This impinges on certain fundamental issues of creating and transferring intellectual property. For a period of about 10 years which are under investigation in this case (from the early 1990s to the early 2000s), there was no evidence to suggest a clear chain of title for IP created by Satyam for third party clients. The discovery procedure has attempted to delve into IP titles beyond the ones immediately in question. It found that there are no documents that show that the thousands of employees that Satyam had in this period had transferred their rights to the company for any of the products they had created for any client. Indeed, there are suggestions that there was no mention whatsoever of “intellectual property”, “patent”, “copyright”, or any such relevant term, in any agreement between employer and employee. Surely, this is “informality” pushed to an undesirable extreme?
Those of you who have been tracking this case for the past one year may recall that we had flagged this issue right at the top. In the initial stages, these were mere allegations made by Upaid in context of their own case. These developments suggest that these allegations may be true, and that the situation may be more grave than originally thought.
The implications of these revelations may be more grave than originally thought.
1. The allegations made by Upaid right at the beginning of this case may be very likely true.
2. If no clear chain of IP title has been found, then it is very likely that there are clients other than Upaid affected in similar fashion. Note that the glamourous roster of Satyam’s clients includes several Fortune 500 firms, and leading international agencies.
3. It is very likely that several engineers working with Satyam in the 1990s have since left and moved on to other firms. They may also attempt to claim IP rights for products they had created in their employment with Satyam, leaving other clients in a similar position, who may find their products “infringed” by competitors, only to discover that they never possessed good title in the first place.
4. The ultimate thing that India as an outsourcing destination needs to be concerned about is this: It is possible that this lack of transfer of IP title is unique to Satyam. On the other hand, this may not be the case. At a time when corporate India and customer confidence is the cynosure of international attention, there is immediate need to introspect and investigate whether or not this problem is systemic in the industry.
Upaid has already contacted Nasscom in this regard in the past, and attempted to find answers for its own case. I believe that it makes good business sense for Nasscom to request its own membership to clarify on this issue, and assure their global clientele that their IP’s in the right place, and all’s well with the industry. It also needs to encourage its membership to treat IP as a fundamentally important aspect of their work, and generate and manage its portfolio systematically. I suspect there may be a hidden business opportunity for entrepreneurs in IP management in the IT sector in India. From a regulatory point of view at least, there may be no better institution in India at the moment than Nasscom to serve such a purpose.
Upaid believes that the composition of Satyam’s new Board is encouraging, and that the Directors will bring to the table their rich and varied expertise, which will serve the company well. For sure, the Board will do well to immediately begin a comprehensive examination of its own IP portfolio which it has transferred or sold to its clients, and listen to the canary’s cries.