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EU Chips Act: Key Intellectual Property Considerations

Semiconductor companies will need to context of collaborative R&D. If so, the parties example, if shortages limit the supply of chips
carefully consider whether collaborative IP to the collaboration will need to agree on who to certain critical healthcare devices, the EU
ownership provisions are right for them. can patent a particular innovation and when. could mandate that a particular manufacturer
Do the benefits of collaboration, and any University participation may complicate mat- prioritize supply of those chips to certain
associated funding, outweigh the downsides ters, as university partners will require that manufacturers.
of shared IP ownership? If IP is to be owned their rights to teach, research and publish be While these provisions clearly have the goal
jointly, what would that mean for your ability respected. of protecting certain critical EU industries
to use the IP for your own purposes in the for the greater good, individual companies
future? The balance of this equation will PATENT-FILING STRATEGIES that supply chips to these sectors will no
differ for different types of organizations. Patent-filing strategies typically involve doubt be nervous about how PROs will be
For example, established semiconductor covering the national territories of the manu- implemented.
companies that have the means to fund their facturing base or the consumer base, or both. The Chips Act does include some safe-
own R&D may prefer more traditional, private Traditional semiconductor patent- guards, including the requirement for PROs
joint-development arrangements. They are filing strategies in Europe have focused on to be assessed based on the principles of
likely to have more control over IP ownership Germany, as that country has the EU’s highest necessity and proportionality, but these prin-
and therefore to have exclusive use of R&D concentration of manufacturing facilities and ciples are inherently uncertain in scope and
outputs. For such companies, the benefits of is one of the largest consumers of semicon- meaning. Companies can ask for PROs to be
taking part in EU-funded R&D collaborations ductors, especially in the home appliance and reviewed in certain circumstances.
may seem marginal. automotive sectors. The act also includes a provision protect-
SMEs, in contrast, are far more likely to find The Chips Act will likely increase R&D ing companies from liability when they must
that access to the proposed design platform and manufacturing activity in Europe, in a breach a supply contract to fulfill a PRO obli-
and pilot lines, together with the associated greater number of countries. Therefore, a gation. However, as with force majeure clauses,
funding, is more important than IP ownership Germany-only approach may no longer be the scope and effect of such protection can
considerations. Nonetheless, SMEs must be appropriate. be uncertain, and it is not clear how quickly
particularly careful when signing on to the Under Pillar 1 of the Chips Act, we will see any remedies might be available. In view of
EU’s IP policies. Those that do not properly collaborative R&D via the virtual design plat- this, companies might be advised to include
understand the relevant IP policy run the risk form and via new pilot lines. Semiconductor additional terms in their supply contracts,
of giving away too much of their technology. companies will need to monitor activity under to allow them to breach contract terms if
Pillar 1 to understand where those activities they are subject to PROs. Such clauses can
PATENTS VS. TRADE SECRETS are taking place. They may have to adjust be quite specific and are not uncommon in
Patents and trade secrets are an important their patent-filing strategies to reflect new supply contracts that require the supplier to
part of any IP strategy. But which form of centers for semiconductor R&D. prioritize customers when there is a shortage
protection should be used and when? Pillar 2 of the act is intended to fast-track of raw materials.
Patents are typically better suited to inven- new semiconductor-manufacturing facilities It’s important to note that responses to
tions that are easily discernible from the end in the EU. Toward that end, it establishes a mandatory information requests risk
product. For example, a new design for the so-called First of a Kind (FOAK) status for breaching confidentiality clauses. Therefore,
structure of a transistor could be protected qualifying facilities. A FOAK facility is one careful attention should be paid to the nature
in a patent, assuming the improvement is that brings a new manufacturing technology of any information provided under these
not obvious. Conversely, trade secrets may to the EU. provisions to ensure that confidentiality is
offer a better form of protection for improve- 2022 saw a number of announcements maintained.
ments that cannot be determined from the regarding new chip-manufacturing facilities
end product. For example, an improvement in Europe. Intel has committed to opening TIME TO ACT
to an etching process may be better off as a two FOAK facilities in Magdeburg, Germany, The European Chips Act will pose plenty of
trade secret. However, there is no clear rule as well as to expanding its Leixlip facility opportunities for EU-based semiconductor
about when to use patents and trade secrets, in Ireland. STMicroelectronics and companies, but companies must carefully
and there are other factors, such as cost and GlobalFoundries have teamed up to announce consider which initiatives are right for them.
competitor activity, that may influence the IP a new 300-mm FD-SOI facility near IP ownership and strategy will play a central
strategy. Grenoble, France. According to reports, TSMC role in those determinations.
Any company entering a collaborative is also considering building a fab in Dresden, Companies should keep an eye on
R&D agreement must consider the balance Germany. We’ve already seen the EU apply developments and review their IP strategies
of patents and trade secrets. When entering the Pillar 2 principles in approving state aid now to ensure that they are ready to benefit
a collaborative R&D project, it may be nec- for STMicroelectronics’ new silicon carbide from the Chips Act as soon as it comes into
essary to disclose confidential know-how to facility in Italy. force. ■
other collaboration partners. While confiden- Semiconductor companies should keep
tiality provisions will exist, the number of a careful eye on new applications for FOAK REFERENCE
organizations involved will inevitably increase status and adjust patent-filing strategies 1 European Commission. (May 12, 2022). “A
the risk of know-how leaking between orga- accordingly. Chips Act for Europe.” Commission Staff
nizations, particularly when employees move Working Document. bit.ly/3iWa7sj
around. It may therefore be appropriate to CONTRACT TERMS
turn the IP strategy dial toward patents and Another aspect of the Chips Act is the provi- Andrew Thompson is partner and U.K. and
away from trade secrets. Ideas that might sion of mandatory information requests and European patent attorney at EIP.
ordinarily be better kept as trade secrets when priority-rated orders (PROs). These provisions
R&D is being conducted in-house might be appear under Pillar 3 and can be initiated Mark Lubbock is a commercial IP and data
more suitably protected using patents in the during semiconductor supply shortages. For protection lawyer at EIP.

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