In light of a number of recent court decisions in
Australia and the United States, companies with
computer-implemented inventions are looking at a broader range of
options, in addition to the more usual patents and copyright
protections, to maintain an advantage in commercialising their
valuable technology in intensely competitive and rapidly moving
fields. One such option is the rigorous use of non-disclosure
agreements (NDA) or confidentiality agreements with potential
collaborators and partners.
Often clients question the value of having an NDA in place; the
enforceability of such agreements has been met with a certain
degree of scepticism in recent years.
For technology company ZeniMax, an NDA has, however, proven to
be very valuable indeed. On 1 February 2017, a Texas Court found
that Virtual Reality technology leaders Oculus had, by extension
from actions of a company founder, breached an NDA with ZeniMax.
This resulted in an award of half a billion dollars in damages to
ZeniMax. A finding of the NDA being breach proved especially
crucial in this instance, noting that claims of trade secret
misappropriation were not upheld by the Court.
Virtual Reality technology is shaping up to be a significant
game-changer in the coming years. With that, it's inevitable
that there will be numerous intellectual property battles as the
major players fight over the new and emerging consumer market. This
is likely just the tip of the iceberg in terms of the litigation to
come. The defendant in this case, Oculus, has been a frontrunner in
the technology space, and the subject of a US$2 billion acquisition
by Facebook in 2014. A number of tech giants have been making grabs
for talent, technology, and intellectual property across all
aspects of the VR space, and further clashes are anticipated.
This case also provides some interesting insights into the
operation of US copyright laws, which are becoming increasingly
important in the software space following restrictions on software
patent eligibility. In overview, establishing breach of copyright
in software code was based around an
Abstraction-Filtration-Comparison Test ("AFC Test"),
which is used to assess non-literal elements of a computer program,
and determine similarity with copyright-protected computer
programs. This involves an approach often considered controversial
that makes use of considerable splitting of code into constituent
parts for the purposes of assessment; Oculus argue the test was
"invalid and unconstitutional" and it is expected that an
appeal of the decision will follow.
Particularly in the software field – where development
occurs quickly and potential collaborations can even more quickly
turn into competitors – this recent case highlights the need
for vigilance in: understanding well what your IP is; protecting
that IP where possible through registrable rights; and making use
of other legal instruments such as NDAs and other agreements to
well define your ongoing relationships with reference to your
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Shelston IP ranked one of Australia's
leading Intellectual Property firms in 2015.
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