This article provides a high-level overview of the competitive landscape for “wearables” and then discusses strategies for protecting knowledge assets relating to the functional features of a specific wearable product.
Setting the Stage: The Competitive Landscape
An IoT revolution, led by “wearables.” Wearables, or “smart” personal accessory devices or clothing, are the fastest growing segment of the IoT. See, e.g., “Internet of Things Market to Nearly Double by 2019,” IC Insights Res. Bull., Dec. 16, 2015 (last visited on May, 8, 2016); Rama Chitkara et al., PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft, The Internet of Things: The Next Growth Engine for the Semiconductor Industry (May 2015) (last visited May 8, 2016). Wearable devices are not new (e.g., hearing aids), but wearables in this context are augmented with sensors, power sources, embedded processing, and wireless connectivity. They can talk to each other, and they can talk to other devices, with a minimum of user intervention. Perhaps the best known example is the wearable fitness wristband, commonly used as a “life logging” device, to track and quantify exercise and calorie consumption, and as a “lifestyle remote,” using collected contextual information to help the user control or automate other “smart” devices. For example, the wristband can share data with the user’s home thermostat, to adjust settings, based on the user’s history, preferences, and recent activities. Top-selling wearables today are wrist-worn, but smart clothing, made with conductive fibers and incorporating flexible hybrid electronics, is entering the mainstream. See, e.g., Press Release, Gartner, Gartner Says in 2015, 50 Percent of People Considering Buying a Smart Wristband Will Choose a Smartwatch Instead (Nov. 18, 2014) (last visited May 8, 2016); see also Daniel Price, “Gartner: Smart Clothes to Become Biggest Wearables Sector for 2016,” [login required] CloudTweaks, Dec. 4, 2014.
Given the existing (and rapidly developing) technology, and the convenience and tremendous utility of the information that can be collected by wearables, commentators project huge market growth. More than 70 million wearable devices were sold in 2014. See Gartner press release, supra. Prominent commentators and research organizations project that many, many more smart devices will be connected and communicating in the next 5 to 10 years. McKinsey, for example, predicts that the economic value of the IoT will be between $3.9 trillion and $11.1 trillion per year by 2025 and attributes between $170 billion and $1.6 trillion of that $3.9-$11.1 trillion to the “human” wearables sector. See James Manyika et al., McKinsey Glob. Inst., Unlocking the Potential of the Internet of Things (June 2015) (last visited on May 8, 2016). CCS Insight predicts sales of at least 411 million wearables, for some $34 billion, in 2020. See Paul Lamkin, “Wearable Tech Market to Be Worth $34 Billion by 2020,” Forbes, Feb. 17, 2016 (last visited on May 8, 2016). Cisco projects six-fold growth in global wearables sales between 2015 and 2020, with over 600 million devices in use by 2020. See Press Release, Cicso, 10th Annual Cicso Visual Networking Index (VNI) Mobile Forecast Projects 70 Percent of Global Population Will Be Mobil Users (Feb. 3, 2016) (last visited on May 8, 2016).
The projections vary, but they all agree that big growth means big money. For businesses competing in the wearables market, protecting proprietary information is a high-stakes game.
Stockpiling for the next IP wars; some first salvos. As wearables competition heats up, we can expect disputes over intellectual property and data. Indeed, the first wave of wearables disputes is already upon us. AliphCom (doing business as Jawbone) and its wholly owned subsidiary, BodyMedia (collectively, Jawbone), and Fitbit have been active in federal and state court and before the International Trade Commission in disputes over wearable fitness trackers. See, e.g., AliphCom v. Fitbit, Inc., No. 5:15-cv-02579 (N.D. Cal. filed June 10, 2015); Fitbit, Inc. v. AliphCom, No. 1:15-cv-00990 (D. Del. filed Oct. 29, 2015). The Fitbit-Jawbone battle is among the most visible “wearables” disputes, but there are more, and their numbers are growing. For example, Sportbrain Holdings has been an active plaintiff, most recently filing patent infringement complaints against Moov (concerning the wearable Moov Personal Coach) and Huawei Technology (over the Talkband B2 bracelet). See generally Sportbrain Holdings LLC v. Moov, Inc., No. 1:16-cv-01237 (N.D. Ill. filed Jan. 27, 2016); Sportbrain Holdings LLC v. Huawei Techs. Co., Ltd., No. 1:16-cv-01231 (N.D. Ill. filed Jan. 27, 2016).
Moreover, well-established technology companies, wearables/IoT start-ups, and nonpracticing entities (NPEs) alike are stockpiling patents to prepare for disputes. In July 2015 (updating a November 2014 report), LexInnova reported that numerous entities are building large IoT patent portfolios. The report indicated that IoT patent distribution is fragmented, with the most prolific applicant being responsible for about 5 percent of all IoT patent filings. See LexInnova, Internet of Things: Patent Landscape Analysis7 (Nov. 2014; updated July 2015). LexInnova specifically noted that several NPEs are near the top of the list, with large numbers of IoT patent filings. Id. at 9. The fragmented nature of IoT patent filings and holdings, together with the fact that NPEs are actively building IoT-related portfolios, “indicates that there are high chances of much patent litigation in this domain in [the] future.” Id.
Our Hypothetical Wearable: Identifying and Protecting Knowledge Assets
Against this backdrop, it is critical for anyone involved in the wearables market to be prepared to defend knowledge assets. We survey available protection for functional product features below, framing our discussion around a specific hypothetical wearable.
miHoodi. The Intellitogs company has developed a hoodie made from inventive textiles with embedded flexible electronics (including sensors), ambient power sources, GPS, and wireless communication capabilities. What Intellitogs has dubbed the “miHoodi” records, transmits, and stores information about the user’s biometrics (stress indicators such as heart rate, breathing rate), geographic location, and external environmental conditions (temperature, precipitation). It includes means for harvesting and storing energy from movement and light. A miHoodi user can select actions to occur at specific stress levels; for example, webbing over the shoulders can constrict and release for a calming, massaging effect and give a tactile indication of a target “calm” breathing rate. A miHoodi user can also elect to share information, perhaps to allow a physician to obtain information about stress levels, to get directions, or to allow other devices to recognize the user.
The following are specific features of miHoodi:
• removable ribbed cuffs that incorporate biosensing and conductive fibers
• fabric over the shoulders that includes photovoltaic cells, flexible hybrid electronics, and stitched webbing of kinetic fibers (that can contract and relax)
• hood lining that incorporates a receiver and earphones
• sleeves made from piezoelectric fabric that converts arm movement to power for the sensors
• GPS
• wireless connectivity, so information can be streamed in real time to and from other devices
A specific miHoodi wearer’s information, compiled over time, creates a “portrait” that is useful for individual safety and well-being, and can facilitate tailored offerings of goods and services. The wearer’s information can also be anonymized and aggregated with data about all miHoodi users to derive information about overall customer trends.
Protecting miHoodi features and functionality. What are Intellitogs’ knowledge assets with respect to miHoodi? At the very least, Intellitogs needs to consider how best to protect
• the hardware in miHoodi, which includes the sensors (biometric and environmental), the photovoltaic and piezoelectric power sources, and the unique ribbing and hood lining, which incorporate flexible electronics and conductive fibers;
• the software that enables miHoodi’s functions, including application programming interfaces (APIs) to facilitate data sharing between miHoodi and other applications;
• other unique or distinctive aspects of miHoodi, in terms of appearance, ornamentation, and name; and
• the information that miHoodi collects, shares, stores, and analyzes.
Protecting valuable and proprietary information embodied in or collected by miHoodi is complicated by the fact that miHoodi is itself an ecosystem. It is a bundle of inventions relating to function and form, some of which are likely to incorporate third-party intellectual property. It is also part of a system in which many players are involved in transmitting, storing, sharing, and analyzing or adding to the data it collects. Most of these third-party players are likely to have amassed, or to be amassing, their own intellectual property and data protections. Given intense, fast-moving competition in the wearables arena, Intellitogs must strategically protect its information to preserve its competitive position.
Intellitogs must first determine what proprietary technology is embodied in miHoodi and to whom that technology belongs. If the technology belongs to third parties, Intellitogs must obtain rights to use it. If the technology was invented by Intellitogs’ employees or consultants, Intellitogs needs to ensure that appropriate invention and assignment agreements are in place.
Intellitogs must then choose how to protect innovations in which it has rights. With respect to functional features of miHoodi, this most often entails choosing between patent protection and trade secret protection, although Intellitogs should also consider copyright protection for integrated circuits and software.
Utility patent or trade secret?Utility patents protect novel, nonobvious, and useful advances over the prior art. 35 U.S.C. §§ 101–103 (2012). Patent protection requires a concrete technological advance and thus does not apply to abstract ideas that are implemented with computer components. Id. § 101. In return for publicly disclosing enough about an invention to permit a skilled artisan to make and use it, id. § 112, a successful patent applicant is granted exclusive rights to the invention, for a term of 20 years. Id. § 154. Patent rights are enforceable in federal court by a complaint for patent infringement, id. § 271, and may also be enforced through investigation by the International Trade Commission (ITC), which can block importation of infringing devices. 19 U.S.C. § 1337 (2012). Attempts to enforce patent rights in district court are often stayed when accused infringers succeed in instituting U.S. Patent and Trademark Office (USPTO) proceedings to reevaluate patentability. See “Motions to Stay District Court Proceedings Pending Post-Grant Proceedings,” Docket Report, Aug. 24, 2015 (last visited May 8, 2016). The ITC has not been receptive to attempts to defer investigation pending the results of such USPTO proceedings. See, e.g., Certain Laser-Driven Light Sources, Subsystems Containing Laser-Driven Light Sources, and Products Containing Same, Inv. No. 337-TA-983 (Mar. 3, 2016) (Order No. 8).
Trade secret law protects proprietary, confidential data, including advances over the prior art. The scope of trade secret protection is dictated by secrecy (in marked contrast to patent protection, a condition of which is disclosure of the invention). The requisite secrecy is typically achieved by (1) limiting access to those who need to know and have signed nondisclosure agreements and (2) physical and “cyber” security to prevent unauthorized access or disclosure. A trade secret can last forever, so long as it remains secret. See generally the Uniform Trade Secrets Act (UTSA), and Kilpatrick Townsend, Legal Alert, Defend Trade Secrets Act Passes House, Soon to Become Law (Apr. 28, 2016) (last visited May 8, 2016) (hereinafter, Legal Alert), discussing the federal Defend Trade Secrets Act, which amends the Economic Espionage Act to create a federal cause of action for trade secret misappropriation (passed by the Senate on April 27, 2016; signed into law on May 11, 2016). Trade secrets are enforced by actions for misappropriation in state or federal court or by instituting an ITC investigation. See Legal Alert; 19 U.S.C. § 1337 (2012). Enforcement attempts often turn on proof of reasonable efforts to maintain secrecy and circumstantial evidence of wrongful acquisition or disclosure.
For the miHoodi hardware, patent protection is attractive because it would give Intellitogs years of presumptive exclusivity (and confers other benefits in terms of credibility and appeal to investors). Obtaining patent protection, however, means telling competitors how to make the piezoelectric fabric, for example. If that fabric is not readily reverse-engineered (if it would be difficult or at least sufficiently time-consuming for a competitor to figure it out), Intellitogs may wish instead to consider protecting that technology as a trade secret. Intellitogs may even consider a hybrid approach—filing patent applications on aspects of the fabric that can be reverse-engineered, while protecting other aspects (perhaps the method by which sensing or conductive fibers are made) as trade secrets.
Timing matters. If, to use our example, piezoelectric fabric technology is moving so rapidly that advances are outpacing feasible reverse-engineering, then trade secret protection may make more sense than undertaking to apply for patent protection. Publication, generally 18 months after the earliest priority date, 35 U.S.C. § 122 (2012), also matters. If Intellitogs wants to buy some time to consider whether to rely on patent or trade secret protection, it could make a “nonpublication request” at the time of filing. Keeping the application confidential, and at the same time preserving trade secret protections, would allow Intellitogs to keep its innovation under wraps during potentially protracted prosecution.
On the other hand, if further advances in piezoelectric fabric technology are likely to rely and to improve on features in which Intellitogs claims rights, then patent protection would be advantageous. Competitors could be forced to take a license, and Intellitogs would then benefit from their sales. In those circumstances, Intellitogs might consider making a request for early publication (available only with a non-provisional application). 37 C.F.R. § 1.219. If there is no substantial change between the patent claims as published and the patent claims as ultimately issued, Intellitogs would be able to claim royalties going back to the date of publication (as opposed to the date of patent issuance).
Copyright or patent or trade secret?Some of the innovative features of miHoodi may also be protected by copyright. The sensors, power sources, and communications all depend on flexible hybrid electronics—silicon integrated circuits (semiconductor chips) printed on, excised from, or embedded in layered substrates that can bend, stretch, and otherwise conform to the shape and movements of the miHoodi user. Virtually all of the miHoodi functionality (over and above its value as clothing) depends on software and particularly on interoperability with other devices and systems.
Integrated circuits can be protected as “mask works” under the Semiconductor Chip Protection Act (SCPA), which provides for protection of original “series of related images” showing the three-dimensional patterns of semiconductor material “present or removed” from different layers of a chip. 17 U.S.C. §§ 901, 902 (2012). A mask work owner is protected against unauthorized copying of any qualitatively important portion of the chip that results in substantial similarity, for a term of 10 years. Id. §§ 903–905; see Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1563–64 (Fed. Cir. 1992). The owner of a chip that embodies the mask work, however, can import and distribute products incorporating that chip. 17 U.S.C. § 906. Moreover, the SCPA permits reverse-engineering, allowing information learned by analyzing someone else’s mask work to be incorporated into a new original mask work (one that shows evidence of “substantial additional work,” see Altera Corp. v. Clear Logic, Inc., 424 F.3d 1079, 1086–87 (9th Cir. 2005)). Id. § 906. “Mask work” protection is thus likely to be narrower than utility patent protection (and is for a shorter term). It can also, however, be obtained relatively easily—without the back and forth and expense of patent prosecution.
The owner of a registered mask work can seek remedies for unauthorized reproduction, importation, or distribution in federal court or can seek to institute an ITC investigation. Id. § 910. Registration entails depositing a copy of the mask work with the Copyright Office. Id. § 908. This would, of course, vitiate trade secret protection, but so would inspection of the integrated circuits once miHoodi is on the market.
miHoodi’s functionality also depends on its software. Because increased scrutiny of subject matter eligibility has limited the scope of patent protection for software-based inventions, see Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014), Intellitogs should consider copyright protection, specifically including protection for its APIs. This topic warrants more extensive discussion, but here, we simply note that the Federal Circuit’s decision in Oracle America, Inc. v. Google, Inc., 750 F.3d 1339 (Fed. Cir. 2014), opened the door to copyright protection for APIs.
For Intellitogs, the Oracle holding is a double-edged sword. It allows Intellitogs to claim proprietary rights in its own APIs developed to build miHoodi software, but it also allows other companies to copyright their APIs on which Intellitogs is likely to rely. On balance, copyright limitations on using APIs are likely to make it more difficult for Intellitogs to ensure that miHoodi achieves interoperability, which is essential to the interconnected miHoodi “ecosystem.”
Conclusion
Rapid growth, tremendous potential, and increasing competition in the wearables market requires intelligent, strategic management of intellectual property and valuable data outside the traditional confines of “IP.” Overall assessment of knowledge assets and comprehensive planning for protection are not simply prudent; they are essential. Multiple forms of protection may be available, and early strategic choices can affect the efficacy and availability of legal and contractual protections. All too often, businesses take a fragmented approach to intellectual property and data, and lose out because they fail to identify and protect valuable information.
As discussed above, interconnected devices in the IoT are more akin to ecosystems than discrete inventions. A wearable like miHoodi is not only a bundle of many different inventions (hardware, software, methods) but also part of a connected community of devices that exchange information directly between them, to store, analyze, and report about data that miHoodi collected. In this context, companies like our hypothetical Intellitogs must adopt a coordinated, holistic approach to knowledge asset protection—not only considering the legal means for preserving exclusive rights but also giving due weight to data privacy and security concerns.
Keywords: litigation, intellectual property, Internet of Things, IoT, wearable, patent, trade secret, copyright, mask work, knowledge assets