IP in Automation

We’re excited to bring you our first-ever podcast series, Enabling Automation. This monthly podcast series will bring together industry leaders from across ATS Automation to discuss the latest industry trends, new innovations and more!

In our seventh episode of season 2, host Simon Drexler is joined by Kuyler Neable to discuss IP in Automation.

What we discuss:

• How to stay on track of an IP/Patent strategy
• Product vs process, patent vs trade secrets
• What are good habits to protect IP inside of a business

Host: Simon Drexler, ATS Corporation (ATS Products Group)

Simon has been in the automation industry for approximately 15 years in a variety of roles, ranging from application engineering to business leadership, as well as serving several different industries and phases of the automation lifecycle.

Guest: Kuyler Neable, ATS Corporation

Kuyler Neable is R&D Counsel at ATS Corporation. He started his career in engineering before pursuing law school and eventually becoming a patent agent and lawyer. He worked for a boutique IP firm where he gained valuable experience before venturing into the the corporate world.

——Full Transcript of Enabling Automation: S2, E7——

SD: Welcome to the Enabling Automation Podcast, where we bring experts from across the ATS Corporation to discuss topics that help our listener base scale automation within their business. I’m your host, Simon Drexler. I’ve been part of the automation industry for over 16 years now at both scaling companies and large corporations. Today, in episode seven of our second season, we’ll be talking about IP in automation, and we’re joined by one of the experts inside of ATS named Kuyler. Kuyler, Can you give an introduction to yourself?

KN: Hi, Simon. Thanks for having me today. My name’s Kuyler Neable and I’m R&D Counsel here at ATS Corporation. I started my career a long time ago in engineering and worked has some experience in semiconductors and software and video graphics solutions. And then I decided to quit my job and join the circus. So I went to law school and then eventually became a patent agent and a lawyer worked for a boutique IP firm, one of the top firms here in Canada, where I gained some very valuable experience under some strong mentorship before venturing back into the the corporate world. So now I’m in an in-house role where I get to be part of the team. I get to help drive success in the long run with folks like yourself and really take a broader and more strategic view of the world of IP.

SD: Thank you very much, Kuyler. And for a lot of our listener base, we’re speaking to companies that may not be large enough to have in-house counsel. So it’s fantastic talking points today, being able to share your experience with those that are trying to scale automation and probably may not have that expert at hand that they can walk into their office and ask them questions.

KN: Yeah, I think it is definitely a benefit that we have at a company of this scale. I have seen different companies of different size and scale venture into this field and for, you know, highly innovative tech companies, it is starting to become a little bit more common that their first legal hire might be an expert in IP, but still it is a certain point of scale that that a lot of companies probably don’t enjoy yet.

SD: Definitely. And that’s probably part of the trends that we’re going to talk about because in the automation space, technology is changing so rapidly. We’re always looking for new solutions to existing problems or the new problems that are generated by the manufacturing world or the industrial world. How would you recommend that a company stays on top of their IP strategy or their patents? What do they do? Where do they look?

KN: Yeah, patents can be an interesting consideration, especially for a small company or somebody who’s highly dynamic and moving quickly because patent value can take a long time to develop and can appear quite speculative at first, and there can be a lot of ambiguity, misunderstanding and generally lack of clarity upfront as to what truly the value of patents are. So I think it is not uncommon for some companies to sort of just make the decision that this isn’t something we’re going to do or this isn’t something that we’re going to do yet. But what I would do, what I would recommend is that if you’re if you’re looking at establishing a patent portfolio in order to help drive your business strategy, start with the basics. Come back to the fundamental raison d’etre of your company in a commercial sense. And always keep in mind what is the value add that you’re bringing to your customer? What is the problem that you’re solving and what uniquely distinguishes you in the marketplace? In other words, what are your customers willing to pay for that aligns with the value that you can capture for yourself? You always need to keep this in the back of your mind before starting a discussion on IP, and with that in the back of your mind. It’s typically a process of learning to identify early on in your innovation process where you might have opportunities to protect your IP, whether it’s through patent trade secrets, etc., so that you can integrate the process of identifying IP protection opportunities with the development of the technology itself. So I generally recommend that in parallel with your innovation process, in your development process, you maintain a patent funnel, and this is just a list of early stage ideas that you think might be unique value add contributors to your long term commercial success and then just throw them in a hopper, just throw them in a funnel and continue to revisit them over time as those ideas and those concepts are maturing and evolving towards a product or a feature that you’re going to release. And at the appropriate time, you can then start to evaluate them and make decisions on whether or not you’re going to seek patent protection or some other form of IP protection. And what the key being really you want to put yourself in a position where you can make that protection decision as early as possible. So basically, as soon as you have a concept of your technology that you think is going to be the concept you’re going to bring to market and then, and then you’ve got a certain amount of commercial clarity on what the value is going to be and how it’s going to be perceived in the market. Then it’s time to make a go no go decision as to whether or not to file a patent nd the earlier you can do that, generally the better.

SD: Is there a deadline, Kuy, where if you’re considering filing a patent, that you get to a point of no return where you no longer can?

KD: Yes, there absolutely is. And I would as a starting point, I would typically recommend anybody based on what I’m going to say to seek your own legal advice. I’m not going to provide any legal advice by way of a podcast to people I haven’t met. But there are the patent laws around the world generally are all in agreement that once you’ve publicly disclosed something, in other words, once you’ve demonstrated your new feature, your new product to the world at large, you’ve lost your ability to file a patent on that. So there’s a fundamental premise here in the patent world that a patent is a effectively a social bargain between the public and the inventor, where the inventor is incentivized by way of the reward of a patent, they publicly disclose how their invention works. And so if you inadvertently publicly disclose this before you go and try and strike the patent bargain while you’ve lost your chance, the Patent Office is going to look at you and say, Why would I buy the cow when you’ve already given me the milk for free? So you need to be very careful that you don’t make your inventions public. And this can happen by way of marketing, posting things on a website, putting it on YouTube also, and in particular in the United States, the act of making a sale might also be deemed to be a public event, even if that sale was done under an NDA with a customer. So really on a case by case basis in different countries, there are different particular deadlines that you need to be aware of. But by and large, you should plan to have your patent filed before you schedule your commercial launch of the product. And ideally, while it’s not a hard deadline, it’s a pretty good idea to have a patent application filed as well prior to talking to a customer about it. Even under NDA, NDAs certainly are a legal mechanism that will protect you from somebody stealing your ideas or taking your idea and giving it to one of your competitors, inadvertently or maliciously. But then you still have the practical issue of needing to enforce the NDA and detecting that that breach occurred in the first place. And the other thing is that depending on the nature of your contractual relationship with your customers, you can avoid perhaps some disputes about who actually owns the IP. If you’ve already filed your patent application well in advance of ever having talked to them in the first place.

SD: Staying on the topic of patents before we move into other types of IPand IP strategy. When a patents being considered by that regulatory body and I know it changes by geographic region, but are there some standard key considerations for an invention to be patentable?

KD: Yes, absolutely. And so you’re right, those regulatory bodies are different in every country, but they are generally all the patent office. A patent is granted by a country, by the laws of that sovereign nation. And so there’s a unique patent office in every country, and each one has its own laws. And although they’re all generally aligned on the fundamentals and they’re all generally based on this concept, as I mentioned earlier, of the social bargain. So the idea of a social bargain in patents is that a patent is not really a reward for effort that you’ve made. And in fact, it’s not necessarily even a proper acknowledgment of propriety in your idea. These are sort of fallacies of the patent system. The patent system is really designed so that when you invent something, you have a decision as to whether or not you’re going to keep that secret and not tell anybody how it works or whether you’re going to disclose to the public how it works and share your share your new knowledge with everybody else. So the whole purpose of the patent system is to try and grow the common general knowledge as quickly as possible. It’s the concept of us all standing on the shoulders of giants. If you can see further ahead on your road of innovation, it’s because you’re standing on the shoulders of those who have come before you. So the patent system is designed to sort of accelerate everybody on that journey simultaneously by sharing information. So what this means is in order to have a patent, you need to actually be contributing something new to the common general knowledge. You need to be teaching the public something that they wouldn’t have known. But for you, disclosing how your invention works, and this is really the threshold that determines whether or not you’re going to receive a patent from the patent office in any particular country.

KD: So the first step that we consider is called novelty and novelty basically ask the question, has anyone ever done what you’re doing before? The second step after novelty is what is called in the United States and in North America generally obviousness and in Europe, it’s referred to as inventive step. And this is a little bit more complex of an analysis. And basically what it says is, okay, what you’ve done is new. In other words, it’s novel. But does it still justify an invention to the extent that you’re teaching something valuable to the public and therefore will obtain a patent in return? So there’s a lot of different ways that we can analyze obviousness and inventive step. But one such way is to basically say, if all you’ve really done is taken a bunch of known components and combine them in in a expected way in order to achieve an expected result, then you haven’t actually invented anything new. And so even though you might say, well, I’m the first person who’s ever done this before, therefore it’s a novel. Yes, but what you’ve done is you’ve combined known elements in an expected way in order to achieve an expected result. And therefore it’s not an invention and therefore you’re not going to get your patent.

KD: Now, I would also caution folks who are out there and thinking about filing their first patents to not get too deep into this analysis on their own. This is really the space for a proper patent professional to weigh in. And it is often the job of the patent professional to understand the requirements of the patent office and to make sure that the patent is going to satisfy those requirements. The fallacy can be that if you, as an inventor or as a technologist are looking at what you’ve produced, may say, Oh, well, that’s obvious or that’s not novel, then you never speak to the patent professional in the first place. You filter yourself out sort of as a false negative and then you’ve lost your chance.

SD: It’s a strange bias that we have as well, right? The things that we do everyday seem obvious, but when you come in from the outside world into that, it can be vastly different identifying that uniqueness in the marketplace. And then the tie to the automation world where regardless of who’s building the machine or putting together the automation, you are you bringing core expertise from a number of different technical areas together to build something new and novel every day. That’s why automation exists. You’re trying to automate something that is currently not done so it can become routine that the teams are innovating, they’re doing something new, and that’s why I think it’s really important what you just said, that you have to have that external perspective because yeah, if you’re living in the forest, you might not see the trees. And so in in our world, one of the areas this starts to get blurry and I know from experience the teams have challenges between intellectual property can be, I would say nuanced or maybe niche between the products that we use in automated solutions and the solution that’s been generated because we’re taking a number of different pieces of technology and putting it together to create a process and solve a process problem. And where that line is between the product and the solution can be very difficult for experienced professionals, but also for those that are doing this for the first time or maybe don’t have that experience, does that line of product applied to new process impact the IP strategy, the ability to patent what you might keep as a trade secret?

KD: There’s a couple of things that I would point to. Number one, always keep in mind that we can abstract systems and components at any level, right? So every component that you’re using in your system can itself be considered a system that is comprised of its own components. So let’s understand, first of all, what is the proper level of abstraction? And number two, let’s see, when we’re thinking about that, let’s always keep in mind that you are creating some sort of a valuable solution for your customer. You must be because why else are they hiring you? What you’re going to be providing in an automated automation solution, from my perspective is probably, you know, some metal that’s been shaped into a very particular shape, some other materials and some software, and then all of this intangible around how it actually works and how it actually operates in a very specific and unique solution intended for its application. And that’s where the IP lies. So understanding what exactly is it that what is exactly is the problem that we’ve been asked to solve? Why is there not a solution on the market already that can provide this? And therefore we’ve done something new. Now, again, you may or may not have met the legal requirements for patentability, but let’s assume that you have, it’s understanding the proper level of abstraction within the system component model at which you’re providing that solution. So in your IP strategy, it’s absolutely crucial to be aware of where the value add is being provided by your solution and where the value add is being provided by your suppliers and and the components that you’re integrating. There is always going to be a natural trend that the person in the middle, the integrator, if you will, is going to get squeezed over time. And we always see this happening in a lot of different industries that we can point to. I like to point to the cell phone industry as a great example of this, where early on in the days of, you know, before cell phones or like wireless phones in a bag that you would carry around and it would weigh 10 pounds and it’s a circuit board that somebody had designed and sourced all of their own discrete electronic components. There might have been a basic processor on there, but, you know, they’re building their own radio, they’re building their own antenna, and then there’s certain push buttons and they’re deep bouncing the manual buttons. And you fast forward to where we are now in the 21st century, and you can buy that entire phone more or less on a chip from a single supplier, complete with, you know, high definition screen interfaces, antennas, all the different telecommunication protocols built right into it. So all of a sudden now all that value add that used to be on the cell phone maker who was actually designing the whole thing from scratch. Most of that value now is actually going into the suppliers, into the supply chain and the chip, the chip vendor. So you see this trend happening really in a lot of industries, and I think automation is no exception to that. So I do think as part of your IP strategy, it’s important to understand where you sit in the value chain and where your value capture actually is going to be. I like to think that this is also going to parallel your commercial success because the fundamental tenant here is that there’s there should be a direct correlation between the IP you’re developing and the margin you’re going to retain in the long run. So if all the IP that you’re if all the solutions that you’re providing to your customer are really derived by value that’s been generated by your suppliers longer term, you’re not developing your own unique IP and you’re probably not going to be in a position to protect your margins as well in the long run.

SD: It’s fantastic advice, Kuy. As we talk about IP, we’ve focused a lot on patents and I think they’re most widely known, they’re most practical. They’re something that you can kind of hold in your hand. Is there guidelines on when you should not patent and use something else?

KN: Absolutely. This is a great question, and very often it is patents versus trade secrets. And this is sort of an age old question. One area in particular where people tend to gravitate towards this is in the software industry. I think that there’s still some prevailing mythology around software and patents.I think people are becoming more informed, but there’s still a little bit of bias and misunderstanding there in some cases. So I’ll use software as an example, but it’s really no different for any technology. First thing I would say is it’s probably not appropriate to be making a patent versus trade secret decision writ large across your whole business or across an entire field of technology. So saying, well, software is not patentable or software is better as a trade secret because it’s all code and it’s all our algorithms and therefore we’re not going to file any patents. I don’t like to make decisions like that at that level in breadth. I like to make them on a case by case basis on a per technology per innovation basis. And then furthermore, I like to just consider several different criteria in arriving at this decision. So again, the fact that you’ve used an algorithm in your software and you believe that that algorithm is proprietary and therefore you don’t want to publish it in a patent application because you want to maintain it as a trade secret. Well, let’s think that through a little bit. Number one, are you have you actually developed a truly unique software algorithm that is not based on some other common general knowledge or software principles, software libraries, perhaps, that are generally available? Number two, are you sure nobody else is going to arrive at the same solution as you through parallel origins? And this is a really big, big one that I think people need to bear in mind. We talked earlier about how sometimes when we get really immersed in a technology space with a talented and dedicated team of experts, we can lose sight of the forest through the trees. I also think that we can also lose sight of the how big the world really is and how many other really bright, talented expert teams there are around the world. And so you’re sitting in a in your team developing your solutions right now, and you’re telling yourself that it’s the greatest in the world. And it probably is. And you’re telling yourself that you have the smartest people in the world, and you probably do. But do not underestimate that. There’s probably another team working on the same problem. Is you somewhere else in the world that you haven’t thought of and they’re either going to derive a very similar solution to you because the convergence of that solution on a single implementation is highly likely or they’re going to arrive at a different solution than you, but it’s still going to have similar effect. And so I caution you to not necessarily just tell yourself we invented something really smart, no one else is ever going to invent it again and therefore it should be a trade secret. Rather, I think you can look at things such as how likely is it that somebody else is going to develop their own through parallel origins and buy parallel origins? I mean, they’re developing it on their own independent of any information you’re giving them. So they’re not copying you at all. They’re just getting to the same place as you by the same means that you got there. Number two, how easily detectable is this going to be? So if you have a patent on something, the patent only good if you can enforce it and in order to enforce it, you need to be able to detect it, that somebody else is actually using that technology. This is, I think, a stronger argument for maybe why sometimes software is more appropriate as a trade secret, because it can be very difficult to determine that somebody’s software is actually executing the same methods steps that you have in your patent. Again, once you get into the legal proceedings, then you can, you know, evoke discovery or some other proceedings in different countries that may be available to you. You might actually be able to get your hands on the software, on the source code. But absent your ability to get your hands on the source code, and if there’s a certain threshold that you need to prove to a court before you’re even allowed to demand that source code, it can be very difficult to detect. So that’s probably more of a consideration. How many different approaches can there be to solving a problem? This is another one. So again, I find somewhat anecdotally that when multiple people are facing the same problem, the problem and solution can kind of going one of two different buckets. One is there is a preferred solution that we’re all going to converge on over time, and that’s just sort of the nature of how innovation and technology advances the constraints in the forces that sort of guide those. The other bucket is there’s a thousand different ways we could achieve a similar result here. So again, if you are in the particular innovation space or your particular solution lends itself more to that ladder, then you know, it arguably does devalue the patent you’re going to get. Patents represent not just your ability to prohibit others and exclude others in the market from bringing the same technology. They also represent cost, right? So when you have a patent, it doesn’t mean nobody can offer a solution that you’re offering. What it means is they can’t do the detailed implementation that’s outlined in your patent. So now you force them to take a longer route on their development. So that adds to their costs. They need to go out and invest in deeper R&D in order to find a unique solution that doesn’t infringe on you. So the number of possible solutions that are out there is going to impact the extent to which that cost is going to be an effective strategy for you.

SD: Kuy, this is a good segue into talking about partnering, because another challenge in our industry is oftentimes the problems are so difficult that you’re bringing in experts from outside of your organization as well. And if you’re working through a joint solution with a partner organization, is there work or considerations, safeguards, that our listener base should be aware of for these types of situations?

KN: So the fundamental issue that comes to mind when talking about a partnership in development or innovation is who’s going to own the IP? And this is typically going to be decided in a contract. And as a matter of law, again, if we’re going to speak about patents and patents are exemplary here, but not definitive as a matter of law, if an individual contributes to the conception or reduction to practice of idea that ends up in a patent claim, then that person needs to be named as an inventor on that patent. And once they’re named as an inventor on that patent, now there’s a presumption of ownership in that patent. So if you have inventors from two different companies contributing to a patent and then the patent gets issued, presumably that both companies are going to be joint owners on that patent. And this is a scenario that typically you want to avoid. It’s best to have it sorted out well in advance, which company is going to own the patent. And so the underlying issue here is ownership in a contract. So I take this right back to sort of square one. A fairly common experience for a lot of people, I think, is that you start discussing a technology solution with a potential partner. You start going down the road of throwing around some concepts and design ideas, and we could do this, we could do that. And then once you’re sure that this is the way you want to move, then you get your lawyer involved and then the lawyers sitting down at the 11th hour trying to sort out the nitty gritty with this lawyer on the other side as to who’s going to own what patents and in what situation. And I think you want to be a little more proactive than that. I think you want to get out in advance, sort of return to first principles and ask yourself, what is the nature of a strong partnership? Is this other company going to be a good partner with us and look at things. Things that I like to see are complementary skill sets, complementary expertise, complementary and non-overlapping interests and expected outcome. So we’re coming together. We’re going to join our common resources for collective good. But individually we both want different things coming out of this and if that is not the basis for your partnership, you’re going to end up with probably a difficult negotiation at the 11th hour with respect to who’s going to own what IP. My preferred way to divide up IP in a contract is on the basis of technical domain. And what I mean by that is my company has a certain business interests, commercial interest that is based on a certain technology domain, our ability to develop and use and own technology in a certain space. And I assume that the partner company has its own technology domain as well. So the preference for me is to divide up. If it’s in this bucket, then my company is going to own it regardless of who invented it. And if it’s in that bucket, your company is going to own it regardless of who invented it. So in practice, if it’s in my technology domain, it’s very likely that my staff has been instrumental in contributing to that. So that’s fair. But every now and then there might be some sort of a windfall where, you know, your guy comes up with some brilliant new solution. And you know what? That’s just the nature of working in a partnership. You can’t always predict these things. And frankly, it very, very rarely happens anyways. So I would really recommend that you understand at the beginning, why are you forming a partnership with this company? What are they bringing to the table that is going to help you in your commercial interest? And what are you bringing to the table that’s going to help them in their commercial interests? Then decide on that basis if there’s any foreground IP this developed that fits into my technology domain, I’m going to own it and you’re going to assign it to me. And if there’s any foreground IP that ends up in your technology domain, you’re going to own it. And I will sign it to you if need be. If you don’t have the right type of partnership in the first place, it’s going to be really difficult to sort that out in a contract.

SD: That’s a great structure to help our listener base understand how to approach those types of conversations and really look at technical domain and come back to the value that’s being offered to the market and divided up front. Because you’re right, it becomes a very challenging conversation to have at the end.

KN: It will be challenging enough even in the best of times, because what I’ve tried to do is explain it in terms of bright lines and of course, in practice there’s always going to be those gray areas, those blurred lines and that overlap. But in the best of times, you can take some risk on those knowing that your risks are confined. In the worst case, you find out that the whole thing is a is an overlap and a blurred line and that you and your partner both want the same outcome for themselves. And then it’s going to come down to negotiating power. And if you have partnered with a larger, more sophisticated and better resourced partner, you’re probably going to end up with the short end of the stick.

SD: Kuy, Thank you very much for sharing all of that valuable insight over the course of this discussion. I have one question remaining for you, and I want to circle back to something that we started with. If you’re starting into this for the first time, a lot of what we talk about in the Enabling Automation podcast is about building habits and making sure that you’re aware of certain things inside the automation world to really help you scale and enable automation. What should a business be doing or what are good habits to protect intellectual property inside of a business that is doing something like this for the first time?

KN:  Number one, I would recommend that you view a patent strategy in building a patent portfolio proactively. Oftentimes, I think what I see with companies doing this for the first time is very much a reactive strategy. And what it looks like is this someone says, Hey, we just invented something really cool. I think we could get a patent for this. And then someone says, okay, well, how much money is left in the legal budget? Okay, great. I think we can afford a patent. Let’s go do it. Rather, I would look at a proactive approach where you can view, for example, what is the competitive landscape that I’m playing in here. When I look at the patents that my competitors or that other ecosystem players may have, what do I need to compete? How much of my investing in my R&D and how much of that is going to contribute, you know, to value add technology development that I’m going to want to retain margin on in the long term and set yourself some goals and maybe the first year it’s relatively simple, arbitrary, pick a number and say we’re going to file three patents this year. I think that it would be very unusual for someone to pick a number that was too high such that they would not get good quality inventions to include in their patents. But if you pick a number, whatever it is, let’s assume that you’re actually generating more output then you need to satisfy that number anyways, so be proactive, have a budget. Understand that you can file these patent applications and that this is a goal for you to accomplish over the next year. Number two, marry into your or merge into your innovation or your development cycle. Some checkpoints where you’re going to just make some basic questions, Hey, what do we just do here? We just developed something new because there was no similar solution available on the market. We had a problem that that our customers were facing that they couldn’t find another solution to. So therefore we probably did something new. There’s probably something we did that is going to satisfy the legal requirements of novelty and non obviousness or inventive step. Let’s not make that decision for ourselves yet, but at least let’s at least flag it and say we did something new here. And then the third thing I would say is when you’re making decisions on patentability, you want your final decision to be made by at least three distinct roles. Number one is your technical staff. So you’re a technical leader or manager, preferably not the inventor on the patent itself, who could weigh in on the technology and the likelihood of other parallel origin technologies competitive solutions, how easy it is to detect how easy it’s going to be to enforce. Number two, you want someone with front end of the business experience in sales or marketing. A commercial leader who understands what the value add to the customer is of this particular technology and what the long term margin protection will be if you have legal protection for that technology. Number three, you want a patent professional and very likely this is going to be someone that you’re going to call as external counsel. But a patent agent, a patent lawyer, patent attorney who has the experience to weigh in and say, look for this, for this particular invention, you’re going to get a relatively broad scope of protection or relatively narrow or, hey, this isn’t even going to meet the bar for patent ability at all. In all, three of those roles need to come together and make a joint decision and everything needs to line up that this is a new technology that is going to create value and offer reasonably strong legal protection through a patent. And when all those things line up and you are still looking to hit your patent filing KPI for the year, then you just pull the trigger.

SD: You make it sound very straightforward.

KN: It really is that easy.

SD: Kuyler, thank you so much for joining the podcast today and sharing your expertise with the listener base. I very much appreciate it. I know that those listening will as well.

KN: Thank you very much, Simon.

SD: To those listening, I really, sincerely hope that you enjoyed the discussion today on IP and automation and hope that you’ll join us next time for our eighth episode, Building and Retaining Top Automation Talent, where we have the CHRO of  ATS, Angella Alexander, joining us. Thank you very much and I’ll talk to you next time.