LICENSING  INTELLECTUAL  PROPERTY
IN  THE  INFORMATION  AGE

(Second Edition)

By
Kenneth L. Port,  Jay Dratler, Jr.,  Faye M. Hammersley, Esq.,  Terence P. McElwee,
Charles R. McManis, and Barbara A. Wrigley

On-Line Problem Supplement
Copyright © 2005   Carolina Academic Press.   For permission, see CMI.
 

Chapter 3

Problem 2:  Convincing Contair to Conduct an IP Audit

Contair has never conducted an intellectual property audit.  Contair's president is not inclined to invest in such an audit, despite the fact that the company has, since its inception in 1923, received more than 5,500 utility and design patents on engine components, braking and suspension systems and parts, as well as various handles, switches and hardware.  In addition, various proprietary software programs control the company's manufacturing processes.  A long culture of secrecy has resulted in a large, but unknown number of trade secrets, including the recipes for special paints and finishes and plastic and chrome plating processes, among other things.  Contair puts very few of its training methods in writing, and manufacturing skills are informally passed from senior workers to apprentices.

Contair's CEO is a notorious penny pincher.  He hates to spend money unnecessarily, especially on lawyers.  Yet he is always open to new business opportunities and effective measures to reduce long-run expense, especially in the current risky business climate.

You have recommended by telephone that Contair conduct an IP audit.  The CEO listened carefully and asked what an audit would cost.  Very roughly estimating, you told him, "Probably not less than $10,000 or more than $30,000."  The CEO responded skeptically, saying, "Write me a memo telling me why I should spend so much money when we're about to go broke, but keep it short!"

Write a memo of no more than 500 words, explaining the advantages of an audit—and the potential disadvantages of not conducting one—for the CEO and Contair's Board of Directors.  Assume that your memo will be the principal basis on which Contair's decision to do or not do an audit will be made.

As you write the memo, consider that your own credibility is on the line.  You will have to "sell" the audit without promising too much; otherwise, your future relationship with your client may suffer.  Obviously, the more specific are your references to potential benefits of the audit (including avoiding risk and expense), the more convincing they will be.  That is, the more you can relate the benefits of an audit to specific facts that you know about Contair, the more effective your memo will be.

Yet you are very conscious of the fact that, at this time, you really know little about Contair, its business, and its various types of IP.  You also have little idea what an audit might discover.  Indeed, that's why you are recommending one.  (You should, of course, review the factual descriptions of Contair and its business in this Problem and in Problem 1 before writing your memo.)

Remember that your memo is, first and foremost, an exercise in client communication.  Humility and consciousness of the limitations of your present knowledge are important.  What you have to offer is an analytical mind and knowledge of the legal and practical consequences of various things that an audit might find (or not find).

Keep your arguments direct and straightforward and your language simple and clear.  Avoid jargon and "legalese" while maintaining precision of expression.  Prioritize your arguments in the order in which they will be meaningful and forceful to the CEO and the members of Contair's Board of Directors, all of whom are your audience.  Be sure to consider both business and legal issues, as the business benefits of an audit (including risks and expense to be avoided) are likely to be most important to your audience, especially the CEO.

(This is one of many times in the course—and, no doubt, your career—in which you will be asked to step outside of your strictly limited role as legal advisor and to abandon, at least temporarily, the credo: "I only advise on the law, never on business matters."  As you write your memo, think about how useful it would be to your audience if you adhered obsessively to that credo.  We will discuss that credo and the lawyer's proper role as we review this assignment.)


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