cle - introduction to ip law

An Introduction to Intellectual Property Law

Protecting your Client’s Most Valuable Assets

• Question: Why should I even care about intellectual property (IP)?

• Answer: MONEY– IP is very likely the most valuable part of your client’s business.

Common Questions

Asset Components of S&P 500 Market Value

1975 1985 1995 2005 20150%

10%20%30%40%50%60%70%80%90%

100%

*Source: Ocean Tomo

Specific Example

Motorola

Patents

Buys$12.5

BILLION

Sells Lenovo

$2.9 BILLION

No!Keeps

$10 BILLION LOSS?

Value of IP• Startup Financing- Investors want to make sure that the

business is protecting the IP.• May want to know what IP the business has and how it is being

protected.• May require a collateral interest in the IP (security interest).

• Preserve and Grow Market Share- Legal Barrier to Entry

• Selling the Business- IP Due Diligence (e.g., IP list)• Purchaser may require a warranty for any defects in the IP.• IP problem have and will kill deals!

Example

Trademarks

Selling

$10’S MILLIONS

® ™

Company A Company B

IP WARRANTIES

• Question: Why do I need to worry about IP-- my client’s business is not a technology business?

• Answer: It is a common misconception that IP law only concerns inventions and technology (i.e., patents). In fact, almost any business needs some form of IP protection.• Business/product name- trademarks.• Appearance of products, websites, sales materials, restaurant space, etc.-

copyrights, trademarks, & design patents.• Financial information, customer lists, & price lists- trade secrets.

• Examples of businesses with valuable IP (not in the tech business).

Common Questions

• Question: Why should my client care about getting sued over IP– the general business insurance policy should cover it?

• Answer: Typically, most business insurance policies do not cover patent infringement lawsuits and usually have carve outs for trademark and copyright infringement lawsuits as well.

• You generally need to purchase a separate policy to cover IP infringement lawsuits, especially for patents.

Common Questions

Different Types of Intellectual Property Rights

TECHNOLOGY/INVENTION

PatentsU.S. PATENT NO. 1,234,567

+ INDUSTRIALDESIGNS

• Question: I heard that you can’t get patent protection for (fill in the blank)?

• Answer: Generally, speaking you can get patent protection for any invention that is new and nonobvious.

• There are a few exceptions where you cannot get patent protection, such as for laws of nature, abstract ideas, criminal tools, and perpetual motion machines.

• Although you can receive patent protection for them, there are certain types inventions that might be better protected with other forms of intellectual property, such as trade secrets for industrial chemical/manufacturing processes.

Common Questions

Different Types of Intellectual Property Rights

NAME/SOURCE-GOOD WILL

Trademarks

® = FEDERALLY REGISTERED

™ = COMMON LAW

Trademark

Word,Symbol,

Etc.

Goodsor

Service(“for”)

Trademark

Trademark

Cadillac(Alone)

Trademark

Trademark

Cadillac(Alone) ?

Trademark

Cadillac for CarsTradem

ark

Cadillac for CatFood

Trademark

Trademarks- What are Some Types?

• Trademark – identify the source & qualities of goods (cars, clothing…) (e.g., Coke® for soft drinks)

• Service Mark – identify the source & qualities of services (accounting, restaurants,…) (e.g., McDonalds® for fast food services)

• Trade Dress - packaging or form of the product that operates to distinguish source/quality of the goods (e.g., Coke bottle)

Ownership: Trademarks• Trademark = Word, symbol, sound, or other

device a manufacturer or merchant adopts to identify and distinguish their goods or services from others.

• A Trademark is Different from a Trade Name

• Trade Name = The official (legal) name of the business/organization, usually registered with the government.• Although different, part or all of the Trade Name

might be used as a trademark.

Trademark v. Trade Name

EXAMPLES

Ford Motor Company Trade Name

TrademarksTRADEMARK INCORPORATES

PART OF TRADE NAME

Different Types of Intellectual Property Rights

CREATIVEWORKS

Copyrights©

Advertising,Marketing,

Software, etc.

Different Types of Intellectual Property Rights

VALUABLESECRETS

Trade Secrets

Customer Lists,

Business Plans,

Financial, etc.

How Do You Obtain US Protection?

• Patents: Registration required (filing an application).

• Trademarks: Registration not required but recommended.

• Copyrights: Registration not required but recommended.

• Trade Secrets: No registration process.

RegistrationRequired

No Registration

How Long Does the Registration Process Last?

CopyrightsWeeks to Months

Trademarks

Months

Patents Years (2-5)

LongShort

Common Questions• Question: Why do I need to file a federal trademark registration– couldn’t I

just use it or file a state registration or rely on common law rights?

• Answer: In the big picture, federal trademark registrations are relatively inexpensive (typically, just a few $100’s) and provide several significant advantages, including:

• Protection throughout the United States• Increases marketability and licensing value of mark• Decreases chance a competitor will adopt a similar mark• Ability to recover lost profit damages in federal court• Prevent importation of infringing goods• Ability to depreciate value of trademark for federal taxes

Trademarks- Consider Federally Registering

• Marks that have significant value for client’s business.

• Brands Used Outside the US• Generally, most countries require registration to

enforce your trademark

• Examples• Corporate Brand• House Brands• Product Brands

(with significant sales)

Trademarks- Do Not Need to Register Them All

• Generally, only register marks with long term value for client’s business.• Remember you still have “common law” rights in the

US to the mark even if you don’t register it.

• Trademarks that you might not need to register• One-off, short term product or service• Low value to the business

• Question: Why do you need to register a copyright?

• Answer: You receive copyright protection for the work as soon as it is created, but if you are a US national, you need to register it in order to:• Sue for damages• Receive attorneys fees• Block importations

• Although registration is inexpensive, you do not need to register every work, only the ones you think are valuable to the business and/or competitors.

Common Questions

How Much Does Obtaining Protection Cost? (Legal Costs)

• Patents: Expensive- thousands of dollars.

• Trademarks: Not cheap- hundreds of dollars.

• Copyrights: Cheap- tens of dollars.

• Trade Secrets: Free- no registration process (but might cost a lot to keep the secret from others).

Expensive

Inexpensive

Who Can Handle the Registration Process?• Similar to Maintenance/Repair

• Some things you can do yourself.• Other things you should get an expert.

Patents Patent

Attorney

Trademarks

Any Attorney

with Training

CopyrightsClient With Appropriate

Training

How Do You Obtain Foreign Protection?

• Patents: Foreign applications generally need to be filed within 1 year of earliest filed application (6-month deadline for design patents).

• Trademarks: Foreign applications generally need to be filed within 6 months of earliest filing date in order to gain priority date.

• Copyrights: Registration generally not required.

• Trade Secrets: No registration process.

RegistrationRequired

No Registration

Warning: Very Simplified!

• Question: Why should I even care about foreign trademark protection, my client is in Indiana?

• Answer: Most countries grant trademark rights based on the first to register the mark and not based on who is using the mark.

• Common practice in China is for Chinese distributors or manufacturers to register the US trademark in China before approaching the US trademark holder.

• Recently, there has been string of trademark squatters for US marks in Cuba.

Common Questions

How Long Do You Receive Protection?

• Patents: 20 years from earliest filing date.

• Copyrights: depends, about 70-120 years.

• Trademarks: Forever, if you continue to use it.

• Trade Secrets: Forever, if it remains a secret.

Shorter

Longer

Trademarks- How Long Do Trademarks Last?

• Common law rights generally last as long as trademark continues to be used in commerce • Registrations typically need to be renewed every 10 years

• Rights can be lost if:– Expressly abandon the mark– Mark becomes generic ( “aspirin”, “Xerox”, “Kleenex”)– Stop using and do not intend to reuse, presumed after 2 years– Allowing loss of distinctiveness by not enforcing infringement

What is Typically the Most Valuable IP Asset?

• For most companies, trademarks (i.e., their good name) are the most important.

However, value can quicklychange due to other

factors!

Trademarks- Selecting• Before using a valuable trademark (or trade name)

strongly consider having a trademark clearance search performed.• Considerable liability risk

• Initial Clearance Considerations• Check Domain Name Availability• Perform Web Search• Check Federal Trademark Registrations- tmsearch.uspto.gov• Check Secretary of State

Unsearchable

Uses

Trademark Searching

Yellow Pages,Web,

Directories, etc.

State Reg.

FederalReg.

Trademark Protection

Overview of US Trademark Prosecution• Every application has one or more filing bases

– Intent-To-Use (ITU)- want to use the trademark.

– Use- already using the trademark.

– Paris Convention 44(a)- based on a foreign trademark application or registration.

– Madrid Protocol- based on an international trademark application.

• Last three are also bases for registration

Trademark Filing• Checklist- What you need to know to file

– What is the mark exactly? Is it a word, stylized, design, etc.? What are the goods and services?

– Who is/will be the trademark owner- look up official name and address in the Secretary of State Records

– Are they using the mark in commerce? If so, when did they start using and first used in commerce? If not, file as intent-to-use (ITU).

– Do they have specimens (as of the 1st use date)?

Description of Goods or Services• Need a description broad enough to encompass

what the client is doing.– Common basis for objection in an Office Action.

• Can save client money by picking from acceptable identifications of goods and services.– Reduced filing fees– Reduced chance of an Office Action– Non-standard ID’s can be an issue when

internationally filing.

Description of Goods or Services• U.S. Acceptable Identification of Goods and

Services Manual (ID Manual)– http://tess2.uspto.gov/netahtml/tidm.html

Specimens• A “specimen” is a real-life sample of how a

client is using the mark.

• The Trademark Office requires specimens as proof of actual usage of the mark. – Not all uses of a mark constitute trademark uses

Specimens• There are four (4) requirements for a

specimen:1. Must show the mark as shown in the application/registration;2. Must be a brand that identifies the good, not merely the company name;3. Must have been actually “used” (i.e., goods sold or transported) in interstate commerce as of the date that we are representing to the Trademark Office; 4. A separate specimen is required for each class of goods (but is not required for each good within a class).

Specimens- GoodsACCEPTABLE NOT ACCEPTABLE

Packaging or container for the goods Label on product or package Tag on product or package Website page that displays a product, if the mark appears on the web page and the web page provides a means for ordering the goods Mark printed, molded, embossed or stamped directly on the goods Point-of-sale display or advertising associated with the goods (for example, at a store or location where one can purchase the goods) Catalogs, if they have a picture of the goods, near the mark, and instructions for how to order those goods Manuals and instruction sheets included with the goods 

Artwork to be used by label printer or ad agency General, non-point of sale, advertising (for example, advertising that is not located at a store or location where one can purchase the good) (print, radio, TV) Advertising circulars and brochures Letterhead Envelopes Business cards Invoices Telephone book listings Yellow pages ads Listings in trade directories Price lists Announcements Publicity releases

See also, http://www.uspto.gov/trademarks/resources/examguide1-13.doc

Specimens- Services The specimen for a service mark must

show proper use in commerce by: 1. Showing the mark used or displayed as a

service mark in the sale of the services, which includes use in the course of rendering or performing the services; or

2. Showing the mark used or displayed in advertising the services, which encompasses marketing and promotional materials.

See, http://www.uspto.gov/sites/default/files/trademarks/notices/SvcMrkSpecEG.doc

Typical Timeline-Mark Used in Commerce

From http://www.uspto.gov/trademarks/process/tm_timeline.jsp

Post Registration- US (Typical)• 5-6 Years from Registration Need to File (6 month grace):

– Section 8 Declaration- mark still used in commerce (or excusable nonuse) to avoid cancellation

– Section 15 Declaration- mark in continuous use, now incontestable (principal registrations)

– Specimen– Fee

• Every 10 Years Need to File (6 month grace):– Section 8 Declaration- mark still used in commerce– Section 9 Declaration- renewal– Specimen– Fee

Post Registration- US• Incontestable (Section 15 Declaration- optional but should file)

– Mark is considered distinctive– More difficult to challenge (but not impossible) because cannot

challenge as lacking distinctiveness (i.e., secondary meaning)

• Accused Infringer Can Still Challenge Incontestable Marks– Fraud– Abandonment– Mark use misrepresents source– Mark is your own name– Your mark registered before incontestable mark

Types of Property Control

Own Lease (Rent)

Types of Property Control

Keep RentOwn

Sell

Types of Property Control

Keep RentMake/Use License/

Franchise

Own

INTELLECTUAL PROPERTY

Sell

Assign

Types of Property Control

Buy RentSteal

Do NOT Own

Types of Property Control

Buy Rent

BUT WANT TO USE

License/Franchise

Assign

INTELLECTUAL PROPERTYDo NOT Own

StealInfringe

Example

OwnINTELLECTUAL PROPERTY

McDonald’s Corporation

McDonald’s Owned Franchisee Operated

What are the biggest

threats to a business?

1st Establish Ownership

Owner/Officer

Employee

3rd Party Supplier

Partnership/Operations Agreements

Employment Agreements Supplier

Agreements

How to fix?

1st Establish Ownership• Ownership- Generally the default rule is that

the author or inventor owns the copyright or patent.• Business should own all IP (not individuals).• Do NOT rely on “work for hire” doctrine because

too many exceptions and a large number of foreign countries do not recognize it.

• Written Agreement- Have Everyone Sign & Keep it Somewhere Safe • You need to be able to find it.• Consult with an IP attorney- courts in a number

of cases require “special” language in order to transfer ownership.

Ownership: Technology Related Agreements• Include Non-Disclosure Agreement (NDA)- to

preserve patent and trade secret rights.• Watch NDA term provisions- want to survive the

agreement.

• Joint Development Agreement- Have it before any work starts. • Who owns the newly developed IP?

• Define what is (and is not) newly developed IP. • Who is responsible and will pay for registration?

• Any licenses of existing IP required?

• Typically, carve out trademarks from any licenses in order to avoid naked licensing problems.

Ownership: Supplier Agreements

• NDA • Intellectual Property (IP) Warranties

• They own or licensed the IP • Will pay for legal expenses if sued for IP

infringement • Ownership of Intellectual Property

• Establish business ownership of IP• Web Developers- don’t let them own the domain

name or copyright to website

Ownership: Trademarks• Registration

• Make sure the applicant (owner) exactly matches the Secretary of State/corporate records (commas matter)!

• Make sure identified applicant is actually using the mark as a trademark• Selling products or providing services with the

trademark• Licensing others who are using the mark

• Assignments• Avoid assignments in gross- the assignment

needs to transfer the trademark and associated goodwill. (“magic words”)

Licensing: General

• Recommendations • Watch out for the many landmines.

• Be reasonable- unless required by the type of business arrangement, have generic provisions apply equally to both parties (e.g., NDA).

• Consult with an IP attorney with experience in the particular IP area (e.g., copyrights, patents, trademarks, etc.).

Licensing: General• General Considerations When Drafting

• What type of IP is being licensed?• Copyrights, patents, trademarks, etc. each provide a

different set of rights, so you need to use the appropriate language to identify what is or is not licensed according to the IP rights.

• Is the IP protected?• For example, you don’t need a license for an expired

patent or an abandoned trademark. • What is the licensing relationship?

• Is it exclusive or nonexclusive?• Exclusive typically requires a higher royalty rate.

• Are there limits to the license?• Field of use- particular industry.• Geographic limits.

Licensing: General• General Considerations When Drafting

• What is the term of the license?• Watch out for patent licenses that extend past the life

of the patent.• What is the royalty?

• Fixed fee?• Percentage? If so, how do you easily count the

basis?• Can other party request an accounting? If so, who

pays, how often, what needs to be provided, etc.?• Anything requires an NDA? Any trade secrets

and/or technology involved?• Any tying arrangements or antitrust concerns?

Licensing: Trademarks• General Considerations When Drafting

• Avoid naked licensing because the client can lose the trademark• Require quality review of the goods or services for

the licensed trademark.

• Watch out- you might be creating an unintended franchise!• Under Indiana Code, Franchisors Need to Register

with the Secretary of State.

Franchise Example

EXAMPLES

Doctor’s Associates, Inc. Trade Name

Trademark

Franchisee

ContractLicense/Franchise Agreement

Can UseTrademarks

Trade Secrets (Know How)

Licensing: Trademarks• Indiana Code§ 23-2-2.5-1

• As used in this chapter:• (a) "Franchise" means a contract by which:

• (1) a franchisee is granted the right to engage in the business of dispensing goods or services, under a marketing plan or system prescribed in substantial part by a franchisor;

• (2) the operation of the franchisee's business pursuant to such a plan is substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate; and

• (3) the person granted the right to engage in this business is required to pay a franchise fee.

Example of Layering IP

65

WHO IS THIS?

Art Fry

Example of Layering IP

66

1968Dr. Spencer

Silver Invents “low-tack” reusable adhesive

1970 3M files

patent for adhesive

1974Art Fry

invents using the adhesive

to anchor bookmarks in

hymnbook

19753M files federal

trademark application

for POST-IT®

1977Launch

PRESS N’ PEEL in 4 cities but

sales lackluster

1978Provided

Samples in Boise Idaho 95% intent to repurchase

Patent

Trademark

Example of Layering IP

67

1980Product debut as POST-IT NOTES

19843M files patent application for a

method of making a removable and

repositionable sheet

19871st Patent to adhesive

expires

19963M files federal

trademark application for the color “Canary Yellow” for stationery

notes containing adhesive on one side

for attachment to surfaces (registered in

2000)

1990-2000’s Remaining patents

expire

PatentTrade Dress

Example of Layering IP

68

Brand Loyalty

SO WHY DON’T YOU BUY FROM OTHERS WHEN PATENTS ARE EXPIRED?

Contact Information

Chuck Schmal (cschmal@uspatent.com)

Woodard, Emhardt, Moriarty, McNett & Henry LLP111 Monument Circle, Suite 3700

Indianapolis, IN 46204(317)713-4954 (direct)(317)634-3456 (main)

www.uspatent.com

An Introduction to Intellectual Property Law

Protecting your Client’s Most Valuable Assets