Companies have information that gives each of them a competitive advantage over competitors. Patenting this information is sometimes legally impossible or disadvantageous — patents expire, leaving vitally important information publically exposed.
Some companies choose to treat the information as a trade secret because such a designation can offer legal leverage in certain situations. And unlike a patent, a trade secret can last forever.
A patent expires 20 years from its effective date of filing, and that previously protected invention enters the public domain. With a patent, you’re disclosing how to make and practice an invention in exchange for 20 years of exclusive rights to do so,” says Daniel R. Ling, an associate with Fay Sharpe LLP.
He says many companies, especially smaller ones, don’t often consider the role of trade secrets, but in certain instances companies could be well served by recognizing and protecting such valuable information. But there’s one catch: “You have to take reasonable steps to maintain it as a secret.”
Smart Business spoke with Ling about identifying and protecting trade secrets.
What are some examples of information that could be a trade secret?
Customer and supplier lists, the arrangement of equipment in a factory and certain manufacturing processes are examples of valuable proprietary information that may not rise to the level of something that can be patented. Often, it comes down to that which makes your product better than that of your competitors but can’t be patented because it doesn’t meet the basic legal standards, which are that the invention is new, not obvious, useful and eligible to be patented.
How long does trade secret protection last?
Trade secrets last indefinitely, as long as the information is maintained confidential and the holder of the trade secret continues to take reasonable precautions against disclosure.
How are trade secrets best protected?
There are many methods of protecting sensitive information. If it’s a process that involves multiple steps, a company could isolate the responsibility for each of those steps across multiple locations so the entire process isn’t carried out in one place and a single person isn’t privy to the entire production.
It’s also fairly common to include confidentiality agreements and nondisclosure clauses in employment contracts for not only employees who might be aware of a trade secret in its entirety, but also for employees who may have only some knowledge of the process. Companies with such sensitive information should work with a business attorney to put together those agreements.
What can be done if a trade secret is leaked?
If the trade secret was misappropriated — obtained illegally or otherwise improperly disclosed — there are steps that can be taken to prosecute the perpetrator. The Uniform Trade Secrets Act, the general framework of which has been enacted by 46 U.S. states, offers remedies when a trade secret is acquired through improper means or through a breach of confidence. This can provide some relief to a trade secret holder in the form of injunctive relief (e.g., stopping the use of a misappropriated trade secret), monetary damages and/or attorney’s fees.
However, if the information is developed independently or introduced to the public lawfully, nothing can be done. Further, if the secret that was being held is a patentable idea, another company or individual could secure the rights to it and bar others from acting on it. That’s why it’s important to carefully consider what you hold as a trade secret; if it can be easily reverse engineered it’s not right for trade secret protection.
Regardless of whether the secret got out legally or illegally, once it’s widely disclosed the remedies under the law might not be sufficient to make a company whole again — once it’s out, it’s out. The trade secret holder ultimately has an obligation to take reasonable protective measures to guard its secrets.
Daniel R. Ling is an associate at Fay Sharpe LLP. Reach him at (216) 363-9000 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Fay Sharpe LLP.
More content is being published exclusively through the Web, which means those seeking to either obtain a patent or attack the validity of a third-party patent need to exercise greater diligence when conducting a patentability or validity search.
“It’s important that the scope of prior art searches, whether used for preparing patent applications or defending infringement accusations, consider Web-based information,” says Mandy B. Willis, an associate at Fay Sharpe LLP.
“Companies need to be more aware of online postings by searching websites when conducting patentability and freedom-to-operate searches,” she says.
Smart Business spoke with Willis about the Web’s impact on prior art and how to apply diligence in this new publishing environment.
How can a solely Web-based reference qualify as a prior art printed publication under the patent laws?
In the past, many companies looked just at patents, patent publications and printed articles when conducting prior art searches. But the court in a recent case, Voter Verified, Inc. vs. Premier Election Solutions, Inc., provided guidance on how to determine whether a solely Web-based reference qualifies as a prior art ‘printed publication.’ The court created a three-part test to make this determination.
What is the test for determining whether an online article qualifies as a printed public document?
The first prong of the three-part test is public awareness. This prong is used to determine if the relevant public is aware of the website which contains the article. And, ‘relevant public’ means persons interested in the technology in question.
The second prong of the test is, having found the website, whether the article can be found by a person exercising reasonable diligence. In one example, this prong can be met if search tools on the website are sufficient to retrieve the article in response to a query using search terms that relate to the subject matter of the article.
And, the third prong is whether the article was accessible to the public before the effective filing date of the patent and/or application in question. This prong is met if the website was undisputedly open to any Internet user by the critical date. A showing of accessibility can be supported if all submissions on the website are treated by the community as public disclosures or if users can freely and easily copy the website content.
To pass the test, all three prongs must be met.
Is evidence of indexing a prerequisite to establishing that an online reference is a printed publication?
The key inquiry regarding whether a solely Web-based reference can be prior art is if the reference is or was sufficiently accessible to the public exercising reasonable diligence. However, it’s not necessary to provide any evidence of how the public located the website or article; the reference just has to have been discovered.
Indexing allows the interested public to locate an article on a website and can be a relevant factor in proving accessibility, but it’s not an absolute prerequisite. Accessibility is based on a host of facts and circumstances surrounding a reference’s disclosure.
Must the disclosure in the online reference be identical to the claims in a patent application or an issued patent to qualify as prior art?
No. Under section 103 of the patent laws, the disclosure in an online reference must only make the method or system of the claim obvious, either alone or when combined with another reference, to one of ordinary skill in the art. It does not have to be identical to the language in a patent application, just similar.
What can a company do to protect its patents from being invalidated or itself from being accused of infringement?
In the event that a patent holder accuses you of infringement, you can try to invalidate that patent with a prior art, which could be a Web-based article. Therefore, document your search strategy and the search terms you use to find the reference to support a showing that the prongs can be met.
If you are building a patent portfolio and/or applying for a patent, expand your patentability search to online publications. If you’re aware of postings that can be cited against your claims during prosecution, you can craft stronger claims earlier in the patent process, which can save you time and money.
Mandy B. Willis is an associate at Fay Sharpe LLP. Reach her at (216) 363-9000 or email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe LLP.
Trademarking a color has become more common — UPS and brown, Target and red, John Deere and green and yellow.
However, Sandra M. Koenig, a partner at Fay Sharpe LLP, says it’s important to remember that trademarking a color isn’t limited to big companies, especially if you have a specific audience and can show the color is distinctive in a smaller segment of the industry.
Smart Business spoke with Koenig about trademarking colors and the law surrounding it.
What can be a trademark other than a word or logo?
Some nontraditional trademarks can be an overall appearance or trade dress, such as color, product shape, scent and sound. When trademarking color, it can be a combination of colors applied to products, packaging or something that represents a service, as well as just one color, called color per se. Consumers should be able to easily associate color with a product or service, or its source. You might be asked to prove the connection, perhaps with surveys.
What does it take to make a color a trademark?
There are certain criteria to get a color registered. It cannot be a color required in an area or acting as an industry standard, such as green’s association with the environment (for an environmental product). The color needs to be used consistently, but your use shouldn’t limit competitors. If it’s the cheapest color to use when manufacturing a product, you can’t keep it for yourself. The color should be unexpected and not related to its function.
Some companies get color or product configuration trademarks as a way to extend protection to something no longer covered by a patent, or never covered. Trademarks last forever, as long as you keep using and renewing them, while patents are good for 20 years from the day of filing and design patents last 14 years. Therefore, when a patent runs out, trademarking the color or shape is a way to keep a unique look under protection.
The registration process can take years, especially if it’s a single color or there are appeals. Last year, in one noteworthy case, Louboutin v. Yves Saint Laurent, a federal appeals court limited Christian Louboutin’s color trademark to shoes with a lacquered red sole and contrasting upper. However, once you have a registration for your color, you’ve got national prima facie exclusive rights.
Is it easy to prove you have a trademark in a color?
It depends on your field and with what the color is associated. Areas where products are supposed to have color, such as fashion or paint, are difficult. It’s also sometimes harder to trademark a product going to general consumers. A logo with a color like the yellow Shell gas station logo is fairly straightforward, a combination of colors absent shape or configuration is more difficult, and one color without limitation to shape or configuration is hardest to prove.
Another consideration is whether you’re registering a particular shade by the pantone number, a range of pantone numbers or a color without limitation to shade. Like with traditional trademark infringement, it comes down to the likelihood of confusion. If you registered the color orange per se and somebody has peach, is that confusingly similar? If you did a pantone range of a yellow, how far outside of that range is confusing?
If you want to protect the color of your product, how can you establish rights in order to register it?
Be proactive and consistent. Don’t dilute the color by offering the same product in an array of colors. If you want to be the supplier of a magenta-colored product, don’t sell the same product in purple, green, yellow and gray.
Promote it in advertising, including saying the color word. Use ‘look for’ advertising, like ‘look for the color red on your grocer’s shelves’ or ‘we’re the green people.’ It helps if your company colors are the same as the product you’re trying to protect. You also can tie the color with something relevant like Owens Corning did with the Pink Panther and its pink insulation. Anything to drive home the association with the color and you and your product.
Sandra M. Koenig is a partner at 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.
Challenging a patent is a strategic decision made by a individual or business and can be done for a number of reasons and at various stages of the patent process — such as during the patent “pending” phase or after the patent has been granted and issued. However, challenging a patent before or after granting is expensive and could have some pitfalls, such as potentially making the challenged patent more resilient to validity assertions if a challenge fails.
Smart Business spoke with James Scarbrough, a partner with Fay Sharpe, LLP, as well as law clerks Matt Burkett and Erik Keister, about strategies for challenging patents and when it’s appropriate to do so.
Why would someone challenge a patent?
There are several reasons to challenge a patent. For example, someone can challenge a patent if they think that the person(s) that obtained the patent stole or copied the invention from them. Another reason to challenge a patent is if there is a concern that a product or process may infringe one or more claims of the patent. Also, if a person has been accused of infringing a patent, and the person wishes to prevent or end a lawsuit or encourage a patent license agreement, the person may then challenge the patent. A patent or pending patent application can be challenged through the U.S. Patent and Trademark Office (PTO) as an alternative to court litigation.
How does a patent challenge work?
One type of challenge can be made after a patent application is filed but before a patent is granted or issued. This particular challenge is called a pre-issuance submission. Documents that can be considered prior art, such as another patent, a published patent application, or any other printed publication of potential relevance can be submitted to the Patent Office. The person submitting the prior art must also provide a concise description of relevance of each document. The submission must occur before a notice of allowance is mailed or the later of two events: (a) six months after the application is published, and (b) a mailing of a first Patent Office Action in which one or more claims are rejected.
The entity whose patent application is being challenged can submit a response to the challenge, but is not required to unless requested by the Patent Office.
Another type of challenge proceeding is called a derivation proceeding. In a derivation proceeding a person may challenge a patent or pending patent application if they think that an inventor in an earlier filed patent application derived the claimed invention from an inventor of their patent application. Any such petition may be filed only within the one-year period beginning on the date of the first publication of a claim to an invention that is the same or substantially the same as the earlier application's claim to the invention.
A third type of challenge is called a Patent Post-Grant Review. A Post-Grant Review is performed once a patent is issued and must be done within the first nine months of the grant date of the patent. A patent owner is given three months to respond after the review request before the Patent Office decides to proceed forward with the review. The patent owner has one opportunity to file a response or amend claims. The challenge can be based on several factors within patent law, such as patentability, anticipation, obviousness, or indefiniteness.
What happens if you win a challenge? And, if you lose?
Winning a challenge could result in the patent being invalidated and any products or processes thought to infringe the patent claims can then be freely produced without threat of a lawsuit or legal action with regard to the challenged patent. A successful outcome might also result in the patent claim scope being limited such that a competitive product can be manufactured or sold without concern of infringement. Winning the challenge could also stop a lawsuit from being filed or a pending lawsuit that has been filed against the challenger. If a challenge is lost, i.e., the patent or patent application survives the challenge, the challenger could potentially be found liable for infringement in a pending or subsequently filed lawsuit. Additionally, a patent that survives a challenge may become stronger in that it has survived a review against additional prior art.
What’s the difference between challenging a patent before or after it has been granted?
When challenging a patent application before a patent is issued via pre-issuance submission, the challenger submits prior art and then is not involved in the process after that point. A pre-issuance submission can be made by anyone before a patent is granted.
When challenging a patent after grant, it depends on the timing whether it is before or after nine months since the patent had been granted. A Post-Grant Review can be performed if it is less than nine months after grant of a patent. A Post-Grant Review is advantageous in that the patent can be invalidated on more grounds and there is a lower burden of proof. Which challenge is appropriate depends on the timing of the challenge, the basis for the challenge and the person or entities making the challenge.
What costs might a company incur by challenging a patent?
Fees for the different types of challenges vary, and can range from $180 for every 10 documents submitted in a pre-issue prior art submission, to $60,000, which is the estimated cost of preparing a petition for derivation. And those figures may not take into all costs incurred, such as attorney fees. Ultimately, a company has to do a cost/benefit analysis to determine whether it’s worth spending the money to file a challenge, weighing the risks of not filing and possibly being exposed to liability.
James E. Scarbrough is a partner with Fay Sharpe, LLP. Reach him at (216) 363-9141 or email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe, LLP.
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 firstname.lastname@example.org.
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 email@example.com.
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 firstname.lastname@example.org.
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 email@example.com.
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 firstname.lastname@example.org.
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 email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe LLP.