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Upaid – the canary in the Satyam coalmine


Things have admittedly deteriorated over the past few weeks for the Indian IT company, and like a commentor on a previous post said, “one feels bad for those working at Satyam”.
I caught up with Simon Joyce, the CEO of Upaid, a UK-based mobile payments technology company, for a reaction on recent developments. He said something very pithy, which I paraphrase: Upaid has been “the canary in the coalmine” in the Satyam story. It’s still singing, though, and it maybe worthwhile if the powers that be actually listen to what’s happening within. He had some very disturbing news to offer, which is of direct interest to this blog. The pre-trial discovery process that is ongoing in the IP-infringement related case in Texas has revealed that Satyam did not have even a single piece of documentary evidence indicating explicit transfer of IP title from Satyam employees to the company.

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.

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4 comments.

  1. AvatarJ. Sai Deepak...Iyer

    Hi Sumathi,
    Great post. I thought i should share a few thoughts here so that even readers may respond. The Satyam imbroglio keeps unravelling to a new level each day and i am surprised at the seriousness and the depth to which the rot exists; but there’s something which i find very strange. Assume that both of us are in the same field and both of us are reasonably high-profile and are competitors to a very large extent; wouldn’t you expect me to have atleast a gross estimate of your capabilities, weakness, in short my own SWOT analysis of you not to mention under-the-table transactions through rumours of some kind? Similarly, i can reasonably expect you to keep tabs on me. This wouldnt exactly fall under industrial espionage, just normal trade talk and backward projections based on what we see on the surface. The reason for this long-winded bhoomika is that one would have expected the rest of the IT majors in the SWITCH group (Satyam, Wipro, Infosys, TCS, Cognizant and HCL) as Gartner calls it, and organisations like NASSCOM to have unearthed all of Satyam’s dirty linen or atleast strongly suspected foulplay. Is it too much to expect some intelligent guesses from our IT whizkids based on Satyam’s scale of operations as to what is actually going on? Not just that, within all these IT majors, the employee population is very dynamic and floating. Everyone almost knows someone in this group and naturally they compare and contrast their experiences right from the food in the canteen, to the amount of chlorine in Infy’s swimming pool in the training campus at Mysore to pay, perks and the works. Yet, none of these brilliant geeks could guess what was happening??? As politically incorrect as it sounds, i think one must give due credit to the guy who master-minded it for so long and has taken everyone for a joyride all these years. I am surprised when everyone reacts in shock and disbelief. My take is that most were silent so that they could keep away from muckraking out of fear that the trail could lead to them at some point or other.

    Further, for ten years a company has been vending its employees to others for projects and most of its clientele boasts of the who’s who in Fortune 500. Shouldnt these companies which set trends in what is fashionably called “best practices”, have been diligent enough to verify the kind of IP agreements which Satyam has with its employees? These are very basic questions which any person with common sense would have asked for verification to avoid unnecessary and avoidable fuss later. Is one supposed to assume that NONE of these companies ever asked Satyam a copy of their employee agreement template? I guess as organisations get bigger and complex, they tend to take for granted certain “elementary” issues and this i think could be the case here.

    I strongly empathise not only with the current employees but each and every soul who has ever beamed with pride on being associated with Satyam, this is because most of them must have gone on to bigger and better places using Satyam as their springboard. This controversy has put a question mark on every one of their records and the value of their achievements leaving them apologetic and alone to defend their past. It is worse enough to be in the eye of the storm, its another thing to watch it from outside when you have been associated with it.

    Also, the print media which keeps feigning sympathy for the employees of Satyam should be sensitive when it brings out new information because each day the morale of the employees is dealt a body blow and i cant even fathom what they must be going through each day dreading to step foot inside the campus, expecting worser than the worst.

    Finally, the biggest loser in this entire affair is India. The IT sector has given Indians something to be really proud of, something which they thought isnt hollow inside out and each achievement was an adrenaline shot. Not just that the kind of spending power which it gave the average Indian middle class families has changed forever the quality and standard of living in this country which it has never seen before having worshipped and deified poverty for centuries. It is going to be more than a Himalayan task to bring the pieces together and to rebuild that confidence. I do not intend to sound alarming, but this incident has certainly given the detractors and competitors of India something to cheer about. I only wish that those interested and involved in finding a solution to this issue do it with a sense of purpose because it is not just about Satyam, it is about the credibility of the entire Indian industry.

    Once again, a great post ably and sensitively handled. It would be great to know your thoughts because you are always a step ahead in these issues 🙂

    Bests,
    J.Sai Deepak Iyer.

    Reply
  2. AvatarAnonymous

    JSDI,

    being in the corporate sector for some time now, let me tell you:
    ANY CONSULTANT [management/ financial/ tax] WILL GIVE YOU OPINION THAT YOU WANT. THIS INCLUDES RUBBER STAMPING VIEWS THAT HAVE ALREADY BEEN FIRMED BY MANAGEMENT EARLIER.
    I guess the above will give you some perspective on why even a ‘global’ audit firm could not find loopholes… guess they did not want to see original reciepts for Bank FDs to the tune of 1.2 Bn $US.

    NOW… the issue of Employee Agreements… i have signed these.. including the ones on Confidentiality… they aint worth the stamp paper they are written on… the problem is that the legal dept. uses a standard template for all employees and makes you sign a Agreement that in theory would not let you work anywhere in the same sector… FOR no consideration. There a lot of loopholes in these standard form agreements.. and missing of IP assignment is just a tip of the iceberg…
    I tell you.. you will laugh at what Employees are made to sign when they join a Company.

    Frequently Anon.

    Reply
  3. AvatarJ. Sai Deepak...Iyer

    Hi FA,
    Thanks for the quick comeback. On the issue of consultants parroting opinions of companies, honestly i have no idea, so i will have to take your word for it.

    As regards the employee agreements, from what you say, the malady seems to be endemic,this means Satyam alone is not in the fray.That is precisely what i was trying to convey; so long as people dont get caught they are honest, only when you start digging through, you will find skeletons tumbling out of the closet, so probably Satyam was unlucky. But thats no justification for what has happened.

    Thanks for sharing your opinions.

    Regards,
    JSDI

    Reply
  4. AvatarSumathi Chandrashekaran

    Thanks JSDI for your compliments, and to both you and FA for your comments.

    FA- you’ve pretty much hit the nail on the head, and indeed already answered JSDI’s queries – that is exactly the concern that needs to be raised here. I don’t think Satyam’s IP Assignment is unique to the company. I strongly suspect this may be protocol in every company.

    I suspect also that there may be a degree of naivete involved in this – companies are eager to garner as many external clients as possible, without paying attention to what is happening within. When it comes to client companies cross-checking the employee assignment agreements, I would definitely hold client companies responsible for not having done so. But then again, it is possible that they relied on the “reputation” of the companies they were recruiting for developing their products.

    This is a quick response, because I am incredibly pressed for time right now. But I look forward to continuing discussion on this.
    cheers
    sumathi

    Reply

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