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Audience Questions IP in Global Markets
The best part of any technical panel is the Question and Answer (Q&A) session, where the discussions become less scripted. Also, it’s where disagreements may occur among panelists that are generally in agreement. Let the final act begin! (Part III: Stop That Thief! – IP in Global Markets)
The final act is about to take place. The moderator has set the stage with his opening remarks. Each panelist has established his or her position on the topic. Now, it’s time for the audience to ask the tough questions.
Here are the cast members for the exciting climax to the DAC 2011 Pavillion Panel on IP quality and security issues in global markets:
- Panel Moderator and General Manager at ChipEstimate – Adam Traidman
- Distinquished Panelist #1: Gerd Teepe, GLOBALFOUNDRIES in Dresden, Germany
- Distinquished Panelist #2: Alan Coady, Integrated Device Technology (IDT), Ottawa, Canada
- Distinquished Panelist #3: Jonathan T. Kaplan, Law Office of Jonathan T. Kaplanm, Vancouver, WA.
- Key Grip and Author: John Blyler
Question #1: This question is for Jonathan. I’m with Globalfoundries. What do you see as the foundry’s responsibilities in helping to enforce some of these IP issues?
Response – Kaplan: I think there is a lot that foundries can do. Since companies like Globalfoundries are large companies, they have the resources to enforce IP rights. Whenever you are advising a client about whether they can get IP rights in the first place, the first question deals with the size of their pockets. Will they really be able to afford to enforce IP rights, because it is a very expensive process? One of the common ways to deal with that, especially in China, is to use arbitration as opposed to the court system. China has an arbitration commission which is called the China International Economic and Trade Arbitration Commission (CIETAC). This commission is very friendly to foreigners. Proceedings can be conducted in English. Also, you may have foreigners on the panel that decide the case and so forth. So, in summary to your question, I would probably recommend arbitration in general. And larger companies like foundries can certainly enforce it.
Response – Traidman: Let’s say that some part of the design IP has been stolen or infringed. The foundry is unaware of this infringement and is manufacturing the IP in volume. Does that put the foundry in any legal risk?
Response – Kaplan: Yes. It doesn’t depend upon the foundry knowing about the infringement. They can still be liable. This is true with other forms of IP, like trade secrets, copyright, and others. You can still be at risk.
Response – Teepe: We are agnostic to design IP. As a foundry, our customers are making deals with the IP companies. But there are some borderline IP areas, such as non-volatile memory, input/output interfaces, ESD and so forth. This is technology specific IP, not something that you can easily buy on the market. Still, we need to provide some help in this area as well, i.e., even in the area where we (Globalfoundries) touch the IP very closely.
Response – Kaplan: You must have considerable concerns about that?
Response – Teepe: Yes. If our customers buy bad IP and consequently can not sell his product, then we can not sell wafers. This would be bad. So we are linked with our customers. This is why we get involved with our customers in the IP process.
Question #2: Some companies don’t seem to mind if their IP is stolen. These companies reason that it is better to have their IP stolen then to have their competitors architecture stolen. Eventually, their stolen architecture will provide a base for future business. Comments?
Response – Coady: I have heard it said by more than one company that they don’t care if their IP is stolen. By the time it is stolen, by the time other people are using it, the company has moved on. I see two types of companies. One company puts a lot of effort into protecting the IP because they are nervous. The other company doesn’t really care because they can move really fast. You have to decide which approach works best for you. If you’re not going to move fast and you have competitors stealing your IP and using it against you, then that is a bad situation. But other companies have said they couldn’t care less if their IP is stolen.
Response – Traidman: Are the companies that don’t care IP companies or system design houses?
Response – Coady: They tend to be big system design houses that do semiconductor design work as their main business.
Question #3: I’m from Chipworks. What due diligence can companies do to understand if there are any legal issues with the IP they are buying? Alan Coady; What does IDT do in buying IP blocks? Gerd Teepe; Does Globalfoundries do anything, given that they are actually fabricating the IP? Does Globalfoundries do any due diligence at all with the IP that is going into the chips?
Response – Coady: A lot of the risk depends upon the company you are dealing with. If company has reputation that they need to protect, then that is a built in freebee. You can ride on their need to be a reputable company. The opposite is true if you’re doing with a company with little to lose but a lot to gain, in other words, an emerging company or emerging country. They do have something to lose, but they also have a lot more to gain because they don’t have much quality on the table. In this case, you carry that risk if you ride with them. In either case, you have to assess what risks you are willing to take. The more risk that the other company assumes, the less you have to worry about.
Response – Teepe: Let me address the question asked of Globalfoundries. During initial contract negotiation, we talk to our customers. We regularly asked those questions, such as, where the cells are coming from. Where is your memory coming from? This is a standard check. But we don’t regularly drill down deeply into the customers system to see if there is anything suspicious.
Question #3 Follow-up #1: Have either of you ever pulled the plug on a deal because the IP wasn’t owned by the people trying to sell it to you?
Response – Teepe: Well, I not really in a position to answer that question. However, I’m not aware of any such case.
Response – Coady: Yes, I believe that I have pulled the plug, but not with my current company.
Question #3 Follow-up #2: In the semiconductor industry, Tier 1 manufacturers will deliver a chip into the market. Almost immediately, fast followers in a secondary market will rise up in China and India to produce a similar chip but with less functionality. Do you see this fast follower secenario in the IP industry, i.e., where you get that second wave of low cost providers that are part of your trusted IP ecosystem?
Response – Teepe: We have built a trusted partner base, a good foundation from which to work. Also, we have a program in place to qualify our vendors. All of these activities are in place to ensure that the IP is legally owned by the vendors we work with. We don’t look into the last details of the transistor design, but we have significant talks about the IP. Naturally, we don’t want to jeopardize our reputation or the business. For our IP deals, through the routine of qualifying them, there are sufficient checks.
Response – Coady: Yes, I do see that there are fast followers in the IP business. They tend to be the smaller companies who sell cheaper IP. These companies are trying to get their foot in the door, trying to be agile. But if you engage with these fast followers, then you take on the risk of the quality and the timeliness of the IP. But I haven’t noticed any pattern of infringement or risk from these smaller companies. That would be a bad business model for them. Still, these smaller companies may stumble into infringement issues. Of course, many smaller companies put more attention and care into their IP and designs. For the end user, it comes for free when the company has a good reputation.
Response – Kaplan: In emerging market countries, business is still done on a more personal level. It depends a lot more on relationships. You’ll have much better results if you can get to know the group that you are dealing with in the emerging countries.