Intellectual property (IP) might be one of the most valuable assets of your company. But if it’s not protected, you can be foregoing a significant advantage in the marketplace.
There are four major IP categories:
- Patents, which protect inventions;
- Copyrights, which protect artistic forms of expression;
- Trademarks, which protect brands; and
- Trade secrets.
Generally, the types of IP small businesses may be interested in protecting are unique to the kind of company and its core competencies. For example, businesses that are predicated on developing new products or technology will be interested in patent protection, while another business may be identified by its brands and would want to protect those through trademarks.
However, John P. Cornely, of counsel at Fay Sharpe, LLP, says it’s important to take a close look at everything — from catalog photographs to manufacturing processes — to ensure the security of all of your IP.
Smart Business spoke with Cornely about successful strategies to identify and protect IP.
How does a small business identify and track its IP?
In a small business, to some extent, you have IP being created by many people in your organization at many points in the workflow cycle. You want to be systematic about identifying your IP. When it comes to patents, consider using an invention disclosure form. These forms can be made available to employees, especially those involved in the invention creation process, and are used to collect the data necessary for completing a patent application — inventor’s names, the date the invention was created, a description and/or drawings of the invention and the location of records that support the invention, such as a hard drive or lab notebook.
Encourage your inventors to use the forms and have regular sessions to review inventions and the potential for protection. Regular review meetings can also assist in identifying and/or ranking the relative importance of multiple inventions.
This form system can be used with other types of IP to identify creations and have a way to systematically collect information about them.
What are important inventions to protect?
It’s most important to protect those that make a product stand out in the market. As a small business, maybe you don’t have the resources to file 100 patent applications and might only be able to do a couple each year, so it’s critical to identify where to best apply your resources. Find the aspects of your products that make them more valuable and desirable in the marketplace. Think of it in terms of what features of your products your competitors would like to copy and select strategic patent protections that will keep your competitors from doing so.
Should companies federally register their trademark?
Yes. There are procedural benefits to registering your trademarks that will help in potential infringement actions.
When you start using a trademark in commerce you naturally gain common-law rights whether you’ve registered the mark with the federal government or not. However, one of the problems is those common-law rights are limited to the geographic area in which you’re doing business. So if you’re selling a product in Cleveland, Ohio, under a specific mark, you only have common-law rights in Cleveland. A federal trademark registration extends your rights nationally. Further, federal registration of your trademark provides you with procedural benefits if there’s an infringement action.
And, much like patents, you want to register those marks and brands that are most important to you if your resources are limited.
What can a company keep as a trade secret?
Sometimes there may be an idea that’s not a good fit for patenting or that you don’t want to disclose, for example, like a process of manufacturing a product. Trade secrets are great tools for protecting some ideas because, theoretically, the protection can last forever while patents commonly expire after 20 years. However, the secret generally has to be something no one else can easily discover, for example through reverse engineering; you have to treat it cautiously and control its dissemination. Many small businesses may think they have trade secrets, but since they are not effectively treating them as such that information won’t enjoy the legal status of trade secret, which has certain advantages.
Some things are easy to keep secret, such as formulas and manufacturing processes, because only a few people have or can discover that information. If the information can be discovered from viewing or reverse engineering your product, you won’t be able to keep that a secret. One risk is that if your secret is discovered legitimately then you’ve lost your trade secret status, but if someone were to uncover your trade secret through theft or breach of contract, then you have a case.
How does a small business secure rights to the company’s IP from its employees and contractors?
While this is important, it’s also often overlooked. You want to have some language in your employee or contractor agreements that details ownership of any IP rights. Contrary to what some might think, it’s not always the small business that owns the rights to IP developed by contractors. For example, when hiring a contract photographer to take pictures for your website, the copyright for the work (i.e., the photographs) stays with the photographer unless you have a written agreement that says otherwise. That also extends to contract programmers who can retain the copyright for developed software absent a sufficient written contract to the contrary.
In general, it’s a good rule to have your agreements explicitly spell out IP ownership rights in writing up front.
John P. Cornely is of counsel at Fay Sharpe, LLP. Reach him at (216) 363-9000 or email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe, LLP
While it may be tempting to snag an image from the Web and use it on your company website, that image is protected under copyright law and using it without permission could lead to significant losses.
“Copyright infringement is essentially a ‘strict liability’ offense,” says John Zanghi, a partner at Fay Sharpe. “In other words, if you infringe on a copyright owner’s exclusive rights you can be found liable for copyright infringement, even if you had no knowledge that an infringement occurred or did not make any money using the photograph.”
Smart Business spoke with Zanghi about copyright law and five strategies to protect your company from infringement.
Who is the owner of a photograph and what rights do they have?
The owner of a photograph is the creator of the work, which is generally the photographer. There are situations where an employer owns the photograph, for example, through a work-for-hire situation, or when the owner of the work transfers the rights to another via a written assignment.
Generally, however, an independent contractor or freelancer owns the work they produce. Being the owner means having exclusive rights to the work, such as the exclusive right to display it, prepare derivative works or modifications based on the original copyrighted work, and the right to distribute copies to the public through any means.
What is fair use of a photograph?
Fair use is an exception to copyright law that allows the use of a photograph without express authorization from the owner. Generally, fair use is limited to various specific purposes, such as criticism, teaching, scholarship, research, comment and news reporting.
Courts look at the purpose and character of the use to determine if an act truly constitutes fair use. Other factors are the nature of the copyrighted work, the amount and substantiality of the portion used in relation to the work as a whole, and the effect of the use upon the potential market or value of the copyrighted work.
If a photograph is posted on the Internet, is it open to public use unless clearly marked as copyrighted?
A copyright owner doesn’t have to provide notice to preserve copyright protection because it’s protected through public display. A photographer could expressly state that a photograph is in the public domain, but it’s safer to assume it’s not and that the copyright owner needs to be contacted to use the photograph. Even if you’re trying to minimize your exposure by citing the source, you could still infringe the copyright in the photograph.
If I’m not the person posting the image to the website, am I still infringing on the copyright?
The company may be liable regardless of who posts the image. The company may try to say it wasn’t aware the Web designer was using a copyrighted image, but if the company had control over the Web designer, it could be vicariously liable for the infringement. Most likely both parties could be held liable. Ignorance is not an excuse for copyright infringement.
Do I have to make money from using the photographs to infringe?
No. Copyright infringement is a strict liability offense. However, the amount of money you made on a protected image could factor into damages for the infringement and could affect the extent to which the copyright owner is entitled to statutory damages. Those can range from $750 to $150,000 for willful infringement, presuming the copyright owner has timely registered the copyright. But even if they didn’t have a timely registration, the owner could still seek actual damages for the profits obtained by the copyright infringer.
What strategies should business owners keep in mind regarding photographs?
- When hiring a photographer, have a contract outlining the scope of use of the photographs including when and how you may use them. To take ownership of and any or all of the copyright owner’s exclusive rights in the photographs, ask for an express, written transfer of the rights from the photographer. It’s always best to get your rights on paper and up front.
- When posting images to your website, make it clear to the Web developers that they must secure the rights and proper licenses to any image they use. Advise them not to just lift photographs from the Web without receiving permission from the owners. An infringement could lead to a cease and desist order that causes you to pull the images you’ve used from your site or from other materials and subject you to possible damages. To avoid this, you could hire your own photographer to take the photographs, which allows you to control the content.
- In the event that you do produce your own photographs and you do own the exclusive rights in such photographs, you may want to protect them further with copyright registration. There are different rules of how to submit photographs or collections of photographs, so ask your Intellectual Property attorney about the best procedure. But generally, because of the timeliness required for registration and the advantages of getting protection, it’s something to consider right away. You may also consider embedding a copyright notice in the digital image metadata.
- When using images from the Web, assume they are not in the public domain unless there is an express statement to that effect. Just because they’re on the Web doesn’t mean they’re free. Assume there is a copyright owner because you could be liable.
- It’s always better to obtain and define your rights before a problem develops, so get contracts when working with contractors. Generally, legal issues develop because someone didn’t imagine there would be a problem and he or she moves forward with a handshake agreement. Then when someone finds there’s more value in a photograph than he or she initially thought, disputes arise. So define the agreement up front, and establish what you’ll pay and what you’ll get back in return.
John Zanghi is a partner at Fay Sharpe. Reach him at (216) 363-9000 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Fay Sharpe LLP
With provisions of the America Invents Act beginning to roll out, it is a good time to review the overall patent process. Here we review the early stage from conception to filing the application.
An inventor’s idea should be matured to the point where it has been built or described in sufficient detail that it can be built in order to file a patent application. This early stage is also a useful time to perform a search to help determine how close the invention is to related techniques that already exist. It is also important for inventors to understand certain patent laws during this stage to secure a filing date for the patent application that avoids bars to potential patent rights .
“With the new laws, particularly the ‘first to file’ rule, it is important to keep track of your disclosures and to move forward with your filing sooner rather than later,” says Alan Brandt, an associate with Fay Sharpe LLP.
Smart Business spoke with Brandt and associates Namit Bhatt and DeMarcus Levy about considerations to be mindful of during the initial phase of the patent process up to the point of filing the application.
When is an idea 'ready for patenting'?
There is a difference between conceiving an idea and being ready to file a patent application. You are ready to file if you have built a prototype of model of the invention or when you have written a description with enough detail to practice the invention. The stage at which your idea is 'ready for patenting' is called reduction to practice (RTP).
RTP includes two forms: actual and constructive. Actual RTP means that the inventor has built and used the invention for its intended purpose. Constructive RTP occurs upon the filing of an application with a detailed description of the invention.
What is eligible for patent protection?
The patent statutes define four categories of subject matter eligible for patent protection -- process, machine, article of manufacture and composition of matter.
- Process – an act or series of acts or steps.
- Machine – a tangible thing with parts and/or a combination of components.
- Article of manufacture – an article produced from raw materials or assembled from components.
- Composition of matter – a chemical compound or mixture of ingredients.
The invention is defined by the claims of a patent application. A machine is defined by apparatus claims, while a process is defined by method claims, an article of manufacture by apparatus claims and a composition of matter by chemical claims.
There are some exceptions to the statutory categories, which are rooted in a premise that basic tools of science and technological work are not eligible for patent protection. These include laws of nature, physical or natural phenomenon, scientific principles and abstract ideas, which are disembodied concepts, or mental processes without specific applications or structural limitations.
How does the invention relate to the 'state-of-the-art'?
The common misconception among inventors is that the novelty of the invention must be a broad, game-changing advancement of technology. Such advancements are indeed patentable. However, incremental changes or minor improvements can also be patentable.
Novelty is one requirement for patentability of an invention. To satisfy the novelty requirement, an existing technique must not include every aspect of the invention; if it does, the existing technique is said to anticipate the invention. Another hurdle to patent protection is obviousness. In order to be non-obvious the invention must not have been obvious to a person who works in same field at the time of the invention.
A patent search can be performed prior to moving forward with a patent application to get a better understanding of how the invention relates to the 'state-of-the-art.' Performing a search is not required, but is useful in identifying, for example, related existing techniques that never made it to the storeroom shelf. The search can help avoid expenses for a patent application in which the invention is unexpectedly close to some search result. The search can also ensure that inventors are aware of features of the invention that currently exist and features that are more likely to be deemed novel.
What actions by a patentee can bar patent protection of the invention?
An invention can be barred from patent protection by a public disclosure. In the U.S., there is a one-year grace period in which to file a patent application after public disclosure of an invention. In some countries, there is no grace period and public disclosure is an immediate bar to patent protection. Public disclosures can include describing the invention in a printed publication; putting the invention on display or in public use; and offering to sell the invention or including it in a product release.
How should filing the application be coordinated with actions that can otherwise bar patent protection?
Ideally, a patent application is filed prior to the earliest planned public disclosure of the invention. This preserves potential patent protection in all countries. If the invention has already been publicly disclosed, the patent application must be filed before the expiration of the country’s grace period. For example, in the U.S., there is a one-year grace period after public disclosure. In some countries, there is no grace period. The American Invents Act implements a 'first-to-file' system which acts as an incentive for inventors to file patent applications as soon as possible in order to establish priority over another inventor filing a patent application for a similar invention.
Alan Brandt, DeMarcus Levy, and Namit Bhatt are associates with Fay Sharpe. Reach them at (216) 363-9000 or email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe LLP
Cybersquatting is a fairly common practice that enables another entity to cash in on the goodwill someone else has established with a name or destination on the Internet.
“Cybersquatters direct traffic away from a valid website, often to a website with a list of advertisements that relate to the industry, brand or subject being searched. These ads could actually lead traffic to competitors,” says Sandra M. Koenig, a partner and intellectual property attorney with Fay Sharpe LLP.
While the hope is that visitors realize they’re not on the correct website and move along, some might see a link to the same product or service on the imposter site and proceed to the imposter website instead of seeking out the correct website, she says.
“Worse yet, your visitors might land on a disparaging website where negative things are said about your business,” Koenig says.
Smart Business spoke with Koenig about cybersquatting, how you can reduce your exposure to it, and how an increase in top-level domain name options might make the fight against this type of fraud more challenging.
What is cybersquatting?
When a trademark is used in a domain name with the intent to profit from the goodwill of another existing mark, it is considered cybersquatting. The Anti-Cybersquatting Piracy Act states civil action can be taken against any person who in bad faith uses, registers or traffics in a domain name that is confusingly similar to another’s trademark.
For example, someone might establish a domain name by transposing or omitting a few letters of a brand or company name or introducing or eliminating punctuation between words. They also could use a different top-level domain name — such as .net rather than .com — to confuse potential visitors into landing on their site instead of the site a visitor intended to access.
What is a top-level domain name and what is the Internet Corporation for Assigned Names and Numbers (ICANN) doing with them?
A top-level domain name is everything to the right of the dot, for instance .com or .gov.
ICANN has opened the door for businesses to establish their own top-level domain name beyond the 22 that already exist. The owner of the designation would become the administrator of a contrived top-level domain name, such as .google. A purchaser could also register the name of its brands or establish ownership of a generic name, such as .coupon. However, the window of opportunity to apply for a name has closed and about 2,000 applications, at around $185,000 each, have been made for a top-level domain. All of these applications are being evaluated by ICANN and likely won’t be used until around 2013.
How does ICANN allowing companies to file for and purchase top-level domain names affect cybersquatting?
On one hand, cybersquatters likely won’t seek to purchase these top-level domain names because they cost too much and there is a lengthy examination process required to prove you have the ability to administer it. Also, ICANN has put safeguards in place to eliminate duplication. Domain administrators will likely have protections in place to deal with trademark infringements on top-level domain names. The domain administrators will be controlling who gets to use the name and could potentially keep it for internal purposes or for use with suppliers.
However, for the generic names, such as .green or .wine, there’s a lot of opportunity for cybersquatting. The increase in these names expands the opportunities for cybersquatters to infringe on a company’s reputation.
What sort of resolution can a company pursue from cybersquatters?
If you are the brand holder and someone is cybersquatting on your property, you can take them to court under anti-cybersquatting legislation or pursue relief through less costly arbitration proceedings. In the latter case, you would file a complaint with an arbitration forum designated to handle this type of case and submit evidence of the bad-faith use of your name or mark and why you — and not the cybersquatter — should have the rights to the domain name. If the cybersquatter does not prove its right to the domain, the infringing domain name is either canceled or transferred to you. However, the other party might have a legal right to use the name even though it’s a similar trademark, such as a company with a similar name that works in a different, non-interfering industry.
How can a company protect itself from cybersquatters?
In many ways it is getting more difficult to guard against cybersquatters. Not that long ago the advice one would give would be to think of all the potential misspellings of your brand or company name or variations using punctuation, but it is a lot of work and expense to attempt to get every adaptation registered in your name, especially with the proliferation of top-level domains. However, it is still important to make sure you try to protect yourself in at least the .com and .net fields, and it is also beneficial to own other domains as described below.
Be proactive and protect yourself as best you can. While the increase in domain options will offer legitimate businesses greater possibilities for branding on the Web, it also creates more opportunities for cybersquatters to take advantage of the goodwill you’ve established through your brand and company name.
Here are five strategies to protect against cybersquatters:
- Register your trademarks in the U.S. Patent and Trademark Office.
- Register your important trademarks as domain names with several different top-level domains.
- Register variations of your domain names including common misspellings, typographical errors and punctuation edits.
- Secure disparaging domains, e.g. brandsucks.com, or domains that may put you in an unfavorable light for your industry, e.g. brand.xxx.
- Be aware of the new top-level domains that will be available beginning in 2013 and seek registration for those that might be relevant to your business or industry.
Sandra M. Koenig is a partner and intellectual property attorney with Fay Sharpe LLP. Reach her at (216) 363-9000 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Fay Sharpe LLP.
The impact of intellectual property litigation can devastate a small business, as it is an extremely expensive and there are many steps involved in preparing a defense.
“The most important thing is to not ignore the complaint,” says Jude A. Fry, a partner with Fay Sharpe LLP. “When a complaint is delivered, you typically have 21 days to answer or to file a motion to dismiss. Don’t just sit on it for two weeks and then decide you have to act because there is a lot you need to do immediately,” she says.
Smart Business spoke with Fry about how to defend yourself against intellectual property infringement lawsuits both before and after a complaint has been filed.
When a suit is filed, how much time can pass before a company needs to take action and should you assert potential defenses?
Act immediately. Contact and retain legal counsel as soon as possible. Preferably, hire an attorney who specializes in patent, trademark or copyright law who can help you figure out the strength of the complaint and your potential defenses.
However, chances are that the attorney you hire will want a retainer. Ask him or her for an estimate of the attorney’s fees you may expend over the course of the litigation so that you’re aware of the potential costs of the suit. Talk with your general counsel to get a recommendation for someone who could handle the case.
It’s possible to assert a counterclaim against the other side to try to leverage a settlement. For example, the products of the entity filing the suit could be examined to determine if any infringe on your patents. You can also assert counterclaims that the other side's intellectual property is invalid or unenforceable, assuming you have a basis for making these claims. Once the other party is under the gun, it may not want to pursue the lawsuit.
The counterclaims that you assert are going to be related to the facts that are alleged against you in the complaint. There are times when the other side may try to file a motion to strike your counterclaims or remove them to a new litigation, but typically they are going to be part of your answer to the complaint.
Can claims contained in the complaint be covered by insurance?
Yes. Particularly if the claims include an advertising component, they could be covered under an ‘advertising injury’ provision of a comprehensive general liability insurance policy. While this type of provision is often part of a policy, it usually has exclusions.
Immediately contact your insurance agent and send him or her a copy of the complaint. The insurance company could agree to defend you in the suit and cover your attorney’s fees. However, it may retain counsel of its own choosing to defend you, and you might want to dispute their choice.
The insurance company may also pay the other side to settle the matter or pay any judgment against you, although this is often only the case when you’ve included previously such a clause in your policy. Either way, it’s worth the time to determine whether your insurance will cover any part of this.
Should documents and emails related to the complaint be destroyed?
Definitely not, because the court is likely going to discover you did so and will sanction you. As a result, you will either have to pay damages or the court could presume that you have done something wrong. Destroying evidence could be devastating to your case.
Contact your IT department and place a preservation hold on documents, including emails that may pertain to the litigation. Take affirmative steps to make sure all evidence is maintained and put steps in place to ensure that you identify and protect documents that, without intervention, could be destroyed.
Have an attorney speak with key people who may have knowledge or documents that pertain to the litigation and advise them of the necessity to preserve evidence.
How can a company assess its potential exposure in a lawsuit?
Work with your lawyer to see what types of damages could be available to the other side, such as monetary damages that could include an award of your profits, a reasonable royalty on sales of infringing products and actual damages to the other side. Also, estimate your sales of the product that has been accused and the profit that you made from those sales.
Statutory damages could also be available in copyright infringement cases. Statutory damages can be applied if fault is established without proof that the claimant has been damaged or that it lost sales to you. Damages claimed can range from $750 to a maximum of $150,000 if willful infringement can be proved.
Also, consider the business implications of an injunction enjoining the sale of the accused product. This could result in an injunction that prevents you from selling the product associated with the violation, which could mean the end of your business.
What steps can a company taketo avoid this type of litigation?
Do your research and determine whether competitive products are protected. Examine packaging, advertising and websites for trademark and copyright symbols and references to patent numbers. If a party is holding a similar product out as covered by intellectual property, talk to an Intellectual Property lawyer prior to selling or manufacturing your product. While there is always the chance that regardless of the precautions you take, you could still get sued, consulting with counsel in the early stages can better position you to disprove a claim that you intentionally infringed a copyright, trademark or patent.
Also, apply for your own intellectual property protection. In addition, if you are working with independent contractors, make sure you have agreements in place to ensure you own all the rights in the work and that your employees execute agreements assigning all rights in IP to you.
Jude A. Fry is a partner with Fay Sharpe LLP. Reach her at (216) 363-9000 or email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe LLP.
Companies often spend a good deal of time and money building a portfolio of trademark registrations in countries in which they do business. However, when a company goes through a reorganization or its assets are purchased, foreign registrations are sometimes given short shrift.
“The new owner often puts off recording the transfer of the foreign registration until it is time to renew the registration,” says Colleen Flynn Goss, counsel at Fay Sharpe LLP. “This typically doesn’t end well.”
Companies risk losing their registrations and it is not always a given that a new registration will be granted.
Smart Business spoke with Goss about what companies need to keep in mind regarding trademarks in foreign countries during the transfer of assets.
How do companies run into trouble maintaining title to foreign trademark registrations during an asset transfer?
While a company’s trademarks and associated registrations are generally properly listed in sale or transfer documents, transactional counsel often doesn’t understand the regulatory requirements of different jurisdictions when it comes to formalizing the transfer of title. A common error we come across is that the transfer language simply says that the company transfers 'all worldwide right, title, and interest in the ABC trademark and to any and all registrations and applications throughout the world.' This simply will not suffice in many countries.
Although title to trademarks is transferred in a bill of sale or assignment document executed at closing, you still need to record the title change in the required format with the proper trademark registries around the world. This can be expensive when there are registrations in multiple countries.
Why wouldn’t one record the assignments as soon as the transaction is completed?
Because recording assignments can be quite expensive, companies are reluctant to incur the expense of recordation, particularly with a large portfolio registered in several countries. Often, the new owner will decide that it will wait until the particular registrations are due for renewal. The thinking is that if the mark is no longer of value in the particular country of interest, the registration will just be allowed to lapse and the cost of recording has been saved. That’s fine – if the mark is no longer valuable and the registration will be allowed to lapse. The problem with this approach is that in most countries a trademark registration is valid for 10 years. What happens if a mark remains important and a problem arises with the transfer documents several years after the transaction is completed?
Why shouldn’t a company wait to register the transfer of a trademark?
Many countries require the use of specific forms that have to be filled out in a very particular way in order to register a transfer. For example, the process might necessitate that you have documents signed both by the new and original owner, or you may need the original documents and not certified copies or legalizations by particular consulates. Or, you may have the situation described above where all of the particulars of the foreign registrations are not listed.
Consider this scenario - Widget Company acquires the assets of TT Inc., including the trademark registrations for house brand TOPSY TURVY in 15 countries in Europe, Asia and South America. The registration for TOPSY TURVY in Russia is due for renewal eight years later and, lo and behold, the yellowing photocopies copies of the trademark assignment that counsel forwards to its associate in Russia for recordation are refused because they do not conform to the requirements for transfer in Russia. This is easy enough to fix with a confirmatory assignment document. However, if there are no longer any officers from TT Inc. available, it can be difficult to finalize a simple confirmatory assignment.
While you may have thought that you were saving money by waiting to file the transfer documents at the time of closing, you may have just walked into greater expense. Additional documents with certifications and legalizations to correct title may be available but have added to the cost. More important, it may not be possible to record the documents at all. Now the company is faced with filing a new application. This is more expensive and is certainly more time consuming than recording title. And here is the unfortunate part – just because you had a registration does not mean that you will be able to obtain a new registration for the same mark. The end result may be that Widget loses its house mark in an important market.
Why not simply file the new application?
Just because you had a registration does not necessarily mean that you will be able to obtain a new registration for the same mark. When one files a trademark application, there is generally a mechanism that allows a third party to object to registration of a particular mark.
There may be entities with similar trademarks that did not contest your application when it was originally filed 20 years ago but might now be in a more financially and market secure position to do so. This could prevent the registration of your mark, even if it has been established in that country for many years.
In addition, the market growth of some countries, such as China, has been significant. Because such countries now have more trademarks on their registry with which to compare new filings, there is a greater chance of conflict with an existing trademark. If your registration is refused you may be prohibited from doing business in that country under your mark, face infringement claims by third parties, or encounter customs issues.
How can companies ensure they have done what is necessary to maintain their trademark rights?
When you are acquiring or reorganizing a company, involve intellectual property counsel for specific guidance on trademark transfer. Make sure that the transfer language and schedules completely and accurately list all of the trademarks and associated registrations and that the conveyance clause includes a specific reference to the transfer of the goodwill associated with the marks. Conduct due diligence to ensure that title to these registrations in various jurisdictions is correctly in the name of the seller. Take the time to contact foreign trademark counsel and obtain and execute the country specific transfer documents. You may still be able to avoid some of the immediate costs of recording transfer documents by postponing recordation of the executed transfer documents until the renewal is due. This way, you have short-circuited the problems that could occur eight years down the road when you need those signatures or papers to complete the transfer and the requisite documents or people are no longer available.
However, the best practice is to bite the bullet and file at the time that the acquisition or reorganization occurs because there is less chance of encountering problems. For companies operating in the international marketplace, trademark registration and protection of your trademark in other countries is just as important as protecting your trademark in the U.S.
Colleen Flynn Goss is Counsel at Fay Sharpe LLP. Reach her at (216) 363-9132 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Fay Sharpe LLP.
The risks for companies using social media are plentiful, from employees who reveal trade secrets to being held responsible when outside users post copyrighted material to company-operated web pages. To avoid legal ramifications and lost business opportunities, you need to be aware of potential pitfalls.
“Social media increases the ease with which information is communicated and it does it in a permanent and attributable way,” says Robert Sieg, a Partner with Fay Sharpe LLP. “This can make it easier for confidential information to be leaked out of a company and create a potentially more harmful situation when such a leak occurs.”
Smart Business spoke with Sieg, as well as Fay Sharpe attorneys Mark Rogge and Sean Weinman, about how social media can impact your company’s intellectual property and image.
What security issues can arise with the use of social media?
With many people conditioned to post almost anything on the Internet, confidential company information such as upcoming product releases and acquisition plans are more at risk. With information posted online, that creates a record that can be found by a routine keyword search and that is directly attributable to an employee of the company, giving it more credibility. This can give the media a much stronger lead to dig into what is going on in your company. Information could also be posted that would compromise a company’s ability to obtain patent protection on new inventions or that reveals trade secrets.
As a safeguard, make sure that only those authorized to do so post to your company’s web site and social media sitesthat your legal department reviews posts before they go live and that patent attorneys review materials to make sure confidential technical matters aren’t being released.
What ownership issues arise in the context of social media?
While the ownership of a tangible item such as a company car can be clear, when it comes to social media, the distinction becomes blurry. In many cases, employees are creating pages on sites such as Facebook for company purposes using their own names and information.
That is something that you need to monitor. If you really want that site being used to represent your company, you need to make sure that it’s clear that you own that site. This can mean opening the account in the company’s name and having documentation, such as an internal social media policy, that describes ownership and proper use of the site, as well as addressing contingencies such as severance issues.
However, sites such as LinkedIn can make it difficult to distinguish between work and personal use, as many companies encourage employees to set up accounts to network with and build business contacts. But if an employee leaves for a competitor, he or she may take that LinkedIn account upon departure, and all of those contacts created as a result of employment with your company go with the employee.
While a company can argue that the account was created on company time as part of the employee’s assigned work, this can be difficult to prove, so you need to proactively set up policies to establish guidelines to ensure employees don’t walk out with your property.
What should be considered in deciding what can be posted to a company’s social media site?
If you allow visitors to post to your site, consider that it could open you up to liability. The Digital Millennium Copyright Act offers some protections against copyright infringement by providing a 'safe harbor' notice and takedown procedure in some cases in which owners of copyrighted material ask for posts to be removed. Companies should be familiar with these policies and have someone monitor posts to the company’s site to ensure that improper material is not posted.
Many companies have a dedicated employee policing their site, but with that approach, you might already be in trouble before that person becomes aware of an issue on the site. To prevent this, companies can implement a moderated system, which allows the host to queue comments for review before they go live.
What are the dangers of using social media for promotion?
While social media can be used to drive awareness and generate sales, you need to avoid misleading and deceptive advertising such as false blogs that appear to be independent but that are actually operated by someone working for the company.
In 2009, the Federal Trade Commission established guidelines concerning the use of endorsements and testimonials in advertising, which require the disclosure of connections between advertisers and endorsers. If you have third-party endorsers rating products on your web site, but they’re misleading the public, your may be liable for that false or misleading practice. But beyond any legal considerations, it's just not good advertising for your company if people discover that you’re misleading them.
How can social media impact the branding of a company?
The growth of social media has brought with it problems that can affect trademark management and the preservation of goodwill associated with a company’s brand. Practices such as cybersquatting, which involves parties purchasing Internet domains related to brands or company names, is a rising trend. Cybersquatters hold companies hostage and try to sell them those domain names for a price. In other cases, squatters may post explicit material under the brand name or company banner, or using your good name to drive traffic to their own sites.
Registering your company or brand trademark can go a long way toward stopping a cybersquatter, but the problem is exacerbated as new social media sites continue to appear. As a result, once a brand new social media network arrives, register whatever space you can that could be associated with your product to make sure that no one else does so.
Robert Sieg, Mark Rogge and Sean Weinman are attorneys with Fay Sharpe LLP. Reach them at (216) 363-9000 or email@example.com, firstname.lastname@example.org or email@example.com.
Companies routinely direct substantial resources to the development of new products, including designing exterior shapes and visual characteristics as well as technical and functional features. If you want to protect the look of your new product from copycats, you should consider pursuing more than just a utility patent. You need to obtain a design patent.
“A design patent will protect the ornamental appearance of
Smart Business spoke with Dugan about design patents and how they can be invaluable in protecting your company’s new product.
What are the benefits of obtaining a design patent?
Let’s say your company is in the eyewear business, and one of your employees develops a new pair of sunglasses. The sunglasses are of an otherwise conventional construction that includes a frame, a couple of lenses and two foldable arms that are connected to the frame. Structurally, there is nothing particularly innovative about this new product, when compared with other sunglasses on the market. However, your employee has come up with a design that is amazing -- it’s new, creative and the purchasing public loves it and is buying it like crazy. The way to protect what is making your company money – the design or appearance of the sunglasses – is to obtain a design patent for the sunglasses. Since the basic configuration of the sunglasses is well known, patent protection under a utility patent wouldn’t be available and couldn’t effectively protect this new design.
In many cases, a product can be protected by both design and utility patents. Taking above example a bit further, if your employee also developed a scratch-resistant coating that is included on the lenses of the new pair of sunglasses, then obtaining a utility patent to protect eyewear with this protective coating on the lenses would also be appropriate. Importantly, the utility patent would not be limited to use on sunglasses that have the new design. Rather, the utility patent might be broadly drafted to cover any eyewear that includes the protective coating, regardless of the design, appearance or type of the eyewear.
What cannot be protected by a Design Patent?
Design patent protection is not available for products with an appearance that lacks visual design elements, such as shape or surface ornamentation. Cleaning products, such as liquid detergent and powdered dishwashing soap, are examples of products for which design patent protection is unavailable and wouldn’t make sense. However, these products are often sold in containers that are covered by one or more design patents, as the containers are normally designed to have a distinctive shape and appearance that makes the product identifiable to consumers.
How does a design patent help protect a company’s product from infringers?
With the continual advances in digital imaging, computer-aided modeling and rapid manufacturing technologies, it keeps getting easier for new players to enter a market by replicating existing products. Unfortunately, this can be achieved at relatively low cost and in a very short period of time. In many cases, the new competitor may not even make the slightest of changes to the knocked-off design. This, of course, is not new news for many companies.
What is often unknown to many companies, however, is that patent rights in the US are not granted to the patent owner until the date that the patent actually issues. So, there is usually a window of three to five years between the launch of a new product and the issuance of a utility patent covering that product. Within this window, a competitor could enter the market with a product having the same design and continue to sell that product – largely without recourse – until such time as a utility patent issues. However, this window can be substantially shortened by pursuing protection for the visual appearance of the product through a design patent.
How long is the design patent in effect, and how much does it cost?
A Design Patent is only valid for 14 years – slightly shorter than for a utility patent, which is about 20 years. So what happens when the 14 years are up? By then, any utility patents will have issued and additional patent protection will be available for the product from these patents, which will still be enforceable.
Additionally, the product design can be tied into ‘trade dress’ protection laws, which is intellectual property that comes from a product’s distinctiveness in the marketplace. If a product has 14 years of exclusivity afforded by a design patent, then it is possible for the patent holder to establish trade dress protection for the design. This is not automatic and typically takes some effort on the patent owners’ part. However, trade dress is perpetual and will continue to protect the design of the product for as long as it is being used. Additionally, most of the same remedies that are available for design patent infringement are available for infringement of trade dress protection.
The Apple iPhone, for example, has numerous design patents for the outward appearance of the phone and probably hundreds of utility patents covering the technology used in the phone. By virtue of many millions of iPhones that have been sold, Apple has also established that the design of the iPhone is recognizable as being an Apple product and has registered the design with the US Patent and Trademark Office. It is important to remember, though, that it is not necessary to sell such a large quantity of products to acquire trade dress protection. But, some effort on the part of the patent owner is usually required.
Design patents cost far less than utility patents — less than $500 for the government application filing fees, plus attorney fees and the cost of preparing formal patent drawings — and take less time to get. For example, a utility patent could take five years. A design patent takes six to 14 months, on average, to obtain from the patent office. The scope of protection, of course, is more limited than a utility patent.
What does a business need to get in place to apply for a design patent?
Obviously, the first thing that is needed is the design itself. Once that has been developed, the initial patent application papers can be prepared for filing.
One of the factors that contributes to the relatively low cost of obtaining a design patent is that these initial application documents are relatively straightforward. However, the initial application will need to include drawings with six to eight views of the product. The scope of protection covered by the design patent directly relates to what is shown in the drawings. So, careful attention is usually paid to preparing the drawings.
You want to fully illustrate the product and the aspects of the design that are to be protected. But, a bit of a balancing act is required. You want to include enough detail of the design, but not too much. With regard to design patents, the less detail that is included the better. The patent attorney collaborates with the client and the designer to find the right balance. Here’s an example of why:
Let’s say you want to obtain a design patent covering a new design for a car. The drawings of your design that are in your patent application show the body of the car, plus the tires and wheel covers, an antennae, and a graphic with flames down the sides of the body. The resulting design patent will have a relatively limited scope of the protection that will require a competitor to sell a car having all of those details to infringe your design patent.
On the other hand, if the tires, wheel covers, the antenna and the graphics are omitted from the drawings of your patent application and only the hood and the front half of the car body are shown, you are protecting the shape of the illustrated car body itself and the resulting design patent will have a broader scope of protection. In such case, there is a greater likelihood that a competitor will be found to infringe the design patent.
Matthew Dugan is a partner with Fay Sharpe LLP. Reach him at (216) 363-9000 or firstname.lastname@example.org.