Many growing companies, especially in the high-tech industries, have built their present fortunes by protecting their “intellectual property” at an early stage. Other companies have lost everything by stepping on the intellectual property rights of their competitors.
Today, business people are more concerned with intellectual property than ever before. When the economy is sluggish, people tend to guard what is theirs – or what they perceive to be theirs. When sales are down, a company’s most valuable asset might be a patent, a trademark, a copyright, or a trade secret.
Since most organizations cautiously guard their intellectual property rights everyone else must be aware of these rights in order to avoid stepping on them. A small mom and pop business, enjoying its initial success, might find itself on the receiving end of a lawsuit by a huge conglomerate. Violating the intellectual property rights of others can be costly. Juries can award millions in damages. Courts routinely order the seizure and destruction of merchandise, and order competitors not to sell the offending merchandise.
Small and growing businesses must be aware of the intellectual property rights of others in order to avoid costly legal battles and to maximize their competitive advantage and profit.
Most of us know what real property (real estate) is. Real property law protects land. Everyone knows what you mean when you say: “I own 5 acres in Vermont”. Personal property law protects other physical objects, such as a car or a television. It’s easy to understand how a person can claim ownership in something as tangible as a piece of land or a car. They are physical objects we can see and touch.
The tough question, though, is how can a person own an idea? Ideas are not a physical object, they only exist in people’s minds. Ordinary concepts of ownership can’t apply. However, a long time ago, people realized that it was important to find a way to protect ideas. No one would ever invest their time and money in producing new ideas, new inventions, or new products if others were free to “steal” the idea and reap its benefits. This led to the development of intellectual property law.
Intellectual property law protects the “property of the mind”, and has four major categories: patent, trademark, copyright, and trade secret.
Patent and copyright laws have their origins in the U.S. Constitution. Article I, section 8, gives laws that: “promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” From this constitutional mandate, Congress enacted the patent and copyright laws.
Trademark and trade secret laws both have origins in state law. They developed over the years in the course of solving business disputes. There are also federal trademark laws, enacted by Congress pursuant to its power to regulate interstate commerce. Each of the four main branches of intellectual property are discussed separately below.
A patent can be described as a contract that an inventor makes with the government. Under this contract, both the inventor and the government have obligations. The inventor agrees to disclose the invention in full detail. In return, the government agrees to give the inventor the right to exclude others from making, using and selling the invention for a limited time.
There are several types of patents: utility, design and plant. A utility patent is the most common type of patent. A utility patent protects a functional invention – that is, an invention that performs a useful function. A design patent protects the ornamental features of an object. An example of the ornamental feature might be a new shape for a bottle. This shape would be protected by the design patent. A plant patent protects special new varieties of plants not normally found in nature. Plant patents are often used by drug manufacturers to protect new varieties of plants they develop to produce pharmaceuticals.
Many products are protected with both utility patents and design patents. For example, an automobile might have a utility patent protecting a new braking system, and a design patent protecting the “new look” of the automobile.
To be patentable, an invention must be new, useful, non-obvious, and must fall within a category of patentable subject matter. These categories are: machine, manufacture, composition of matter, and process (editors note: see “Agents Corner” elsewhere in this publication for further definition of these terms).
Even if an invention would be patentable, the inventor might still be barred from obtaining a patent by the so called “patent killer statutes”. These laws specify certain events that will trigger a one year period within which a patent application must be filed for in the Patient and Trademark Office (PTO).
One such patent killer is the “on-sale” bar. If an invention is placed on sale in the United States, the clock begins running. The inventor must file a patent application within the next year, or the inventor can never patent the invention. What usually happens is that the inventor decides to try to market the invention before deciding whether to invest the money necessary to apply for a patent. Two years later, when sales are phenomenal, the inventor decides to apply for a patent. However, it’s too late! The inventor is prevented from obtaining a patent by the statute.
Another patent killer is the “printed publication” bar. If the invention is described in a printed publication in the United States or in a foreign country, such as a brochure, technical journal, trade paper, newspaper or a magazine article, the inventor has one year from the date of publication to file a patent application. In general, it is extremely important to file a patent application before the invention is made, used, sold, published, or publicly disclosed. Otherwise, any rights under the patent laws might be compromised.
A trade secret, as the name indicates, protects anything that a business is legally permitted to keep secret. A trade secret can be a formula, a process, a customer list, etc. – anything that gives your business an advantage over competitors who don’t know the secret. What is important is that the process, list, etc., must be kept secret. When it is no longer secret, the trade secret is lost.
How are trade secret rights violated? Trade secret rights are only violated when one learns the secret through improper means. A company that spies on another to learn the trade secret has violated trade secret laws. Similarly, an employee who knows a trade secret from working at Company X can’t reveal the secret to Company Y without violating trade secret laws.
However, a company is always free to independently develop the same idea as their competitor. For example, Coca-Cola has preserved their formula as a trade secret for more then 100 years. For a large part of that time, competitors have tried to duplicate Coca-Cola’s secret formula. If they were successful in duplicating the formula through their own research, they would not have violated Coca-Cola’s trade secret. However, if the competitors spied on Coca-Cola to obtain the formula, or paid a former employee who knew the secret to reveal it, they would have violated trade secret laws.
A trade secret comes into existence by simply developing an idea and keeping it a secret. No governmental formalities are necessary. You need not register a trade secret. All you have to do to main a trade secret is keep it a secret. The costs incurred in maintaining a trade secret are typically security costs. The extent of the measures you take to keep the secret will determine how far the law will go to protect your trade secret.
Copyright law protects authors against unauthorized copying of their works. Copyright protects drawings, paintings, photographs, movies, plays, songs, books, sound recordings, architecture and computer programs.
How does a work become copyrighted? Following changes in the copyright laws, a work is automatically protected the moment it becomes “fixed in a tangible form”. For example, a song becomes “fixed” once the songwriter either writes it down or records it. From that moment on, the songwriter is protected from someone “copying” the song. In general, a work becomes protected the minute the painter puts the brush to canvas, the computer programmer saves the program to disk, or the film maker shoots a film.
Copyright law only protects the author from others copying the work. In other words, if you write a poem and then another author coincidentally writes an identical poem ten years later, you can’t successfully sue the other author for copyright infringement unless you can prove that the second author actually copied the work from you. Usually, the first step towards proving that others have copied your work is to show that they knew about or had access to your work. However, they can defend a copyright suit by showing that they created the same poem without copying your poem.
Copyright doesn’t protect ideas, it protects the expression in the work. If you write a story about a plane crash, your copyright doesn’t prevent others from writing a story about the same subject. However, copyright law will prevent them from copying your expression – the words you chose to describe the event. For example, the copyright on a chemistry textbook doesn’t protect the chemical principles described in the book, it only protects the way the author of the textbook chose to explain those principles. Similarly, if one takes a photograph of a house, the copyright is for the image, not the house. Another photographer is free to come along and take his or her own picture of the same house.
You might notice a © on books, magazines, and photographs. This provides notice to others that the publisher owns its contents. If you write a book, a play, or even take a home movie you may write © (your name) 2008” to give others notice of your copyright.
A trademark is any identifying feature used to designate the source of a product or service. A trademark can be a name, logo, a design, or anything else used by consumers to identify a particular product.
Trademarks have their origin in Medieval England, where craftsmen would stamp their mark on their craft to identify their goods to consumers. Their stamp stood for the quality that consumers expected from goods bearing their particular mark. Their reputation depended on the integrity of the mark. The English Common Law protected the craftsmen from disreputable merchants who might try to confuse consumers by stamping the craftsman’s mark on their own products.
Today, trademarks are also used by the consumer to distinguish the source of goods. When consumers buy a drink with a label that says “Coca-Cola”, they know that the drink will taste the same as the last time they bought a drink that had the “Coca-Cola” label. Trademarks protect consumer expectations.
One develops trademark rights in a distinctive name by using that name in conjunction with a good or service. When you come up with a distinctive name for a product and then introduce it into commerce, you develop trademark rights in the distinctive name. If you operate a photocopy store called “Impact Copiers” you are developing trademark rights in that name. If one month later, someone else wants to open a photocopy store around the corner with the name “Impact Copiers”, they are most likely infringing your “common law” trademark rights.
Even though common law trademark rights come into existence simply by using the mark in commerce, you might also wish to register your trademark in the United States Patent and Trademark Office. Registering a trademark gives it nationwide effect. Your “common law” trademark rights might prevent your competitors from using your trademark in geographic areas where you have been selling your products bearing the mark. However, a registered trademark will provide protection across the entire United States.
A registered trademark has other advantages. First, you can use the federal court system to enforce your trademark. Second, you can record your registered trademark with the U.S. Customs Agency. They will stop any unauthorized products bearing your trademark from entering the United States. A registered trademark will always bear the ® symbol, where as non-registered trademarks will simply have a “TM” next to them.
For a new business, it is important to perform a trademark search of your intended business and product names. First, it will help determine if your name is protectable. Second, it will help determine if your intended business or product name might infringe someone else’s trademark. If you conduct your trademark search at an early point, you might avoid further investment in the problematic trade name, and avoid a potentially costly legal problem.
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