IP protection for computer chip
The case: infringement of IP in a computer chip
Michael Harrison, a circuit layout (computer chip) designer for electronic games manufacturer Datronix, designed a brand new circuit layout to power a new interactive game called ZEN-X. The chip was a success, as was the game.
The game was so successful that a Taiwanese competitor, Computrom, examined the computer chip driving the ZEN-X and developed a modified version for their new product, GENERATION-X. This 'new' chip was created with the assistance of computer-aided design and was largely identical to the Datronix ZEN-X chip.
When GENERATION-X came on the market, Datronix realised that the chip was a near copy of the one designed by Michael Harrison. It sought legal advice from Ernst & Young law firm about whether it had ownership of the circuit design and how it could prevent the sale of GENERATION-X in Australia.
The lessons
Chris Peterson, manager of the Datronix video games business unit, and IP lawyer Sharyn Ch'ang had the following conversation:
Exclusive rights to an employee's design
Sharyn: 'Chris, who designed the ZEN-X circuit layout? Was it an employee of Datronix or was the circuit design custom made by a contractor?'
Chris: 'It was designed in-house by Michael Harrison, one of our brightest employees. I have been in the industry for a long time and what he designed is most certainly original'.
Sharyn: 'Because the original design was made by an employee, Datronix has a number of exclusive rights in relation to the design, including the right to make a chip from the layout and to commercially exploit the layout in Australia. If it can be shown that Computrom breached those rights ...'
Chris: '... but how can we show that?'
Automatic IP rights to circuit layouts
Sharyn: 'Well, unlike patents for inventions, circuit layouts do not have to be registered in Australia to be recognised, so ownership of such rights becomes a matter of evidence.
The rights themselves arise automatically, and from what you have said, Datronix is likely to have CL rights in the design from around 1997, when Michael completed the layout design. Did Michael keep accurate records of his design and do you have dated copies of all drafts and developments?'
Chris: 'I think we have all of Michael's early sketches and the designs that we used for our prototype chip. I will follow that up with him. We may also have copies of internal emails submitting the plans to the production team'.
Reverse engineering defence not valid
Sharyn: One of the first steps in proving your case, after establishing that Datronix has CL rights to the circuit layout, is to show that the two circuits are the same or substantially similar. To determine this the court would look at the nature of the copying. It appears that the physical similarities of both circuits are so substantial that it is unlikely that Computrom will be able to rely on the reverse engineering defence provided under the Australian Circuit Layouts Act.'
Chris: 'To our technical team it looks as though it is a straight copy. Computrom even included the non-functional parts of the circuitry developed by us. Do you think we have grounds for preventing Computrom from using the same chip in other products?'
Grounds to prevent use of the infringing chip in any product
Sharyn: 'Because we are concerned about the chip itself and not the product in which it is cased, it is likely that you will be able to prevent use of the GENERATION-X chip in other products as well. Though, given that there is a demand for your ZEN-X chip you may consider licensing its use to others for a fee.
Datronix’s rights to the circuit layout design exist for a period of 10 years after first commercialisation... so you have some time to think about this option. You may also be able to prevent the sale of GENERATION-X products overseas in over 130 countries, including Hong Kong, as reciprocal arrangements exist within those countries. However, you are likely to have difficulty enforcing those rights in Taiwan as they are not members to the relevant treaty'.
Chris: 'We have not considered bringing an action overseas but we will look into it. In Australia, what do you think our best options are at present?'
Preliminary injunction
Sharyn: 'The best option at this stage is to seek a preliminary injunction from the court to prevent any more GENERATION-X products being imported and sold in Australia and to serve letters of demand on Computrom and its distributors demanding that they withdraw the product from the market. If they do not respond or refuse to withdraw the products, Datronix should consider bringing legal action. The action must be filed within six years of the alleged infringement'.
Last Updated: 13/12/2012
