How to Develop an IP “Clean Room” Policy
August 23rd, 2023
A “cleanroom” is a controlled environment in which pollutants like dust, microbes, and aerosol particles are filtered out. A cleanroom is used for the development and manufacture of things like microchips and other electronic parts, lenses, pharmaceuticals, nanotechnology, etc.
But why would you need a “clean room” environment for intellectual property (IP) development?
“Clean” for IP development has a different meaning in this case. It means that the IP can’t be “tainted” by being based on, or unduly influenced by, existing IP owned by others.
As the Cornell Law School Legal Information Institute explains,
Clean room is a method of developing proprietary material in which a development team works in an isolated environment to ensure that the work is authentic and is not copied. The purpose is to provide evidence that similarities to others works is because of legitimate reasons and not copying.
In the context of intellectual property, clean room technique means to develop new technology in a room from which all trade secrets, other licensed know-how, or copyrighted material have been excluded, thus making sure that the technology is independently developed and is not subject to any infringement claims.
A “trade secret,” as defined by the Uniform Trade Secrets Act ("UTSA"), is:
- "information, including a formula, pattern, compilation, program, device, method, technique, or process that:
- Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
- Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
To support a claim for violation of trade secret rights, a plaintiff must show:
- The subject matter involved qualified for trade secret protection.
- The plaintiff took reasonable precautions to prevent disclosure of the secret.
- The secret was misappropriated or wrongfully taken.
Examples of a secret being wrongfully taken include:
- Violation of a non-disclosure agreement (NDA) by an employee, contractor, or others
- Industrial espionage
- Bribing an employee with access to the secret
- Fraudulently inducing someone to disclose the secret (for example, based on a promise to do business together)
- Reverse engineering in violation of an agreement that prohibits it.
Trade secrets (unlike patents and copyrights) can last “forever” – as long as they’re properly protected by their owners. However, once a trade secret is known publicly, the “cat is out of the bag” and the previous owner can no longer claim an exclusive right to use now-lost secret.
“Independent development” is no defense to a claim of patent infringement, but it is a defense to a claim of trade secret theft if the defendant can prove that its development was truly independent – i.e., not tainted by wrongfully acquired proprietary information belonging to others.
A company might want to set up an IP clean room because:
- It hired an employee or contractor from a competitor who had (or might have had) access to that competitor’s trade secrets and other proprietary information.
- Two companies were working on joint development but parted ways, and one company no longer has the right to use the other company’s IP.
- Two companies shared confidential information under an NDA in anticipation of doing business together but ended up not doing business.
For example, Roto Zip, a tooling company, showed Sears, Roebuck a combination power tool, in hopes that Sears would sell it under its private label. After the parties signed an NDA, Roto Zip showed Sears its prototypes and proposed marketing plans.
The parties couldn’t agree on pricing and ended up not doing business together. However, two years later Sears introduced a tool that Robo Zip claimed was the same as the one it had shown Sears.
Sears was unable to show that it (or any other company working with it) had independently developed the tool, and a jury awarded Roto Zip $21 million in damages.
Also, to make a claim for copyright infringement the plaintiff must prove
- ownership of a valid copyright; and
- that the defendant copied constituent protectible elements of the original work without permission.
Copying may be shown by proving that:
- the defendant had “access” to the plaintiff’s work and
- that the two works are “substantially similar.”
“Access” can be shown if there is a direct connection, or chain of connections, between the plaintiff’s work and the defendant’s, or if the plaintiff’s work has been widely disseminated.
Copyright protection extends beyond a work's strictly textual form to its non-literal components. This also applies to computer programs. Thus, a company developing software to accomplish a specific task may want to take pains to assure that its developers don’t have access to its competitor’s code.
To protect its IP clean room environment from “contamination,” a company should assure that:
- any “tainted” employees and contractors (such as those working for a former competitor) aren’t working on the clean room project
- both “tainted” employees/contractors and “clean” employees/contractors are subject to NDAs and repeatedly reminded about the importance of avoiding “cross-contamination”
- information being sent into the clean environment is monitored and screened to avoid contamination
- the independent development process is thoroughly documented to show where the ideas came from and how they evolved
- the end result of the clean room development is compared to the “forbidden” related material to determine whether contamination might have inadvertently happened.
Of course, maintaining a rigorous cleanroom environment can be expensive. But it can be less expensive than getting sued for copyright infringement or trade secret theft.
Trade secret theft can even result in criminal charges.
- For example, as The Verge reported, Anthony Levandowski, a self-driving car engineer and former Google executive, joined Uber via an acquisition of his autonomous truck company and later agreed to plead guilty to stealing Google's trade secrets.
Levandowski was charged with 33 counts of theft and attempted theft of trade secrets for allegedly stealing about 14,000 documents from Google before founding his own company and then selling it to Uber.
Uber also paid more than $244 million for the trade secret theft.
Categories: Trade Secrets