Reverse Roles from Guest to Host
May 23, 2022
By Robert Cantrell - Registered Patent Agent
A common threat to intellectual property is an adversarial strategy called “Reverse Roles from Guest to Host.” This strategy, defined in writing over three thousand years ago, involves gaining authority step-by-step in an assisted organization through a series of agreements and concessions. Other entities may employ the strategy against you if allowed to do so.
Reversing Roles from Guest to Host is at the heart of debt traps. One entity lends money to another entity and, step-by-step, gains control of the debtor’s resources when the preceding debts come due. If the individuals authorizing the debt are unaccountable for paying the debt, the dynamic is all but assured.
The target of an adversary employing Reverse Roles from Guest to Host may be know-how and patented inventions. For example, a producer’s proposal to offer low-cost manufacturing may be the first step toward that producer becoming a competitor. Manufacturing often requires knowledge transfer. Step-by-step, the producer accumulates knowledge until the provider of that knowledge is no longer needed. The centers of gravity for entire industries have shifted borders through knowledge transfer driven by production cost advantages and permissive regulations. Pharmaceutical production, high-tech electronics, and back-office support provide well-known examples. Home enterprises face a lose-lose proposition of being unable to compete in the short term without engaging low-cost overseas producers but then having those overseas producers become or create long-term competitors.
Reverse Roles from Guest to Host can be challenging to combat if the involved third parties have the wherewithal and intent to compete independently. The difficulty is magnified if more powerful entities allow or encourage the reversals to happen.
The first step toward addressing an adversary’s strategy is to define it. Put Reverse Roles from Guest to Host on a whiteboard or somewhere else visible and describe it. From there, select a word-picture that conveys the spirit of your options. For example, I framed one of my encounters with Reverse Roles from Guest to Host this way: avoid the dragon, resist the dragon, or ride the dragon. A plan came together from there.
By Jose W. Jimenez, Esq – Former Chief Patent Counsel & Registered Patent Attorney
As Robert posits, companies from start-ups to Fortune 500 will eventually move or be “moved” from Guest to Host. But as patent counsel watching this happen, negatively or positively, what can you do to protect our client’s interests posed by this business strategy? Whether you agree or disagree with your client’s strategy, at the end of the day, your job is to give your clients good options. Your client needs to be able to move quickly should circumstances change. So, what does that mean for you a patent counsel?
First protect your home and largest markets. Consider expedite the patent securement process, at least in our home market, to quickly establish your defensive shield. Consider also apply for design patents when possible because they provide added protection for a minimal added outlay.
Secondly, protect know-how to prevent it from being taken over by your host. Document your trade secrets and set up the proper safeguards internally to ensure their protection in the US market. Consider adding a licensing provision with a minimal royalty in the transaction for the know-how being licensed because such licenses are valid and enforceable well beyond the 20-year lifespan of a US patent.
Finally, remember to register trademarks, trade dress, and copyright protection at home. These instruments are inexpensive and give you more cards to play. Remember to conduct yearly audits on your licensed trade secrets and your trademarks to maintain validity at home.
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