,” he said. “And what it provides for is a means of automation to execute transactions without human intervention.”

Back at Bryan Cave Leighton Paisner, Clark said the pace of innovation has the potential to create problems for corporate counsel. Still, in-house lawyers may find that their biggest headaches don’t lurk in the future but rather in the past.

“Technology that most of us — including in many instances, general counsels — think is new and cutting-edge has actually been around for a while, or at least the precursors have been around for awhile,” he said. “So what you see a fair amount is a general counsel or a company that’s a little bit late to the dance [in] thinking they are ahead of the curve [when they] are actually a little bit behind the curve.”

In short, certain pieces of your company’s brand-new invention may be old news to the patent office. Clark said certain aspects of self-driving vehicle technology, for instance, have been around since the 1930s. New to your company doesn’t mean new to everybody.

Fortunately, the same changes that have wrought such uncertainty under the Alice decision also can work to a general counsel’s benefit.

“If you are behind the curve, you probably can’t get a patent — but maybe you can use Section 101 to invalidate someone else’s patent, should they come after you,” Clark said.

He recommends that companies form patent committees so they keep abreast of the landscape and understand the best ways to write applications that won’t get scuttled on Section 101 grounds.

Meanwhile, legal action is becoming common by large and small enterprises alike. At one end of the spectrum are established players trying to litigate startups out of business. On the opposite end: predatory patent trolls looking to shake down large companies for a payout on the other.

Moreover, from next-generation batteries to virtual workers, the technology continues to evolve and build upon — or even against — itself. Clark notes that the explosion in drone technology has sparked its own counterrevolution: a flood of patents on contraptions to disable or capture the pesky devices.

Also worth noting is another area of emerging tech, Clark said. 3-D printing is creating its own set of challenges, headaches and opportunities in IP, a trend that seems likely to intensify before it settles down. Clark compares it to battles of yesteryear involving Napster and illegal file-sharing, but the issue today involves electronic blueprints rather than music. These printers can effectively act as mini-factories which churn out anything from vases to appliance parts in a legally nebulous world where IP violations are hard to detect, creators are difficult to find and the end user is nearly impossible to police.

“The use of 3-D printing, both by businesses and individuals, is triggering potentially huge issues in copyright and patent law in particular,” Clark said. “General counsel need to be thinking about the risk to their intellectual property portfolios created by the increasing proliferation of 3-D printers. On the copyright side, there is the potential for widespread personal manufacturing of copyrighted objects independent of established markets which the copyright owner can monitor.”

No matter how one views the issue, patents will continue to be on the plate of corporate attorneys from coast-to-coast as technology rolls on, cryptocurrencies move forward and the fallout from the Alice decision and Section 101 questions shake out.

“In almost any new technology area on any list you pull down off of Google, a patent war is looming and perhaps already in progress,” Clark said.

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