The U.S. Supreme Court’s recent decision in Citizens United vs. FEC overturned over a century of campaign finance law by opening the door to increased corporate involvement in American politics. The ruling was instantly celebrated by some commentators as a welcome victory for First Amendment rights and maligned by other commentators (including President Obama) as a threat to representative democracy. Passions aside, Citizens United is a noteworthy legal ruling which significantly alters campaign finance laws for corporations at both the federal and state levels.

Corporations here in Texas are especially interested in how the ruling impacts our state’s campaign finance system, and what changes they can or should make to their Texas government affairs programs in the midst of the 2010 Texas election campaigns.

Initial forecast: The Citizens United ruling may be passionately debated by legal scholars and political pundits for years to come, and it may have a significant impact on federal politics, but it is not likely to dramatically change the role of corporations in Texas elections in the near future.

The lawsuit in Citizens United challenged the constitutionality of federal and state laws that have historically prohibited corporations (and labor unions) from “electioneering.”  Electioneering is the expenditure of money on campaign activities, for example, the running of campaign advertisements for or against a political candidate. Texas has long had very strict laws against corporate electioneering, requiring corporate executives to donate their own personal money to candidates or to political action committees.

In Citizens United, the court struck down all such laws nationwide as unconstitutional restraints of First Amendment rights, thus permitting corporations (and unions) to spend freely on political advertisements for or against candidates. As a result, corporations are now relatively free to electioneer in Texas campaigns. For example, ABC Corporation may now spend unlimited amounts of its treasury funds to run advertisements for or against a political candidate: “Representative Doe is a True Texas Hero; Reelect Representative Doe in November,” or perhaps “Representative Doe is bad for Texas; Vote against Representative Doe in November.”

It is important to note that the court’s ruling did not overturn all Texas or federal restrictions on corporate political activity. Corporations are still prohibited from contributing directly to a candidate’s campaign coffers. Corporations are still prohibited from coordinating the timing or content of their electioneering efforts with a candidate. Corporations are still required to publicly disclose their electioneering expenditures and include identifying disclaimers on their political advertisements. Most importantly, violations of these laws can still result in criminal prosecutions. So if corporations decide to step onto the campaign field, they should tread very carefully and consult with election law experts.

We represent a number of corporations and trade associations who are active at the Texas Capitol, and interact on a regular basis with many more. Our initial observation is that contrary to conventional wisdom most Texas corporations are not wildly celebrating the Citizens United ruling, nor are they hurriedly making plans to jump into the political fray. We find that most Texas corporate executives already cringe at the amounts of money they spend on government affairs (though trade associations, lobbying and political action committees) and do not particularly relish an “opportunity” to spend more. Most Texas corporations have no interest in inserting themselves into the rough-and-tumble of Texas political campaign advertising.  Moreover, most corporations are probably not eager to explain to shareholders and consumers why they spent big money supporting Representative Doe over Representative Smith.

In addition, recent voter surveys show that following a long run of corporate scandals and financial bailouts, Americans’ trust in corporations is at an all-time low. In this environment, Texas political candidates may not welcome the “support” of a campaign advertisement that ends with a corporate disclaimer. (“This ad for Representative Smith paid for by Megacorp, Incorporated.”)

We in Texas will probably see an occasional corporate advertisement supporting or opposing a candidate. But the vast majority of Texas corporations will continue the traditional — and relatively safe — government affairs package of lobbying and personal giving through political action committees and will say “thanks but no thanks” to their new opportunity to engage in corporate electioneering.

Gaylord Armstrong and Royce Poinsett are government relations attorneys at the Austin office of McGinnis, Lochridge & Kilgore, L.L.P.

#1 — Don’t panic and abandon your patents and trademarks
Intellectual property can be critical in the distribution of market share during a recovery. If things do turn worse, perceived value in intangible assets can help fuel an unforeseen business deal.

#2 — Do develop a strategy for paring your costs
Assemble a patent committee from marketing and engineering.  Task them with (a) evaluating new concepts and how they further your goals, and (b) critically review existing patents for the ones that will retain their value.

#3 — Value your patent and trademark applications individually, not in bulk
Often, the value of a patent or trademark portfolio lies in a handful of patents or marks. While the total portfolio has an overall value on the balance sheet, it is the value of each asset that matters and should be recomputed at each major decision point.

#4 — Don’t abandon your patent applications at random
Each pending application is on its own schedule, and applications awaiting an office action may be maintained at very little expense until an action is issued by the patent office

#5 — Do focus on quality, not just on quantity
Some large corporations derive overall portfolio value in filing many patent applications, betting that a few gems will emerge from the pile. Most companies aren’t blessed with such budgets.  One well-written patent application can protect a market position, if it is key to commercial success.

#6 — Do file initial applications provisionally
Filing provisionally enables the consideration of new developments and opportunities, and in deciding whether conditions still warrant filing U.S. and/or foreign applications based on the earlier provisional application.

#7 — Don’t file “cover page” provisional applications
Cost savings of a “quick” provisional may be attractive, but it may not protect your invention if it is later found not to support your claims.  This risk is particularly high in foreign countries .Base the decision to file a first application as a provisional, a U.S. utility, or an international PCT application not on cost, but on a substantive protection strategy.

#8 — Do train your inventors to produce thorough, descriptive and relevant invention disclosures
While some patent attorneys quote fixed prices for preparing and filing patent applications, the real cost of doing it right is a function of the amount of time it takes.

#9 — Don’t work with an outside attorney or agent who is unwilling to train your people
An attorney putting your interests first will help you reduce your legal costs, even if it means a smaller fee.

#10 — Do consider hiring an in-house patent administrator
If you find yourself communicating with your outside counsel at least once a week, consider hiring an IP administrator.  The cost of such a person will be at least partially offset by the lower bills from your attorney.

#11 — Do conduct a prefiling patentability search
Although it is not legally necessary, such searches will provide valuable information in crafting a patent application directed specifically at what is likely to be considered inventive. The cost of a reasonable search is usually more than offset by the savings in attorney time, and the improved likelihood of a positive examination.

#12 — Do insist that your patent counsel focus on the key aspects of the invention(s)
Identify the invention and craft an application focusing on what is inventive, providing alternate examples of how the invention can be accomplished. If you and your counsel cannot concisely articulate the invention, reconsider whether you should be filing a patent application at all.

#13 — Do make sure your attorney is familiar with efficient filing procedures
It is less expensive to file applications complete, with all necessary attendant paperwork.

#14 — Don’t forget to tailor your claims for each country
If you may later seek foreign protection for your invention, make sure your attorney is familiar with patent practice in the most important foreign jurisdictions.  A patent application properly written for protection in the U.S. may be found inadequate to provide protection when extended to Europe.

#15 — Do reevaluate the application and claims just prior to examination
A few years may lapse between filing and examination. Don’t expect the claims originally drafted will still be the best ones to pursue – much can change in the law, prior art, and your objectives.

#16 —Do work with outside counsel who provides electronic reporting options
Electronic document access portals and electronic communication can significantly reduce the fees billed.

#17 — Do hold periodic and regular docket meetings with outside counsel
Addressing several matters at once can significantly lower outside counsel fees, and helps insure nothing “falls between the cracks.”

#18 — Don’t overlook licensing or selling some of your patent portfolio
The current economic climate is causing many companies who would never have dreamed of licensing their IP, to seriously consider doing so.

#19 — Do keep track of your competitors
Be aware of the property rights of your neighbors.  The cost of searches for recently-granted patents is nothing compared to the cost of defending against an unexpected charge of patent infringement.

#20 — Don’t forget that patents and trademarks are long-term investments
The term of patent protection is about 20 years from the filing of the application. Those companies positioning themselves for future prosperity are investing in their portfolios now, as keys to their long-term success.

James W. Babineau is an attorney with Fish & Richardson P.C. and is based in Austin and Boston.  He can be reached at 512-472-5070.

To protect its Intellectual Property Rights (“IPR”)of trade secrets, demonstrating that information qualifies as a trade secret, companies should consider the following :

1.Develop and Implement an Overall Intellectual Property Rights Protection Program.
Whether a company is just starting out or is a multinational company with enormous revenues, an effective IPR protection strategy or program (“Program”) is critical to a competitive advantage.  The four intellectual property rights: patent, copyright, trademark and trade secrets, each need to be considered in developing, implementing and maintaining a Program.
One important detail of a Program is to assign an employee as the initial IPR Officer of the company.  We have seen employees from any number of areas be appointed to this position (e.g. legal, finance, IT, human resources) and situations where IPR Officer is one of multiple titles held.  All employees are to be informed of the appointment, and the IPR team, if the needs demand a team.  Our experience shows that the most effective IPR team draws from various disciplines within a company, based, among other factors, upon the business of the company, number of employees, size of the IP portfolio, types of IP and jurisdictions in which business is conducted.  The team members which companies most often fail to include are persons experienced in the full-range of human capital issues:  understanding and guiding company culture, compensation and benefits, issues of motivation and morale, legal issues as well as internal contracts, policies and procedures. Such a person will add significant value to the IPR team.
2.Conduct a Trade Secrets Audit
Conduct a trade secrets audit to identify information as trade secrets.  It has been our experience that audits are expensive and audits without a plan and timeline for completion are the most expensive and time-consuming and can become a waste of resources with little benefit.  First plan the audit, then successfully conduct the audit.
Questions to be answered to assist trade secret identification include the following:
Is the information known outside the company?  To what extent?
Is the information known inside the company?  By whom, categorically?  To what extent?
What steps have been taken to keep the information secret?
What is the value and/or competitive advantage in keeping the information secret?
What has been the cost (time, resources, expenses) in developing the information?
How would such information be properly (i.e. without misappropriation) obtained or duplicated?  How difficult would this be?
Could such information be properly developed or duplicated?  How difficult would this be?
It is important to note that a company should not identify all its potential confidential information as trade secrets because being over-inclusive could potentially trivialize the trade secret portfolio.
3.Employee Policies, Procedures and Training
The importance of employee policies, procedures and training cannot be over-emphasized in the development of the IPR Program.  In addition to the policies that are discussed in detail below, a company should also consider adopting the following policies to assist in protecting its trade secrets:  external communications policy, electronic mail policy, internet usage policy, new confidential information notification policy, new inventions notification policy, lab and engineering notebooks policy, information classification policy and a computer usage policy.  Policies should be drafted to work with other policies and, as always, considering the business, IP portfolio, types of IP, size and culture of the company.  Initial and ongoing training on the polices and procedures is a crucial piece of a successful Program.  Drafting and implementing policies is only the beginning; key to an effective program is continued compliance with all policies as well as updating policies as necessary.
4.Record Keeping, Document Retention and Destruction Policies
Companies should have record keeping, document retention and destruction policies in place for a variety of reasons, including trade secret protection.  As with all policies and internal procedures, the company must be vigilant in making certain that its employees comply with the policies.  Unfortunately, these policies are most often vetted during litigation, when discovering the strengths, weaknesses, and compliance with them is sometimes too late.
5.Document Classification
Practitioners often advise companies to adopt a policy that require documents containing or reflecting trade secret information be labeled “Confidential.”  The policy has more impact if it contains more details about a series of potential classifications and access, and employees are furnished instructions and provided detailed training , with concrete examples of information to be and not to be labeled.  Over-labeling will make it more difficult for a company to prove in litigation that its own designation has meaning; under-labeling, on the other hand, could mean THE critical trade secret document is not so labeled.
6.Access
Limit access to trade secrets to a need to know basis only. If you have the secret formula for Coke for example, how many people should be given access?
7.Agreements
Agreements are ubiquitous in trade secrets litigation and are often the best ammunition a company has in its arsenal to protect its trade secrets.  In fact, this topic could easily stand alone as an article.  Like laws related to trade secrets, contract laws are governed by state law.
a.Employees
Trade secrets protection begins prior to employment.  Offer letters should be made contingent on an employee executing a proprietary information and invention assignment [and non-compete] agreement (a “PIIA”).  In developing its PIIA, a company should determine whether or not it will include restrictive covenants not to compete, not to solicit customers, not to hire, not to raid and/or not to solicit employees and, if they are to be included, the parameters of the covenants., based on the controlling state law.
b.Independent Contractors
It is arguably more important that independent contractors sign agreements similar to a PIIA.  Unlike employees, independent contractors do not necessarily owe a duty of trust, duty of loyalty or other common law duty to the company and, as such, no common law duty to keep information secret.  Moreover, there is no work for hire theory, so independent contractors own their copyrights unless they are assigned to the company.  Equally, even if an independent contractor were hired to invent, an independent contractor is not presumed to have assigned such inventions to the company, rather this must be done in a contract.  As such, PIIA-type contracts should be executed by independent contractors and subcontractors alike.
c.Third Parties
In contracts with outside vendors, customers, suppliers, purchasers, business partners and other entities, companies should ensure that strict confidentiality provisions protect any trade secret information disclosed as part of the relationship.  Potential joint-venturers and potential acquirers must also be required to maintain confidentiality.  We see numerous times a potential suitor will look under the hood of a company, only to quickly thereafter begin to compete with the company.  A potential business partnership relationship should be entered into cautiously and certainly pursuant to a non-disclosure or other detailed confidentiality agreement.
9.Conduct exit interviews
Trade secrets most often walk out the door with employees.  The last opportunity a company may have to either try to learn if it should be concerned with IP misappropriation and/or to provide guidance to an employee of his or her continuing obligations to the company is in an exit interview.  Based on the person’s position leaving the company, an HR, IPR or legal person, or a combination, might conduct the interview.  Traditionally, these interviews were used strictly as a human resources tool to understand the attrition and, if possible, discover looming HR problems within the organization.  With the increase in IP litigation, especially trade secrets litigation, the exit interview has become increasingly important to protect a company from losing its IP.
If possible, during the interview, it should be determined where the person is going to work (competitor or not) AND what the person will be doing at the new position, for a potential inevitable disclosure argument.  Another copy of the PIIA should be provided to the exiting employee and, in a non-threatening manner, the employee should be reminded of his or her various continuing obligations, including the non-disclosure provision and any restrictive covenants.
With the increased mobility of employees as well as information itself, it is critical for a company to set its culture as one that protects its intellectual property and to establish practices to protect its trade secrets.