CIOs and IT managers must closely examine contractual agreements when purchasing IT goods or services to ensure all bases are covered when it comes to intellectual property (IP), a legal expert has advised.
Apple recently won an interim Federal Court injunction to prevent the sale of Samsung’s Galaxy Tab 10.1 tablet device in Australia until the legal battle regarding two particular patents has been resolved.
Brisbane-based law firm, McCullough Robertson Lawyers’ partner, Malcolm McBratney, told Computerworld Australia that the case has highlighted the growing realisation companies now have about the importance of IP.
“As a CIO, imagine if you’d just placed an order for 10,000 of the Samsung devices and you had paid in advance and then this case comes along, what does the contract say about IP and IP infringement, can you get your money back and all of those types of issues,” McBratney said.
“Depending on the organisation, if your CIO is a purchaser of IT goods and services, the golden rule is not to sign the supplier’s contract without thinking about it and getting some legal advice,” he said. “That’s to look at issues like IP warranties and whether they are standing behind the IP, delivery obligations and some of the other commercial terms.
“That won’t always be appropriate. Sometimes for smaller purchases it’s a ‘sign these terms and conditions or not’, but if you’re a serious purchaser of goods and services in the IT space then there is the opportunity to negotiate those contractual terms.” According to McBratney, for the IT industry as a whole the days of developing a product and not worrying about what’s out there already are gone, and for emerging companies there are many issues to get through patent thickets and commercialise without “stepping on someone else’s toes”.
“If a company was ready to roll out a product and then has to do something else, what are their rights?" McBratney said.
“The big issue will be if you had a large contract, whether you can get alternate supply had you already set up your arrangements going down one route and now you have to go down the other,” he said. “So there’s potential loss of ability to cover the funds paid, there’s loss of opportunity and because things move so quickly maybe the horse has bolted on some other project you’re working on.
“If a company has signed up to the supplier’s terms then they’re going to have very limited rights against them, while if they’d actually thought about IP issues then maybe in the negotiation of the contracts they might have been in a better position.”
The worst case scenario, McBratney said, using the Apple versus Samsung example, would be Apple coming after Samsung’s customers, which he said is a regularly used tactic. This puts pressure on the infringing supplier as they have both the customer and the plaintiff “screaming at them”.
“The purchasers of IT products certainly do need to keep an eye on IP issues out there, you just can’t blindly assume that server or system or service isn’t stepping on someone else’s toes.”
“I think at the end of the day it does show the importance of IP and [make sure] that these suppliers are willing to protect that investment they’ve made in research and development.”
Should Apple win the case, Samsung will need to tread carefully in bringing out the follow-on product from the Galaxy Tab 10.1 tablet, ensuring it engineers around the patents already allegedly infringed upon as well as the wealth of other patents owned by Apple.
Samsung could win with a ruling that Apple’s patents are invalid or that the Galaxy 10.1 tablet does not infringe upon the patents, both of which would have an adverse impact on Apple.
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