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Advantages of IP Portfolio Management From Switzerland
By John Moetteli, Esq., US Patent and Trademark Attorney-at-law, Da Vinci Partners LLC, Switzerland. © 2009 - 2015
Take a company like IBM, Tyco
International, or Semtech, global companies, leaders in their fields. Where do they
choose to place and manage some or all of their most valuable intellectual property?
New York? California? Delaware? Perhaps to some extent, but not exclusively.
They have chosen Switzerland, what some would consider an unlikely base from which
to manage a precious asset. Yes, there are legitimate, significant and even compelling
reasons to choose Switzerland as a base from which to manage your intellectual
property, whether you're a small enterprise or a large multinational. This article
explores the most significant reasons for choosing attorneys based in
Switzerland to manage your IP portfolio. 1
Probably the most common reason for basing a company’s IP management function in Switzerland is to operate an IP holding company, which licenses IP to a parent or members of a group for a royalty, which is taxed at local, often negotiated tax rates.
When a parent corporation creates a holding company to hold IP and other assets for the benefit of subsidiary operating companies of a group, the intellectual property is essentially quarantined from legal claims (e.g., product liability claims) filed by the clients and business partners of the operating companies which exploit the IP.
Switzerland has a developed legal system and a long and recognized experience with arbitration and mediation in resolving otherwise costly legal disputes. Many of the world’s best arbitrators are located in Switzerland.
Foreign judicial discovery orders are carefully scrutinized by the Swiss authorities before being executed by these Swiss officials (which unlike in the U.S., are not lawyers paid by the other side)9. Collection of evidence in Switzerland, by way of pretrial discovery or otherwise, for any kind of foreign proceedings without the participation and consent of Swiss officials is considered a violation of Swiss sovereignty and may lead to criminal sanctions being imposed on the party seeking the discovery.
Switzerland is a member of all major international treaties, in particular the IP treaties, including the Paris Convention, the Berne Convention, the Madrid Agreements, the Patent Cooperation Treaty, and the Hague Agreement. Through adherence to these treaties, Swiss entities are able to register IP rights in a large number of jurisdictions through a centralized registration system, thereby avoiding the need of hiring attorneys in the jurisdictions in which protection is sought.
Switzerland is a multilingual country, a microcosm of the world, and so,
Swiss professionals are better trained to manage things international. Switzerland is
the home of the World Intellectual Property Organization (i.e., the World patent office)
and is two hours drive away from the European Patent Office, which makes
dealing with these authorities less costly. Switzerland's people have a high level of
education, making finding skilled employees easier than in other countries. Switzerland’s
financial and legal system makes holding financial assets in Switzerland more secure
and reduces the legal risks of performing research and development activities here.
Switzerland's breathtaking scenery and higher education system makes for a
pleasant work environment, helping companies attract key people, whether
talented researchers or wealthy businessmen. 15 This also makes any reason
for spending time in Switzerland more appealing, evidenced by the fact that
Switzerland has already enticed many of the world’s billionaires and movie stars to make
Switzerland their new home.
Because it offers significant advantages over holding IP in the home
country of the IP owner, Switzerland warrants serious consideration as a base
from which a company’s intellectual property portfolio is managed. Centralized
management and flexible Swiss IP law, together with a business-friendly legal
system, make managing IP from Switzerland efficient, secure and no-hassle. The country
itself is a favorite destination of the world's wealthy, and so offers an attractive setting
for such persons to conduct business. In sum, it is difficult to find a more strategic
home for a company’s critical IP assets than Switzerland.
Do check the actual credentials of your attorneys before engaging them, should you use them to manage your IP portfolio. Most are very competent but when it comes to managing your offshore IP portfolio, an attorney(at-law) with formal legal training is probably best for handling confidential advice and other sensitive matters, as well as for giving you unbiased advice on issues that in the client's best interest.
2 On the other hand, unless the license to a
group member is exclusive and includes the right to sue to collect for lost profits, by
placing the IP in a passive holding company
that does not promote products protected by
the IP, the group may lose the ability to
recover lost profits from infringers—rather,
recovery of damages from infringers will
likely be limited to a reasonable royalty,
under the Poly-America doctrine. Poly-
America, L.P. v. GSE Lining Technology,
Inc., 383 F.3d 1303, 1310-12 (Fed. Cir.
2004). Whether this is an issue in creating
an IP holding company depends on the
goals of the group. If the goal of the group
is to maximize possible revenue form
enforcing intellectual property beyond all
other goals (like providing a safe haven for
the group’s IP and minimizing litigation risk),
then perhaps forming an IP holding
company should be reconsidered.
Nevertheless, even under these
circumstances, the IP holding company can
argue that the value of the patents held was
in excluding competitors for the group
members, not in licensing the rights to them,
and that that the operating company
received the benefit of its wholly owned
subsidiary’s profits, there would be a strong
argument that the IP holding company that
also enforces IP rights on behalf of its group
operating companies is entitled to recover
lost profits on behalf of the group. Case of
the US Court of Appeals of the Federal
Circuit recognize the guiding principle of the
patent statute to award an amount sufficient
to compensate the plaintiff for all the harm
caused by the infringement. See, e.g., King
Industries Corp. v. Perego, 65 f.3D 941, 947
(Fed. Cir. 1995); Rite-Hite Corp. v. Kelly Co.
3 These issues are described in Lawrence
Collins, Essays in International Litigation
and the Conflict of Laws—The Hague
Evidence Convention and Discovery: A
Serious Misunderstanding (1994);
Bundesamt für Justiz, Rechtshilfeführer—
Praktischer, Führer Zur Internationalen
Rechtshilfe in Zivil—Und Strafsachen
[Federal Office of Justice, Guide to Legal
Assistance—Practical Guide on International
Legal Assistance in Civil, and Criminal
Matters] (7th ed. 2002)(amended Feb. 2004),
4 See Code of Civil Procedure of the Canton
of Zürich (ZH-CCP) §§ 115, 183, 148.
5 See Code of Civil Procedure of the
Canton of Zürich (ZH-CCP) §§ 163(2).
6 See Art 332, Swiss Code of Obligations.
7 US patent firms can offer direct services
only through separate offices and so cannot
benefit from the efficiency and synergy that
managing such cases under the same roof
8 Da Vinci Partners LLC is one of the few,
but not the only such firm. Consequently, a
client who is aware of the advantages of
using such a firm and so seeks such a firm
out, is likely to receive the band-width of
attention they need from these service
providers to properly manage their
9 Evidence is taken by the judge. If a party
fails to give evidence in a civil case, the
court may draw inferences adverse to the
non-disclosing party, but cannot impose
criminal sanctions. See Code of Civil
Procedure of the Canton of Zürich (ZH-CCP)
§§ 115, 183, 148.
10 Punitive damages are considered contrary
to the Swiss ordre public. Dörig, supra note
1, at 356, 360; Felix Dasser, Punitive
Damages: Vom "Fremden Fötzel" zum
"Miteidgenoss" [Punitive Damages: From
Stranger to Co-Confederate], 96
Schweizerische Juristenzeitung [Swiss Law
Review] 108 (2000); Decision of the civil
court of Basle of February 1, 1989 in the
matter of S.F. Inc. v. T.C.S. AG, Basler
Juristische Mitteilungen, 31 (1991). See
Christian Lenz, Amerikanische Punitive
Damages vor dem Schweizer Richter
[American Punitive Damages before
11 Such actions are more likely to be
considered administrative or criminal in
nature. Beweisaufnahme [International
Legal Assistance in Civil Matters: Service
and Evidentiary Assistance], in Paolo
Bernesconi et al, , Assistenza Giudiziaria
Internazionale in Materia Civile, Penale,
Amministrative ed Esecutiva [International
Legal Assistance in Civil, Criminal,
Administrative and Execution Matters] 25
(1999); BB1 1993 III 1265.
12 Richard Frank et al., Kommentar Zur
[Commentary to the Code of Civil Prodedure
of the Canton of Zürich], preliminary remarks
to § 133 ss., at 16 (3d. ed. 1997) at ZH-CCP
13 See Article L. 612-9 of the Code de la
Propriété Intellectuelle français--however,
this requirement is considered by many
invalid under GATT TRIPS. In addition,
German law forbids filing German state
secrets abroad. German state secrets are
defined as facts and knowledge accessible
to a limited number of people whose
relevation would damage the external
security of the German nation §93 Nr. 1
Strafgesetzbuch (StGB)(Ger.), translated in
Joseph J. Darby, The Penal Code of the
Federal Republic of Germany 118 (1987).
Therefore, this covers almost all militaryrelated
inventions the details of which are
known by only a few. As for the UK, filing
applications abroad on military technology,
or technologies that could harm national
security or public safety is prohibited under
Section 23 of the UK Patents Act.
14 Handbook on European Intellectual
Property Management, Why File in the
United States First, Chapter 7.7, Kogan
Page and the European Patent Office (July
15 IBM Rüschlikon has attracted several
Nobel Price winning researchers for its
European headquarters near Zürich.
About The Author
John Moetteli is an International patent attorney and managing attorney of
Da Vinci Partners LLC (www.davincipartners.com), an IP firm in Switzerland specializing in preparing and
filing U.S. and European patent applications for global clients.
He has advised clients as adjunct faculty.
Besides his almost 20 years total IP experience, Mr. Moetteli has more than 15 years
experience filing U.S. patent applications directly from Europe. Readers interested in setting up an
IP holding company in Switzerland or to discuss managing their IP portfolio from Switzerland are
invited to request further information via contact form. Note that although this
article is subject to copyright, the author does not object to reproduction of this article
provided it is copied and distributed in its entirety including footnotes.