European CleanTech Companies Face IP Hurdles When Expanding in U.S.

Patent protection, high costs and cultural differences are among the many challenges that European technology companies face when pursuing business opportunities in the U.S.  Identifying and overcoming these hurdles was the focus of a recent CleanTechIQ webinar, Top IP Issues Global Companies Face When Pursuing U.S. Clean Energy Projects

In fact, protecting intellectual property (IP) rights when pursuing cross-border partnerships and licensing agreements in the U.S. should be a technology company’s primary focus, according to Nathaniel Lucek, senior associate at law firm Hodgson Russ.

A growing number of innovative companies from Germany France, Belgium and Finland are looking to expand in the U.S., Lucek said. In particular, his firm is seeing companies focused on renewable energy, green buildings and smart city technologies interested in projects in the U.S. due to a strong shift to a more decentralized energy system in certain states.

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Patent protection laws vary by country, so even if a company’s IP is protected in its home country, it may not be protected in the U.S.  Further complicating things is the fact that the types of intellectual property that can be patented in the U.S. changes frequently, Lucek said.

That is why companies should consider working with cross-border experts and with their country’s chamber of commerce office, all of whom can advise on legal, IP protection and cultural issues companies face when entering the U.S. market.

It’s important to do a thorough patent search to examine the existing patents of your competitors in the U.S., Lucek said, since there may be existing patents that can block a foreign company’s ability to operate here. A patent search firm can helpful in conducting this research.

In general, getting a patent in the U.S can take anywhere from six months to two years, depending on a company’s strategy and the fees it is willing to pay, Lucek said.

N-Side, a Belgium-based developer of advanced analytics software for industrial applications, decided not to pursue a patent in the U.S. due to differences in the types of software that can be patented in Europe versus in the U.S. Since N-Side is a cloud-based service-as-a-software service, this allows the company greater control over potential fraudulent usage, said CEO Jacques Parlongue.

Instead of seeking a patent, the company developed distribution partnerships with major technology firms, such as Oracle, to implement its solutions with U.S. clients including large pharmaceutical and industrial companies. Its software includes energy optimization solutions that incorporate renewables and smart building technologies. Since its U.S. distribution partners have strong IP protection embedded into their contracts, they also protect N-Side’s IP, Parlongue pointed out.

However, selling your technology through local U.S. partners can also raise issues, Lucek warned.

For example, some part of your software may be licensed from other European software developers, and you will need to confirm that you have a worldwide license to this software and that it can be shared with other third parties.  This might require you to negotiate a new license for the technology, he pointed out.

And you will need to set up confidentiality agreements with your U.S. distribution partners in order to have the ability to file U.S. patent applications.

Companies should also have joint development agreements in place that govern collaboration that stipulates which company owns the IP that is developed jointly, Lucek said.

Companies coming to the U.S. are often intimidated by the complicated legal framework and high costs of protecting their technology here, said Daniel Atz, member manager at the Belgian-American Chamber of Commerce (BelCham.) He said he has seen a big influx of Belgian technology companies coming to the U.S. for new customers and access to capital, and this is a growing concern among such companies, he said.

To help these companies make a smoother transition to the U.S. market and to identify potential IP issues, the Chamber conducts market research and makes introductions to experts and potential local partners.

Human resource issues present one of the biggest challenges European companies face when entering the U.S. market, webinar panelists said.

One key challenge is that there’s a greater tendency among U.S. employees to jump from job to job compared to their counterparts in Europe, Atz said. That means it’s vital to set up IP ownership agreements with U.S. employees and contractors, particularly when hiring software developers.

Addressing IP ownership issues with new U.S. employees is a big point of concern for N-Side, according to Parlongue, who pointed out that in Europe, employee contracts are much more restrictive than in the U.S., with IP protection usually embedded in those agreements.  Companies generally need to be more careful about protecting their IP with U.S. employees, he said.

In a cautionary tale, Atz recounted an example of a Belgian technology firm that raised capital for expansion and quickly hired 33 U.S. employees without having them sign confidentiality agreements. The company soon ran into serious problems because it didn’t fully appreciate how challenging it was to work in the U.S., Atz said, which led to the dismissal of many of its new U.S. employees. Because of that lack of confidentiality agreements, many of its software developers walked away with the company’s IP, a situation that had a material impact on its business.

Another key cultural difference that can manifest itself in cross-border contract negotiations is the higher risk appetite and greater tolerance for failure in the U.S. than in Europe. This can potentially lead to more lawsuits if it’s not addressed in contracts, said Lucek.

However, many of these cultural differences disappear when a company uses a U.S. law firm in their negotiations, said Lucek, who pointed out that many European clients he meets with are quite worldly and he expects some cultural differences to fall away over time as more European companies enter the U.S. marketplace.

 

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