Intellectual Property Protection Guide - Of Chameleons and Pitfalls

by John A. Leonard

Conduct an IP Inventory - Beware of Chameleons. The first step in developing a protection and licensing strategy is to understand what you have. Some IP “Chameleons” can change their colors and be classified in more than one area-or defy classification at all.

Copyrights. Copyrights protect expressions of ideas. Although copyrights arise by operation of law, plan on registering copyrights with the United States Copyright Office. Registration forms, instructions, and a varied of helpful publications are maintained by the Library of Congress on its copyright website: www.copyright.gov. The term of a copyright is generally the life of the author plus additional seventy years. If the copyright is a “work for hire”, and authored by an independent contractor, then its term is ninety-five years from the date of publication or one hundred and twenty years from the year of its creation, whichever occurs first.

Patents. Patents protect ideas. Patents are divided into utility patents, design patents, and plant patents. Utility patents protect technological inventions and are arguably the most important class of patents. Examples of inventions protected by utility patents include electric generators, methods of extracting gold, business methods (software) and pharmaceuticals. The main condition for receiving a patent is novelty and non-obviousness. Generally, the term of a new patent is twenty years from the date on which the application for the patent was filed in the United States. Getting information on particular patents is easy. Go to the “Patent Electronic Business Center” at www.uspto.gov. If you have only general information regarding a patent, you will need to search both the published applications and issued patents sections of the database.

Trademarks. Trademarks protect names, symbols, slogans used to differentiate products and services. Trademarks arise by operation of law upon use but may be registered on the state and federal levels. The short-hand test for trademark infringement is likelihood of confusion in the same stream of commerce based upon sight, sound and meaning. Search existing federal registrations and applications at www.uspto.gov. In addition, the website posts the current trademark manual of examining procedure. Chapter 1200 contains the “substantive examination of applications” and can be an invaluable source into how trademark examiners review an application. Trademarks last indefinitely but must be renewed between the fifth and six year of registration and then every ten years from the date of registration.

Trade Secrets. Trade secret law protects ideas and expression of ideas. Most states have adopted a form of the uniform trade secrets act. As a general rule, trade secret law will protect only information that is truly a secret and only if a company has taken reasonable means to protect the secret. Trade secrets are not registered, and if protected, will survive indefinitely. The formula for Coca-Cola is often sited as a trade secret.

Chameleons. A chameleon is IP that can change its colors and therefore be placed in more than one of the categories listed above or IP that, because of its color, defies classification. Software is an example of IP that can change its colors and be placed in trade secret, copyright and patent categories. “Know how” (important knowledge that does not rise to the level of a trade secret) and “branding” (the strategic combination of all of the categories listed above) are examples chameleons that defy IP categorization. The whole is greater than the sum of its parts. Coca-Cola relies on its branding, not its formula, for success.

Develop IP Protection Plans - Beware of Pitfalls.

Copyrights. There are two basic strategies in copyright. First, file early, file often. Actual damages are frequently difficult to prove in a copyright case. However, statutory damages are available if the copyright has been registered prior to infringement. There is a presumption of ownership if registration has occurred within five years of publication. Second, get copyrights (all other IP) transferred in writing from employees and independent contractors. Under copyright law, authors are owners. Software code drafted by an independent contractor is owned by the independent contractor - even though the company has paid for the coding. In that case, the company usually ends up with a non-exclusive license to use object code but has no rights to create derivative works or distribute the software. Be careful of transfers from existing employees. Frequently when a company adopts a trade secret protection strategy, it has its employees execute blanket transfers of all IP. For new hires, the blanket transfers are part of the hiring process. However, for existing employees, the new agreements arguably are not supported by independent consideration. One of two bad things can happen: the transfer is deemed ineffective because lack of consideration or, the consideration inferred is that the employee has converted his status as an “at will” employee to one that is discharged only for cause. An extra $50 to an existing employee to ensure independent consideration is cheap insurance.

Patents. Develop patent prosecution and patent licensing strategies. Provisional Patents (patents that are not reviewed and have a 12 month term) can be invaluable protection when searching for funding and the need to discuss an invention. Business Method Patents are also very useful for protecting a way of doing business as small as the Amazon “one click” for purchasing an item on line, to something as large as a data processing patent for mutual funds (Google: “state street business method patent” for discussions on the latter).

Trademarks. Register what needs to be registered - not everything that can be registered. Every client is different. Protect the crown jewels with a registration.

Trade Secrets. Colorado did not adopt the uniform definition of “Trade secret” when it adopted the Uniform Trade Secret Act in 1986. The result is that one still needs to refer to court cases to glean what a trade secret is. One decision, for example, holds that a trade secret is information that is not shared outside of the company. This comes as a surprise for those who hire independent contractors, especially for software coding.

Watch Your Language. This is an issue principally for copyright and patent licensing. For purposes of copyright, 17 USC Section 106 confers the following rights to authors: to reproduce; to prepare derivative works; to distribute copies; to perform; to display; and to perform certain works by means of digital audio transmission. Copyright licenses should be expressed in terms of the various copyrights. Likewise, 35 USC Section 271 grants the patent owner a monopoly to make, have made, sell, offer to sell, use and import an invention. The additional clarity will help a court properly interpret the intent of the parties to a patent or copyright license.

Understand Options to Develop Intellectual Property and Be Creative. Companies can retain IP internally for its goods and services without licensing to others. Companies, especially those with patents, may rely on modifications to the underlying patent in order to extend the life of an invention. Pharmaceutical companies frequently use new coding technologies, new manufacturing methods and other similar “choke points” in order to extend the life of a patented drug. Companies can also retain areas of use for themselves and license the technology in “carrot and stick” approach to users outside the company's field of use. Under a carrot approach, an owner identifies potential licensees who could benefit from using the patent. In “stick” licensing, an owner identifies an infringer that is using protected technology and seeks to either prevent the infringer from using the technology or enter into a non-exclusive licensing arrangement.

Finally, licensing can be used to create an entire industry standard. Recently, the Rocky Mountain News reported on a technology standoff between Toshiba with its HD-DVD format on the one side and Sony, Panasonic and others that developed the Blue-Ray standard on the other hand. Sony learned its lesson. Twenty years ago, the battle was between JVC and Sony. Video players and recorders where introduced they were two basic standards. JVC produced the VHS standard and Sony produced the Betamax standard. Most people in the industry believed that Betamax was a superior technology and Sony decided to retain the technology for its own use-rather than licensing it. JVC, on the other hand, licensed VHS to others. The result was that VHS became the ubiquitous industry standard.

This Article is published for general information, not to provide specific legal advice. The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis of the specific facts involved.

Comments or inquiries may be directed to: John A. Leonard