What Can You Protect? Types of Intellectual Property

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Is your intellectual property properly protected? Your company's success could depend on it. This Quick-Read gives you the low-down on how to guard your copyrights, trademarks, trade secrets and patents.

OVERVIEW [top]

When many of your company's assets are intangible, intellectual property rights are critical to the survival of the business. Look to the law on copyrights, trademarks, trade secrets, or patents to protect your creative works, sales lists, inventions, and manufacturing processes. Unfortunately, there are no "copyright cops" or "patent police" to pursue infringers on your behalf, so your rights in this area are only as good as your willingness and ability to enforce them. Consult your legal adviser early and often. It's the key to maximizing your competitive edge and minimizing the impact of possible infringement on your bottom line.

Copyright and trademark laws have strengthened creators' rights to ownership of the works they create. Clients do not automatically own concepts, designs, writings, photographs, or other materials even though they have paid the creator a fee. Knowing who owns what and what can be protected is vital so that owners of creative-service businesses do not lose their creative works without receiving just compensation and avoiding ill will with a good customer.

In this Quick-Read you will find:

  • The types of ideas and creative works that are protected as intellectual property.
  • How to maximize protection of intellectual property.
  • How to avoid misunderstandings over who owns the intellectual property.

SOLUTION [top]

Many companies' existence and survival depend on their ownership and control of their intellectual property. Ideas and creative works represent their most important business assets. Intellectual property can be protected four ways:

  1. By copyright.
  2. By patent.
  3. As a trade secret.
  4. By trademark.

In general, you want to protect all intellectual properties your company creates to control commercial exploitation and maximize revenue from each.

In all of these areas, the best way to ensure the company owns the works being created by its employees is to create a written agreement signed when the person begins work. It should reflect the company's intentions and extent of rights regarding the outcome of a creative endeavor. In addition to ownership arrangements, this agreement can address the possible use of trade secrets after employment ends.

To ensure customers understand what restrictions exist on the creations they are purchasing from the company, copyright or other proprietary notices should be marked on all documents or creative materials sent to customers. An additional statement of copyright protection should be affixed to all physical creations, perhaps with an ink-stamp or by printing adhesive labels and attaching them to each component.

Copyright

Copyright law protects the creative expression of ideas. Ideas themselves may be protected by patents, not copyrighted. Any creative work that has been fixed in a tangible medium of expression, such as paper, software, or film, and that can be reproduced or otherwise communicated exactly is automatically protected by copyright law. Registration of the work with the U.S. Copyright Office is not required, nor is a notice of copyright. However, in a lawsuit over copyright infringement, registration is strong evidence that you are the originator of the idea's expression. You can receive greater remedies for infringement if the work is registered within 90 days of publication or before the infringement (whichever is first). Register your copyrightable work of authorship by filing a form and a copy of the work with the Copyright Office. You may omit or black out trade secrets within the copy you file under certain circumstances.

With a properly registered copyright, you conceivably could recover lost profits plus statutory damages up to $20,000. But to recover statutory damages under the 1978 Copyright Act, the copyright must have been registered before infringement took place. Registration also allows you to recover attorneys' fees. Willful infringement for commercial advantage or private financial gain carries criminal penalties.

Basic copyright protection is good for the life of the author plus 70 years. Under the fair-use exception, a limited amount of copyrighted material can be quoted without consent of the copyright owner for educational study, news reporting, research, commentary, and criticism.

Unless an agreement is signed indicating otherwise, customers who buy works related to copyrighted materials as part of a product or service are paying only for limited usage rights, with the remaining rights (including ownership) retained by the creative supplier. These agreements can include any amount of rights transfer desired. Often, customers obtain all rights up front through a special "work made for hire" contract. Companies often use work made for hire contracts to gain ownership of the creative work so they can use and adapt the materials as they wish.

Patents

Patents protect ideas that are novel, useful, and nonobvious. Patents give owners the exclusive right to these concepts for 14 to 20 years, depending on the patent. When a patent expires, the item or process enters the public domain. Until that time, a patent holder can prevent unauthorized use, manufacture, or sale of the invention. These rights differ dramatically from copyright law in that employees own their own inventions except in three rarely allowed exceptions: they have signed a contract stating otherwise, they were specifically told to create the invention, or the employee indicates the employer can make use of the employee's invention.

Most states prohibit employers from including patent ownership provisions in employment agreements or from requiring employees to assign inventions as a condition of employment. The "hired to invent" doctrine also seldom is applied to either employees or independent contractors; the regulatory goal is to ensure rights are not being purchased through employment.

Patent law is all about complete disclosure: Patent applications to the U.S. Commissioner of Patents and Trademarks often require considerable detail about the invention or process at issue, including specifications, drawings, and cross-references to related patent applications. The invention or process must be unique and not obvious in light of existing technology. Whether it's novel is determined by whether prior instances of use or public knowledge of the concept existed.

The issuance of a patent is strong evidence that the patent is valid. If a defendant contends there was no infringement because the patent was not valid, the defendant must present clear and convincing evidence that the patent should not have been granted.

If a court finds infringement, it will likely order the infringement stopped and may direct that the patent holder be paid a royalty. There are no state patent laws, but federal law does not stand in the way of a claim under state law for unfair competition against a patent holder. Finally, if a patent is obtained by fraud, any claim of infringement is unenforceable in court.

Trade secrets

Trade secrets are techniques, formulas, programs, and collections of information used to gain a competitive advantage. It's not a secret if it's a matter of public knowledge or well known within the industry. A trade secret must meet four criteria:

  1. Secret information.
  2. Not generally known or readily available.
  3. Gained at its owner's expense.
  4. Provides a competitive advantage.

Owners of trade secrets have exclusive rights to its use or sale, but they lose that protection if the information is discovered through proper means, such as reverse engineering (taking a sample apart to see how it works).

The law requires business owners who want trade-secret protection to take reasonable precautions to protect proprietary information by, for example, restricting access to sensitive areas and creating confidentiality agreements for employees. Review your marketing plans, customer lists, databases, and product specifications with your attorney and identify your trade secrets. Be prepared to describe how each trade secret gives your firm a competitive edge. Document steps you've taken and could take to safeguard the confidentiality of each trade secret.

Trade-secret protection requires no searches or registration. In fact, no federal statute specifically protects this type of intellectual property. Most states have adopted the Uniform Trade Secrets Act (UTSA). It authorizes a claim for damages if a trade secret is misappropriated through theft, bribery, or industrial espionage. The lawsuit can be instituted as soon as the trade secret is threatened with disclosure, and you have three years to take action from the date the misappropriation was or reasonably could have been discovered. As with other intellectual-property conflicts, restraining orders and injunctions can be used to prevent short-term wrongful use of trade secrets while you await trial.

Misappropriation does not generally include inventions derived independently of the trade secret, reverse engineering, or observing processes already in the public domain. If a court does find misappropriation, the measure of damages under the UTSA includes lost profits, the cost of developing the trade secret, any gain realized by the misappropriating party as a result, and any royalty that the injured party might have been charged if the secret had been licensed instead of appropriated.

Trademarks

A trademark consists of any word, symbol, or device used to distinguish the company's goods or services. Trademarks differ from copyrights in that copyrights are given for individual uses of ideas. It is possible to create copyrighted material that includes trademarks that don't belong to the copyrighter, as long as the trademarked material is indicated. Also, if an independent contractor creates a trademark for a company, the owner should obtain a written copyright transfer from the creator to ensure all rights to its use are valid.

Protect your brand name or image by registering it with the U.S. Patent and Trademark Office (PTO). Before applying, search the PTO trademark files to make sure the one you want is not already taken. Otherwise, you might have to withdraw a product after the rollout because the trademark is too similar to an existing one. Patent depository librarians can help you conduct a preliminary search, but ask your attorney, not the librarian, for a definitive search and legal advice.

Registering with the PTO gives you the right to sue in federal court. Although it's added protection to register your trademark with state agencies where you conduct business, state courts require you to meet particular jurisdictional tests. It's preferable to take your claim to federal court because penalties usually are greater. And federal registration is good for 10 years with 10-year extensions possible. You can register a trademark for future use as well, as long as you plan to use it in more than one state.

REAL-LIFE EXAMPLE [top]

Example 1

Point of Purchase Advertising International created three programs to help them protect their copyrights on materials shared with member-customers:

  • A handbook for employees and customers detailing antitrust requirements, intellectual-property-ownership rights, ethical principles, and purchasing standards to explain rights.
  • A basic announcement of rights on the organization's Web site that can be downloaded by members and printed onto labels. It says, "WARNING: This prototype/creative design is the exclusive property of (company name), and is protected under the copyright laws of the United States and other countries. All persons to whom this prototype/creative design is displayed agree that they will not make any use of, or disclose to any third party, this prototype/creative design without the express written permission of (company name). Any unauthorized use of this prototype/creative design may constitute a violation of the United States Copyright Act."
  • A repository at the association's Web site where designers can upload designs, drawings, and renderings. This repository, which cannot be accessed except by the member's password, date-stamps each design to provide proof of ownership.
Example 2

Having a copyright on your idea is not always a guarantee that your work is unique enough to be protected, however. A photographer could not convince a federal court that his depiction of a businessman about to jump from a window ledge was unique enough to warrant copyright protection. Twelve years ago, the photographer created and copyrighted an image of a man in wing-tip shoes and pinstriped pants about to take a leap from a high-rise window. The picture appeared in a book of stock photos distributed to ad agencies.

Four years later, an ad agency preparing for a campaign to promote camera lenses prepared a prototype image for bidders on the project to follow. The image portrayed a businessman on the ledge of a building with sharp vertical and horizontal lines. One of the entries submitted in the bidding portrayed a similar image with wingtips at the center of converging horizontal and vertical lines.

The photographer whose copyrighted picture appeared in the stock-photo book sued the ad agency and the TV network that used the second photographer's picture that won the competition. He claimed infringement of his stock-photo idea. But the court said the central idea is unprotectable because a leap from a tall building is a standard way to depict a businessperson's exasperation in a fast-paced work environment. The court also said it would be impossible to depict the subject matter without the window-ledge pose of the shoes and pants legs, so those elements are not copyrightable. As for the activity on the street below, lighting, shading and color, those elements were copyrightable but in this case were different enough to escape infringement.

(Source: "Decision of Interest": Kaplan v. The Stock Market Photo Agency, Inc. New York Law Journal (3/13/01): 27.)

DO IT [top]

Copyrights

  1. Determine what creative works in your company are associated with your image and products and be certain that your ownership rights to those materials are clear to both customers and employees.
  2. Review your marketing plans, customer lists, databases, and product specifications with your attorney and identify your trade secrets.
  3. If you purchase creative materials from outside consultants or suppliers make sure the contract specifies your ownership of the creative work's copyright.
  4. Specify in contracts what customers are purchasing or being allowed to use when they are supplied with creative materials in the course of doing business.
  5. Ensure employee agreements address their rights to patents and any copyrighted materials, especially those created outside of regular business hours or from other locations, such as their homes.
  6. Create procedures that ensure all creative materials that leave the office are affixed with a copyright or other proprietary notice to prevent misunderstandings.
  7. If your stock-in-trade is an invention or inventive manufacturing process or material, ask your attorney what could put your ownership rights at risk before you share any details with others. Based on legal advice, go ahead with a search of patent registers.
Trade secrets

Because trade secrets are not registered, they're more easily stolen than other forms of intellectual property. Engineer-Attorney Philip Furgang recommends the following:

  1. Label proprietary materials. (Don't use "Secret" and "Top Secret" labels because they are used by U.S. government agencies, and you'll have to change your labels if you ever deal with them.)
  2. Keep documented secrets under lock and key.
  3. If secrets are kept under electronic lock and key, make sure you have a secure firewall.
  4. Set up a sign-in process for new employees and issue identification badges.
  5. Educate employees about what is confidential.
  6. Establish a process to trace the use of confidential files.
  7. Require employees to sign out files containing trade secrets.
  8. Maintain a register of nonemployees who enter and exit the premises.
  9. Destroy unnecessary extra copies of documents containing trade secrets.
  10. Remove photocopy machines from locations near exits.
  11. Have employees sign an exit agreement, which reminds them, upon separation from employment, of any continuing obligation to maintain trade-secret integrity.
  12. Conduct regular audits in which your company attorney looks at your business facilities, talks with employees, and reviews your intellectual property needs.
Trademarks
  1. To substantiate first use of a trademark in commerce, maintain a file with an invoice showing the trademark and description of your product, a bill of lading, or a dated letter from a buyer acknowledging receipt.
  2. Use the symbols TM for trademark, SM for service mark, and an R in a circle for registered trademark.
  3. Any time your brand name is used as a generic description for a kind of product (such as with Kleenex or Xerox), protest immediately.
Patents
  1. Ask your attorney early on to prepare an employee contract spelling out the company's rights to inventions developed by employees during and in some cases even after their employment.
  2. Periodically, conduct a search to see if a proposed invention or improvement infringes on your current patent. The PTO is in the process of making patent information available online at no charge. There are also 90 patent and trademark depository libraries in the United States with librarians who can show you how to conduct a search.
  3. If two or more people worked on an invention, each should apply as co-owner of the patent, obtaining an undivided interest in the entire patent when it's granted. Caveat: Special rules apply to the assignment and licensing of patent rights when co-owners are involved.

RESOURCES [top]

Books

Legal Aspects of Managing Technology, 2nd edition, by Lee B. Burgunder (West Legal Studies in Business, 2001).

Protecting Your Company's Intellectual Property: A Practical Guide to Trademarks, Copyrights, Patents & Trade Secrets, by Deborah E. Bouchoux (AMACOM, 2001).

Intellectual Property: Patents, Trademarks, and Copyrights in a Nutshell, 3rd edition, by Arthur R. Miller and Michael H. Davis (West Group, 2000).

Internet Sites

National Paralegal College - Patents, Trademarks & Copyrighs

Associations

U.S. Patent and Trademark Office

U.S. Copyright Office

Web articles

Intellectual Property: Copyrights, Trademarks & Patents. Brint.com.

Avoiding Intellectual Property Problems, by Thomas G. Field, Jr. Franklin Pierce Center for IP, University of New Hampshire.

Article Contributors

Writers: Craig A. Shutt and Beverly Poppell

[Craig A. Shutt interviewed Stephen R. Bergerson, a promotion and intellectual property attorney with Fredrikson & Byron P.A. in Minneapolis, Minn., and Richard Blatt, president of Point of Purchasing Advertising International in Washington, D.C., for this Quick Read.]

Philip Furgang, Esq.
Furgang & Adwar, LLP
Two Crossfield Ave., Suite 210
West Nyack, NY
(914) 353-1818

Ray Dickinson, Librarian
US Patent Depository Library
Ferris State University
Big Rapids, MI
(231) 591-3730

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