With an estimated 80 percent of the value of S&P companies in their intellectual property holdings, businesses cannot ignore the impact of IP on their bottom lines, their equity value and their day-to-day operations.
Intellectual property law is among the most complex and misunderstood fields of law and represents a veritable mine field for businesses, says David G. Henry, Sr., a member of the Intellectual Property Group at Dykema Gossett PLLC.
“Failing to recognize intellectual property issues as they arise, asking the wrong questions, or acting upon the many myths surrounding the proper handling of IP issues can lead to substantial losses and/or liability for a business, its shareholders and its officers,” he says.
Smart Business spoke with Henry about recognizing intellectual property issues when they present themselves and what to ask IP experts before acting in any material way.
What are patents and some of the myths regarding them?
Patents are legal monopolies that allow owners to prevent all others from making, selling, using or importing patented subject matter, which can include machines, chemical compositions, manufacturing processes and business methods.
There is a common perception that you can protect an invention by mailing yourself a letter describing your invention. However, that does little, if anything, to protect an invention, and relying only on that will destroy any patent rights for failing to file a real patent application. Applications must be filed within one year of the first public use of the invention, its sale or offer of sale, or a description of the invention in a printed publication, among other things.
Another fallacy is that you cannot patent something that is just a new combination of old parts. In fact, most new inventions are merely new combinations of old parts. Assuming that it is impossible to patent your invention, or that patents are easily circumvented and not worth the time and expense (another common misconception), you may miss the opportunity to secure your most valuable asset, perhaps costing you millions of dollars in value.
Finally, many people believe they can get around an existing patent simply by changing or adding something to the patented item. However, patent claims often cover much more than the item shown in a patent, and, if you infringe, it could cost you your business.
What are some misperceptions regarding copyrights?
There is often confusion about what a copyright covers. Copyrights protect the expression of ideas and information, not the underlying ideas or information. Items such as books, software, photos, paintings and recorded music may be protected, while mere information like recipes, mathematical theorems and phone listings may not.
There is a common misperception that if you change someone’s work enough, you can get around the copyright. However, copyright covers much more than just literal, verbatim copying, including the making of derivative works. And admitting that you changed someone’s work to get around the copyright may be an admission of infringement.
There is also the perception that if you pay for a copyrighted article that you own it, especially if you paid to have it made. However, ownership most often results from creating the work yourself or having your employee create it as part of his or her job (a true ‘work for hire’ under copyright law). Companies often make the mistake of thinking that because they paid an independent contractor that they own the end product, but they often do not, absent a contractual assignment of the copyright.
There is also the myth that you only have copyright protection if paperwork is filed with the government, but copyright exists the moment a protectable work is reduced to tangible form. You can be liable for infringing on a copyrighted work for which no filing has occurred.
However, before you can sue for infringement, you must register the work in a timely manner. Registering too long after publication and after an act of infringement can cost you the right to statutory damages and attorney fees.
How do trademarks work?
Trademark protection is for words and symbols that distinguish the goods or services of one vendor from those of all others. Trademark rules protect the public from confusion and makes commerce work. Properly selecting and protecting trademarks will help you protect your reputation and market power, and avoid considerable trouble and expense.
Businesses must know what they do and do not own as a trademark. If the Secretary of State’s office merely says a name is available as a corporate name, for example, that doesn’t necessarily means it’s OK to do business under that name. Too often, companies make the mistake of incorporating under a name that, if used as a brand, may infringe trademark rights of a third party. Some also believe that merely filing an assume name certificate (DBA) creates exclusive rights, but such is not the case.
Concerning infringement: Just changing a spelling or adding a word to an existing trademark often does not protect you. Trademark infringement typically exists if your trademark (however spelled or configured) creates merely the likelihood of confusion as to source, sponsorship, approval or affiliation. Trademark infringement is easier to commit than most think, can be very difficult to spot, is expensive to litigate and is potentially ruinous in terms of wasted reputation investment.
Intellectual property is often a company’s most valuable asset and is easily overlooked, lost or destroyed, or infringed upon. By understanding the value of IP and consulting with experts in the field, you can avoid the potential land mines that abound.
David G. Henry, Sr. is a member of the Intellectual Property Group at Dykema Gossett PLLC. Reach him at (214) 462-6439 or DGHenry@dykema.com.
Trademarks help consumers identify and distinguish your products and services in the marketplace. If you don’t protect your trademarks, your rights can be weakened, which may allow for competitive products/services using similar markings, ultimately diminishing the value of your trademarks.
“If you’re a new business or are launching a new product — especially one that’s innovative — it’s important to choose your trademarks wisely,” says Jim Dimitrijevs, a member at McDonald Hopkins LLC, whose practice focuses on Intellectual Property.
“It’s important to consider the inherent strength of a proposed trademark,” adds Grant Monachino, also a member specializing in Intellectual Property at McDonald Hopkins LLC. “It’s equally important that you enforce your trademark rights as the years go by, or you risk losing them.”
Smart Business asked Dimitrijevs and Monachino how companies can best select and protect trademarks.
How does a company go about selecting a trademark?
First you need to consider the product or service itself, as well as its life expectancy. If it’s going to be long lived, an inherently strong trademark will likely be more beneficial over the life of the product or service. If it’s going to be a fleeting fad and you want to ensure quick catch-on, you might select a more basic descriptive name that fits that purpose, but is not necessarily an inherently strong trademark. You also need to consider whether the product is going to be sold outside of the U.S. If so, you’ll need to assess 1) how those markets will perceive the trademark, and 2) whether the trademark is available for use in all the jurisdictions you’re considering.
How can you evaluate the inherent strength of a trademark?
In the initial marketing phases for a new product, it can be beneficial to use a basic, descriptive term, but it won’t be as easy to protect. It is easier to protect words and marks that are more distinctive when used in association with the company’s product or service.
When selecting a trademark, we look at the ‘spectrum of distinctiveness’ in the context in which a proposed trademark will be used. On the weakest end, we have generic terms that are essentially the common name for the product or service (e.g., ‘DVD’ for digital video/versatile discs). Next we have descriptive terms (e.g., Web Analytics Experts for services regarding the analysis of Internet-based statistics), followed by suggestive terms (e.g., Sure for a deodorant). At the stronger end, we have arbitrary terms (e.g., Apple for a computer) and fanciful (invented) terms (e.g., Kodak for film).
In practice, most trademarks are somewhere in the middle range between descriptive and suggestive. However, there can be a lot of long-term benefit in selecting an arbitrary or fanciful mark if you’re introducing something completely new to the market and/or the product/service being introduced will have a long shelf life.
What happens after the company agrees on a proposed trademark?
You check on availability and assess risk. Counsel will evaluate the marks you want to use and consider them against the goods and services you want to link them to, and then have a trademark search conducted. The search will uncover whether any other companies or individuals are already using the same or similar marks for similar goods and services. Counsel will analyze the search results to determine if there are conflicts that could cause consumer confusion, and prepare a legal assessment of risk.
How can a company protect its trademark?
In the U.S., trademark rights accrue with use (i.e., ‘common-law’ rights). You will obtain your best rights, however, by registering your trademark at the federal level. In the U.S., this gives you protection in all 50 states (among other benefits). In most jurisdictions outside the U.S., trademark rights are only protected if a registration is obtained. Thus, you should register your trademarks not only where you sell, but also where you manufacture, especially if you sell or manufacture products abroad.
Trademark rights are somewhat unique in that you need to police them. Although theoretically, you can maintain a trademark registration and the related rights for as long as you use the mark, if you let others use your trademark or something similar without trying to stop them or enforce your rights, you allow your rights to be eroded.
How do you proceed if you think another company is infringing upon your rights?
First, conduct sufficient due diligence to confirm you have superior rights, as well as the nature and scope of your rights.
Once sufficient due diligence has been conducted, consider who the infringer is in crafting your approach to try to resolve the issue. One typical approach is sending a cease and desist letter. Another is filing a court action (in lieu of or in connection with a C&D letter). While sending a letter may achieve a quicker, less expensive result, it may also give the infringer the opportunity to select the forum where the dispute will be resolved (i.e., by filing a declaratory judgment action in a jurisdiction more favorable or convenient to the infringer).
Claims available may include one or more of the following: federal trademark infringement, state trademark infringement, federal or state unfair competition, and/or an action in court or the Trademark Office to challenge the trademark application or registration of the infringer.
If both parties have viable rights, or want to avoid the cost and unpredictability of an action in court or in the Trademark Office, they may decide to resolve the dispute by a coexistence agreement that allows both parties to use their marks in ways that avoid consumer confusion.
JIM DIMITRIJEVS and GRANT MONACHINO are members at McDonald Hopkins LLC, both specializing in Intellectual Property. Reach Dimitrijevs at (216) 348-5774. Reach Monachino at (216) 430-2003.
You’re proud of your website. It's your face on the Internet, your online presence, and it may provide a robust suite of services for your customers. But if you aren't careful, cyber-looters may be able to snatch elements of your site for their own use, leaving you without legal recourse.
"Be vigilant about your website," says Sandra M. Koenig, a partner with Fay Sharpe LLP. "Generally there seems to be a thought process that because it's on the Internet it's fair game. It's really not."
Smart Business spoke with Koenig about how to protect your website from copyright and trademark infringement.
How do standard copyright and trademark laws affect websites?
The traditional copyright and trademark rules still apply in the electronic world. So copyright protects copyright owners' rights, and it gives them the right to decide who can copy it. So if you own the copyright for your website, somebody should not be copying your website, or elements of your website, or taking photographs from your website, because that is still an infringement. It's still stealing.
What are some website-related copyright infringement issues companies should be aware of?
Most often, we get calls from clients telling us that someone took a photograph, text or other image from their website and copied it to their own site. Also, sometimes a competitor might emulate the overall look and feel of a website a little too closely.
There are a lot of relevant trademark issues that end up in legal battles, as well.
Perhaps unique to the Internet are the use of someone else's trademark in your website's source code, domain name hijacking, or registering a misspelled version of another's trademark as a domain name to direct consumers to your site.
How can 'metatagging' be used for copyright infringement?
Sometimes a competitor will insert another person's trademark in their own website's source code. So when people are searching online for that trademark, the competitor's website will show up at the top of the search results.
The trademark is buried in the source code – it's not visible to viewers of the site.
How can a company prevent competitors from copying tangible elements or intangible aspects of its website?
Primarily, companies must be concerned with vigilance. There are mechanisms by which you can lock your website by disabling certain options. That way, people can’t copy and paste elements that you want to keep secure.
Another important step is registering your copyright for the website or sections of the website that are of critical importance. For instance, if you have detailed photos of your product line, you could register those instead of the entire website. Registration is beneficial if you needed to sue someone. To ensure you are able to legally retaliate in a copyright infringement matter, it is important to have your registration in place or in the works, if it's not done already.
Keep your copyright and trademark notices visible on each web page. This is particularly useful because hyperlinking can create trouble, too. If a link doesn’t go to a company's home page but goes deeper into the website, the site visitor may not see the copyright or trademark notice. Many companies only put the copyright notice on the first or last page. It's a good rule to put legal notices on every page just in case someone links to a 'middle' page.
What steps can you take if you believe a copyright infringement has taken place?
Depending on the situation, you might begin with a cease and desist letter from your lawyer to try to negotiate a resolution right away, without going through the court process. A C&D letter is more economical, but it is always an option to file suit for copyright infringement. Arbitration is also an option.
Does a letter get results right away?
Surprisingly it often does. It wakes people up. You can request damages or you can just request someone stop using the copyrighted element or infringing trademark.
Aside from sending a nasty letter or filing suit, if the alleged infringement is a domain name issue, there are Uniform Domain-Name Dispute-Resolution Policy (UDRP) proceedings where the two parties go to arbitration over the domain name.
How do you know if you truly own the elements of your website?
There are two parts to a website, the underlying code and the visual images -- what you see on your screen. If you are working with an outside web site developer, ownership rights should be negotiable. They will often want to own the 'building block' code, which allows them to re-use this code without needing to reinvent the wheel. They should however, assign any images and text they might create to you. Also, any content you are asking them to incorporate into the site needs to be owned by you. So if you like a particular picture you want to be sure you have title or the right to use the content. In other words, do not go online and just download content or take content from a book.
One thing to keep in mind is if you create the site internally, the company owns it. Sometimes elements are created by those outside the company. You might hire a photographer or someone to make illustrations. It's important to clear up who owns the copyright for those elements ahead of time because it will become important if someone were to steal one of those elements.
Sandra M. Koenig is a partner with Fay Sharpe LLP. Reach her at (216) 363-9137 or firstname.lastname@example.org.
In today’s global economy, protecting your company’s good name is more important than ever. You’ve worked hard for customers to create a positive association with your brand, so if someone is putting your trademark on an inferior product and selling it, you’ve got a major problem.
Not only have you lost that customer, you’ve also lost other potential customers who are turned off by your brand based on the negative comments that came from the person who bought the counterfeit product.
“It’s very important to police counterfeits because they cheapen the brand and create bad publicity,” says Luis Alcalde, of counsel with Kegler, Brown, Hill & Ritter’s IP, Litigation and International Business areas.
Smart Business spoke with Alcalde about how to protect your brand in the international marketplace.
Why is brand protection important?
A trademark or service mark owner has a legal obligation to take action against infringers. For example, when you file a trademark and you start using it to create an association with your products or services, someone else may start using the same trademark. If you know about it, but you don’t do anything about it, and later you decide to take legal action, you could have waived your rights.
Trademarks have to be renewed after so many years, so failure to police or challenge infringements can create problems when trying to enforce or renew a trademark. There are technical, legal reasons to police your trademark, primarily to argue that you haven’t waived your rights.
From a business perspective, the reason someone creates a trademark is to create an association in the minds of your consumers with your product or service. Over time, these associations become more valuable. Whenever you walk into a McDonald’s, you have certain expectations. Those expectations have been created over many years of associating the name with certain types of food and service. The only way to create that association is to put a lot of effort, time and money into making sure that your products or service lives up to the association you create.
What can happen when a company is not vigilant about brand protection?
Without any of the work the trademark owner has put into it, infringers place your trademark on their product and profit from it. In that sense, they are stealing your intellectual property. Beyond that, depending on the quality of the counterfeit, you may lose sales as well. In many places where counterfeit goods are sold, the vast majority of consumers know they are getting a fake. They never thought they were getting a real Rolex watch for that price, for instance.
The trademark owner who knows these cheap products are being made and sold may not be motivated to do much about it, because they are not losing a customer. Frankly, you have someone walking around advertising your product — not necessarily the way you want it advertised, because it may be poor quality, but it is still free advertising.
However, you still have to do some policing because of the legal aspect — so no one later claims you waived your rights. In that scenario, you may focus on the big infringers, like people selling a high-quality imitation that may cause you to lose real customers.
For instance, if a famous luxury brand is selling a handbag for $2,500 and someone is selling a high-quality counterfeit bag for $700 to $1000, that’s different. Someone who can pay $1,000 for a bag is a potential customer.
How can you address liability concerns?
The counterfeiting of some types of products, like automobile or airplane parts or products that are ingested like pharmaceuticals, could lead to injury or death. In addition to the loss of brand image and the loss of consumers, you have the problem that these counterfeits can kill. That creates liability issues. Your company may get sued because someone says they drank your product and got sick, or the brakes they bought failed. You, as the manufacturer, need to find out if the offending product is legitimately yours. Companies have to continue to embrace anti-counterfeit technologies like smart tags, holograms, molecular marking and other tracking tools that identify legitimate products.
What steps can you take to protect your brand?
First, you need to make sure your trademarks are up to date and filed in every jurisdiction where you are doing business or intend to do business in the near future. The second step is to police the areas where you notice that infringement is taking place or where you think your customers would be buying. Many companies have enforcement programs in place. They hire private investigators or law firms to hunt down infringers. When they find these people, they have a procedure in place to bust these people and prosecute them — civilly, criminally or both.
Also, police the Internet: eBay, Alibaba, all the large Internet vendors. If you notice unusual drops in sales in certain areas, it may be due to counterfeiting issues. Be vigilant to your business and consumers. When you see infringement, whether it’s on the Internet, the streets or with your own customers, find the source and take action.
Why is it necessary to be proactive when protecting your brand in the international marketplace?
The same legal issues of policing it and the same business issues apply internationally. There is no central trademark; just because you file in the U.S. doesn’t mean you’re protected anywhere else. Countries that are members of the Madrid Protocol allow filing with a single application in English. But many important and major countries or markets are not members of the Madrid Protocol. So, in many instances you have to file your trademark in the individual countries in which you want it protected.
Luis Alcalde is of counsel with Kegler, Brown, Hill & Ritter’s IP, Litigation and International Business areas. Reach him at (614) 462-5480 or email@example.com.