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McHale Slavin Newsetter

General Summary of Intellectual Property Law: Advantages/Disadvantages

A. Patents   B. Trademarks   C. Copyrights   D. Trade Secrets   E. Unfair Competition

A. PATENTS (UTILITY)

1. Legal monopoly: gives the owner the right to exclude others from making, using, or selling the invention. Only available with respect to a "new and useful process, machine, manufacture, or composition of matter or useful improvement thereof." Patent rights exist exclusively under federal law, which supersedes any inconsistent state law.

2. Patents are available only if applicant is the first to invent, and the invention is novel, useful, and "not obvious" to one of ordinary skill in the particular field.

3. Unless the invention is "reduced to practice" by filing a patent application or diligently working to create a prototype within one year of the date it is "ready for patenting", patent rights may be lost to another person who conceives of the same invention after the first inventor but reduces it to practice before the first inventor.

4. U.S. patent rights will be lost unless a patent application is filed within one year of the date the discovery is first published or embodiments of the invention first go "on sale."

5. U.S. Patent protects only against infringement in the U.S; not a bar to infringement elsewhere. The following are the three main statutory prerequisites to patentability, codified under Title 35 of the United States Code:

§101

Under 35 USC §101, in order to be entitled to a utility patent, an invention must be a new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.

§102

Under 35 USC §102, a patent cannot be obtained on something: (a) in technological history; (b) patented or described in a printed publication in this or a foreign country or in public use; (c) abandoned; (d) patented by the inventor in a foreign country more than 12 months prior to the filing; (e) described in a patent or application; (f) if the applicant is not the true inventor; (g) if the device was made in this country by another who had not abandoned, suppressed, or concealed the invention.

§102

Under 35 USC §102, a patent cannot be obtained on something: (a) in technological history; (b) patented or described in a printed publication in this or a foreign country or in public use; (c) abandoned; (d) patented by the inventor in a foreign country more than 12 months prior to the filing; (e) described in a patent or application; (f) if the applicant is not the true inventor; (g) if the device was made in this country by another who had not abandoned, suppressed, or concealed the invention.

6. Advantages

a. Protection lasts up to 20 years from the date the patent application is filed1.

b. Strongest available type of intellectual property protection.

(I)

Protects against manufacture, use, or sale of items embodying or made with the patented technology as "claimed", even if the technology is independently discovered later, by another party. Patent laws provide relief against reverse engineering and "clean room" development techniques. If an invention is developed subsequent to your invention, and if the later invention is used or sold in the United States, and if it is within the scope of the claims then there is infringement. Moreover, under the Doctrine of Equivalents, there may be infringement if elements of the infringer's invention functions in the same way to achieve the same result as the patented invention.

(ii)

Can be used to block importation of infringing goods into the United States even though lawfully made in a foreign country where the U.S. patent does not apply.

(iii)

Process Patent Amendments Act of 1988 gives the owners of United States process patents the right to exclude others from using or selling throughout the U.S., or importing into the U.S., products made by the patented process, irrespective of whether the products themselves are patented. The Act significantly increases the value of U.S. process patents, and creates enormous potential liability for domestic businesses.

(iv)

Under right facts, can protect against manufacture of key components in the U.S. for assembly and sale of the patented device outside the U.S.

c. Treble damages and attorney's fees available as remedies for infringement if case is deemed "exceptional".

d. Owner can enter into "field of use" or other restrictive licenses which limit the ways in which the licensee may use the patented process.

e. Patent Pending is a federally recognized term and designates a patent application is pending.

f. Government reduces various fees if the Applicant is a small entity (less than 500 employees).

g. Employer automatically has at least a "shop right" to use inventions developed by its employees within the scope of employment. However, under applicable state law, a "shop right" may merely be the non-exclusive right to use the technology without paying royalties, not ownership of the exclusive right to practice the invention. If the employer wants to be sure it owns the technology it pays its employees to invent, or they invent as a result of knowledge of the employer's trade secrets, it is important to have a written "invention agreement" clarifying ownership rights.

7. Disadvantages

a. Cannot protect algorithms. To be patentable, claims must cover a process for solving problems (which process may be based upon one or more algorithms), or a product which embodies the process.

b. Rights to obtain patents overseas may be lost unless a patent application is filed before the invention is first publicly marketed.

c. U.S. application requires full disclosure of the "best mode" of practicing the art. The issued patent is published in the Official Gazette placing it into the public domain. Competitors may be able to use the information disclosed in the patent to "design around" the patent claims, or to market in countries where a patent was not obtained.

d. In Europe and many other countries, patent applications are published 18 months after the priority filing date so that others claiming rights in the invention can oppose the patent before it issues. This publication puts the contents of the application into the public domain.

e. Patents for software may be obsolete by the time patent issues.

f. In U.S., maintenance of patents requires a formal filing and payment of additional fees by the 3-1/2, 7-1/2, and 14-1/2 anniversaries of the date the patent issues. Other countries also require payment of periodic fees as a condition of maintaining the patent in good standing.

g. No protection while application is merely "pending." (e.g., merely filing an application does not result in any rights which can be used to force another to stop practicing the claimed invention). However, marking products embodying the patent with "patent pending" is allowed and may deter competitors from copying the device because on the day the patent issues, the owner will have the right to stop the competitor and its customers from making, using or selling the covered invention.

h. In accordance with the American Inventor’s Protection Act, U.S. Applications now publish 18 months after their earliest effective filing date.



DESIGN PATENTS

Design patents protect the ornamental design for an article of manufacture. In general, a "utility patent" protects the way an article is used and works while a "design patent" protects" the way an article looks.

1. Advantages

a. Inexpensive to file.

b. Consists mainly of drawing sheets, typical drawing sheets illustrate each view (top, bottom, side, perspective...) of the product.

c. The provisional application effectively defers examination of an invention for a period of a year, after setting forth the first inventor. This may be useful to applicants who may want to further develop the invention, determine marketability, acquire funding or capital, seek licensing, or manufacturing while contemplating patent registration.

d. No maintenance fees.

e. Have the right to state "patent pending" without disclosing what type of patent is pending.

f. A design patent and utility patent may be obtained on the same article if invention resides both its utility and ornamental appearance.

2. Disadvantages

a. Patent is limited to the ornamental shape only, does not protect the underlying idea.

b. Expires 14 years after the day of grant.

c. Design patents may include only a single claim.

d. An international application naming various countries may be filed for utility patents under the Patent Cooperation Treaty (PCT), while no such provision exists for design patents.



PROVISIONAL PATENTS

Provisional patent implementation of GATT establishes a new type of patent application referred to as a provisional application. This application will not be examined except for formal requirements.

1. Advantages

a. The filing fee for a provisional application is 1/10th the cost of a large entity non-provisional patent application filing fee.

b. The provisional application effectively defers examination of an invention for a period of a year, after setting forth the first inventor. This may be useful to applicants who may want to further develop the invention, determine marketability, acquire funding or capital, seek licensing, or manufacturing while contemplating patent registration.

2. Disadvantages

a. A provisional application will not mature into a patent registration and will automatically go abandoned by law one year after filing.

b. Short cuts in an attempt to save money may leave the application with insufficient specification that can be used against the patentee in subsequent litigation.

c. Filing of a provisional application starts the time for International filing in accordance with the Paris Convention.



B. TRADEMARKS (SERVICE MARKS - TRADE DRESS)

1. Trademarks and Service Marks are words, phrases, designs, sounds, symbols, special color combinations, etc. which identify the source of the goods or services marketed under them. In general, they are used on or in association with goods and/or services. The public learns, through purchasing experience, that the goods or services bearing a mark come from a single (but possibly anonymous) source which meets its expectation of a standard of quality.

2. In general, trademark rights are acquired by use whether or not the owner registers them. They may be registered under both state and federal law. Trade names are names of businesses which are neither used as trademarks (e.g., applied to the products as brand names) or service marks (e.g. used in the offering of services). Trade names cannot be registered with federal or state trademark offices, but state common law and/or statutory law may be used to protect them.

3. The same word may be used as a trademark "& ™ ", a service mark "K", and a trade name. For example, Xerox is the trade name of a company. When used to designate its copiers, it is a trademark. When used to designate its copying service, it is a service mark.

4. It is possible to apply to register rights in trademarks and service marks on an intent to use basis (e.g., while the product is still in the planning stage and has not been commercially used, thereby establishing a priority in the right to use the mark (assuming it is ultimately used and becomes registered) as of the date the application is filed.

5. Federal registration, and only federal registration, grants the right to use the distinctive ® symbol in connection with the registered mark.

6. Federal registrations and renewals issued prior to November 16, 1989, are in force for twenty year periods; on and after that date, federal registrations and renewals are issued for ten year periods.

7. Trademarks are evaluated on a spectrum of generic words (not protectable) through descriptive terms (protectable upon showing secondary meaning), suggestive marks, arbitrary marks, fanciful marks to coined terms. The type of mark determines the mark's strength.

8. Marks can be used to force someone to stop using a name, logo or packaging style which is likely to confuse prospective customers as to the source of goods or services or which will dilute the distinctiveness of the mark.

9. Federal registrations and applications to register marks are "constructive notice" of the owner's rights in the mark. Treble damages and attorney's fees may be awarded against infringers, if the case is deemed "exceptional". It is very important to have a mark screened for availability before spending money on packaging and printed materials which use it.

10. It is important to police marks by sending "cease and desist letters" to competitors which infringe them; otherwise exclusive right to use the marks may be lost.

11. Trade dress protects a product's packaging, or configuration, the total image of a product, which may include features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques. Trade dress protection is found under §43(a) of the Lanham Act, which protects unregistered marks

12. Permits use of the "Cyberpiracy Prevention Act" if a bad faith intent is found to profit from a mark (or personal name).

13. Provides a cause of action against a domain name holder if the domain name is identical or confusing similar to a registered mark.



C. COPYRIGHTS "©"

1. A copyright is the exclusive right to make, publish, distribute and publicly perform or display copies of original works of authorship2, and to create other works "derived3" from such works.

2. Copyrights exist exclusively under federal law, which preempts and supersedes any inconsistent state laws. State "common law" copyrights no longer exist.

3. Advantages

a. Protects work against unauthorized reproduction, even though the work has been "published" (e.g., released without restrictions on disclosure of the information they contain).

b. Statutory damages4 and attorneys fees5 available as sanctions against persons who infringe registered copyrights, if registered within three months of publication.

c. Long life. In the case of a "work made for hire"6 created by an employee as to which the employer is deemed to be the "author", the U.S. copyrights last for the lesser of 100 years or 75 years from the date the work is first published. If a natural person is deemed to be the author, the copyrights last for that person's life plus 50 years.

d. Under the Berne and other Conventions, copyright protection is available in most other countries without the need to separately register copyrights in each country7.

e. U.S. copyright registration is inexpensive ($30 filing fee8) and can be handled by a trained layman. However, if the owner wishes to treat the works as unpublished works and to petition for special relief relieving the owner of the obligation to deposit computer source code or the like with the Copyright Office (where the deposited materials will be publicly available), legal assistance in petitioning for special relief may be desirable. It may also be possible to register copyrights under the "rule of doubt" to prevent loss of trade secrets.

f. Copyright protection is available for compilations of information contained in databases (even if the data itself is in the public domain), as well as for the application software which manipulates the database information.

g. Copyrights may be registered at any time during the life of the copyright. However, if copyrights are not registered within 5 years after first publication of the work, the owner will have the burden of proving its entitlement to copyright protection in any subsequent infringement litigation9. (If copyrights are registered within the 5 year period, the infringer has the burden of proving that the owner does not have copyrights).

h. Seizure of infringing works can be accomplished through the federal courts.

i. Employer automatically owns copyrights in tangible works created by its employees within the scope of employment.

4. Disadvantages

a. Protects only against copying original expression; does not protect the underlying ideas, processes, procedures, methods of operation, conception or principles embodied in the copyrighted works. Competitors can take the ideas or facts without infringing copyrights.

b. Unless special relief is granted, registration of copyrights in manuals requires depositing a complete and unmasked copy with the Copyright Office (and if the work is a "published work," depositing two copies with the Library of Congress), where competitors may read them. Trade secret protection will be lost for any information so revealed.

c. Unless the applicant can demonstrate that they are released only to "special clients" in controlled circumstances, registration of copyrights requires a deposit of the hard copy format with the Library of Congress, where competitors may use it.

d. As software, manuals, brochures, and so forth are updated, copyrights should be registered in each subsequent release which contains substantial differences from the previously registered version (e.g. added functions, increased efficiencies, and not just error corrections). The Copyright Office will require disclosure of the ways in which the then current release differs from the previously registered version. This means that the registrant must either keep good records of changes as they are made, or else preserve a copy of each registered version of the software either by manually comparing it to the previously registered version or by use of automated "red-lining" software so that an accurate description of differences can be created.

e. At present, most state agencies are immune from liability for copyright infringement.

f. Tendency of users to ignore copyrights and make copies for friends or intercompany use, such use is difficult to detect and stop.

g. If freelancers or subcontractors are used, copyrights in the works they are paid to create must be assigned in writing to the company commissioning the work. Otherwise, the commissioning company only gets the right to use the work in licensed ways, and the freelancer or subcontractor retains ownership of the copyrights.



D. TRADE SECRETS

1. Protection of both oral and written information (e.g., business plans, sales strategies, customer lists, computer source codes, methodologies, formulas, etc.) knowledge of which, if maintained in secrecy, provides an economic advantage from not being generally known, or readily ascertainable by proper means. Information concerning what does not work is as protectable as information concerning what does work. The basis for this reasoning is that competitors should bear the expense of their own trials and errors and not profit from your experience.

2. Trade secrets are safeguarded by either an "express contract" to maintain secrecy (e.g., a written or oral agreement to treat the information as secret) or an "implied contract" to maintain secrecy.10 When parties participate in a confidential relationship such as partners, employer/employee or contractor/subcontractor the law will usually impose a duty to maintain secrecy even if the parties did not expressly agree to this. However, to withstand the rigors of litigation, it is recommended that the terms of such an agreement be in writing.

3. Advantages

a. Protection lasts as long as the technology or information is preserved as a secret.

b. Can protect unpatentable technology.

c. Does not require government registration.

d. Most industrial nations have laws which can be used abroad to protect trade secrets.

e. License agreement can define permitted uses and required protections.

f. Can be used in combination with copyright law to protect "unpublished works."11

g. Users less likely to make unlawful copies or disclose protected information if each has personally signed an agreement not to do so.

4. Disadvantages

a. No protection if another person or entity independently creates or discovers trade secret subject matter.

b. Subject matter available in the marketplace, can be "reverse engineered." For example, when a jet engine is sold, the buyer or the public has no duty to the manufacturer under trade secret laws and is free to reverse engineer the engine to make a duplicate. (However, if there is a contract prohibiting disassembly or if the matter is protected by patents, reverse engineering may be prohibited on other grounds).

c. Requires adoption of, and adherence to, appropriate measures for pre-serving trade secret status, such as restricted access, secrecy agreements, and physical security measures. If appropriate measures are not taken, courts are likely to hold that the information was not maintained as a trade secret.

d. Prevailing in litigation against a person who has unlawfully taken or used the secrets, the owner will have to bear its own legal costs unless there is a contract between the parties or the court finds willfulness, bad faith, or malice, which will also permit a doubling of damages.

e. Once a breach of confidentiality occurs, the information may cease to be protectable as a trade secret. In addition to obtaining damages and injunctive relief against the party in breach, there may also be a remedy against third parties who have received the information as a result of the breach.



E. UNFAIR COMPETITION

1. Remedies may be available in special circumstances under state statutory and common law for actions which are deemed to be unfair methods of competition.

a. "Tortious interferences with contract," such as inducing a person to breach confidentiality agreements and disclose a competitor's trade secrets, or inducing the breach of a covenant not to compete may be an unfair method of competition.

b. Blatant industrial espionage activities, such as electronic surveillance, wire tapping, breaking and entering, accessing computer-stored information or software without authorization, etc. may be both unfair methods of competition and violations of criminal statutes.

2. It is not unfair competition to take advantage of a competitor's carelessness by listening to conversations which occur in public places or over mobile telephones, or by going through a competitor's trash which has been disposed of in a public place, or by asking prospects about information which competitors have disclosed without first requesting confidentiality, or by viewing competitors' displays at trade shows and other public places.

3. It is not unfair competition to reverse engineer a competitor's publicly marketed product, unless doing so violates the competitor's copyrights or patent rights; it is not unfair competition to copy a competitor's product unless doing so violates the competitor's copyrights or patent rights, or the resulting product is marketed in a way which so resembles the competitor's product that there is a likelihood of confusion as to the source of the copy, or affiliation with the senior user.




1       The 20-year patent term implemented in the GATT legislation changes not only the number of years associated with the patent issuance, but will change the date from which the term is calculated from the issue date of the patent to the filing date of the application for a patent. The change in patent term which began on June 8, 1995, applies only to utility and plant patents and not to design patents.

2       17 U.S.C.A. §102 (1978).

3      17 U.S.C.A. §101, clause 14 defines "derivative works."

4      17 U.S.C.A. §504(c)(1) and (2) Statutory damages are an alternative to actual damages.

5      17 U.S.C.A. §505.

6      17 U.S.C.A. §101 (1978).

7      GATT Act restored copyright protection for all classes of works for all World Trade Organization and Berne Convention member countries in 1996.

8      Fees are adjusted by the Copyright Office every five years with the next adjustment due in 2006.

9      Registration is prima facie evidence of validity of copyright 17 U.S.C.A. §410(c).

10     The Uniform Trade Secrets Act is found in the Florida Statutes at F.S. 688.001 et. seq.

11     The copyright notice (symbol) should be placed on unpublished works (e.g., Unpublished work © 2009 McHale & Slavin).


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