Issue #1, Volume 1
Issue #2, Volume 1
How to Protect Your Intellectual Property (IP) Editor’s Note Today, we have Dr. Nick Skrekas, who’ll be talking to you today about tips on how to protect Intellectual Property rights. We’ll be looking at some incisive ways to protect one of the most important assets that your company has and it applies whether you're an SME or a multinational company.
Introduction to Intellectual Property Rights Success in today's global economy is increasingly dependent on effective identification, protection, and enforcement of Intellectual Property assets. Intellectual Property has in fact exploded in value over the last 20 years. For example, Intellectual Property may be worth more than $5.8 trillion in the U.S. alone. Protecting it has become more challenging since Intellectual Property is very legally fragile. Many small and medium sized businesses are only now becoming aware of the nature and extent of their IP assets, and the extent to which these assets may be protected by one or more types of Intellectual Property law rights. However, there is an even bigger threat to all businesses given the technological developments, cyber espionage, piracy, counterfeiting, and other theft of IP assets. Therefore, protection of Intellectual Property assets is critical whether you're a multinational or a single person home-based business.
Importance of IP Protection to Business If you're a new business, or if you've been in business for a long time and haven't taken steps to protect your Intellectual Property rights at home and abroad, you may be unsure what IP rights your business has to begin with. Incidentally, small and middle sized businesses now produce 14 more times more patents per employee than larger companies. So it's not just for the big boys. There's a lot more IP in your entity than you might imagine that is protectable. Don’t delay in focusing on your IP assets any longer. IP provides several benefits to small and middle sized businesses. It can enable them to reap profits from its ideas and creations. From licensing those rights, small and middle sized businesses can preserve a market niche and thereby compete more effectively with larger companies; establish and grow reputation and goodwill in the marketplace; enhance the worth of the small business in the eyes of the investors and financing institutions like banks; and raise the value of a small business in the event of a sale or merger.
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Categorizing Intellectual Property Rights – Industry Property and Copyright IP rights are divided into two broad categories: Industrial Property and Copyright. Industrial Property includes patents for inventions, trademarks, and trade secrets. Copyright includes literary works such as novels, poems, plays, films, musical works, artistic drawings, paintings, photography, sculpture, and architectural designs. These days, copyright is becoming more commercially oriented as computer programs are technically lumped in as literature. An Intellectual Property right obtained within a jurisdiction is only valid in that jurisdiction. However, there are Intellectual Property laws that are moving towards greater harmony between nations. In addition, there are some useful and developing Intellectual International laws, albeit nascent.
Defining Intellectual Property Rights – A Brief Overview of Definitions Patents An owner of a recognized patent can exclude others from making, using or selling their invention for the duration of the patent. There are three types of separate patents: Utility patents, Design patents, and Plant patents. Utility Patents make up about 90% of all of them. They are new useful inventions and processes, and this is what most people understand as Intellectual Property. Design Patents cover new and ornamental designs for articles. Plant patents are new and distinctive plant varieties. Most patents are valid for about 20 years and it gives you a monopoly period post registration.
Copyrights Copyright is available for a variety of works like literature, music, drama, graphics, etc. Importantly, it does include website content, slide presentations, and computer programs. As previously noted, the latter is considered to be literature. Copyright arises at the moment when the work is created, and no registration is generally needed even if registration is optimal. Copyrights give the owner the right to reproduce, distribute, perform, display the work, and the right to create derivative works based on the original work.
Trademarks Trademarks are names, designs, and slogans by which a company identifies its products and services. The marks must not be generic or merely descriptive. Trademarks are critical to the success of the franchise sectors.
Trade Secrets Trade Secrets is valuable information that gives an owner a competitive advantage. Nearly all information is protectable: i.e.: customer lists, pricing data, recipes, formulas, forecasts,
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methods of doing business, etc. It comes to existence when the information comes into being, and lasts in perpetuity provided reasonable efforts are taken to protect it.
Valuing IP Assets The value of an IP asset can be determined by the contribution the asset makes to the business; the resale and license value; the amount invested to develop it; and the amount the business would be willing to invest to protect or enforce against infringement. Regardless of size, every business should conduct an initial IP audit to determine what assets the business owns, whether and to what extent these assets can be protected through Intellectual Property law rights, and where it should seek protection. The frequency with which a company should conduct an IP audit depends on its size and the nature of its business. Generally, an IP audit should always be conducted on the establishment of a website; the purchase or sale of a business; the licensing of an Intellectual Property rights to a third party; and the expansion of the business to a new country, region or market. An IP audit will also enable one to ensure that any use by one’s business of others' IP assets is properly licensed or otherwise authorized by the third party. It should be preferably in writing so there's some documentation of it.
The Practices of IP Intense Sectors Pharma and Chemical sector - Patents Pharmaceuticals and Chemical sectors are one of the biggest IP intense sectors in the world. Patents are used and licenses of patents are used. In many situations, there is merger and acquisition activity of a large marketing driven pharmaceutical of smaller but highly innovative subsidiaries or to be subsidiaries. Licensing in the Pharmaceutical and Chemical sector is dependent on patent protection since it is easy to identify the composition of any new pharmaceutical or chemical. A trade secret would not provide any protection since the compound can be broken down, analyzed, and its composition can be identified.
Semiconductor – Exclusive Contracting for Hire, Copyright, trend of Patents growing In the Semiconductor industry, there are exclusive contracts for hire for consultants and it's almost always the case that that happens. These are contracts for hire in the sense that anything that the contractor does or creates belongs to the employer and not to the contractor itself. Copyright is the dominant form of protection because computer programs are considered text or literature. However, there is a growing trend in places like the U.S. that lead the world in IP rights and now we're seeing more and more patents of computer programs.
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Cross-licensing is when two companies enter into an agreement to allow a use of their programs by each other, and it is more prevalent in the electronics and computing industries.
Biotech – Trade Secrecy In the Biotech sector, Trade Secrecy is pivotal. Patent applications have the drawback that technical information must be disclosed and thus, people in the biotech sector won't take that risk.
Services, Electrical, Electronics, and Transportation Industries In the services, electrical, electronic and transportation industries, patent rights are found to be influential.
Patents Patents are inventions that touch every aspect of human life. They have revolutionized our world since the Industrial Revolution. Everything from electric lighting to automobiles, plastics, to products that have made our life easier, such as dishwashers and pens, are all patentable products. By creating a system of economic reward in exchange for disclosure of knowledge, patent laws encourage the creation and distribution of products and technologies that enhance the quality of life. Although a trademark can last forever if properly protected and maintained, and copyright has long term duration (the author's life plus 70 years), patent protection lasts only 20 years from the application of a utility patent, and only 14 years for plant patents. After these periods of exclusive monopoly end, the invention falls into the public domain and is free for all to use. The right that a patent gives you is to effectively exclude all others from making, using, or selling the patent invention during the monopoly period.
Patent Types and Legal Rights Utility Patent: Covers innovative products, services & processes – 20 years Basic requirements As previously noted, Utility Patents cover innovative products and services for a process of 20 years. The basic requirements of a Utility Patent are the following: the invention must be useful and its purpose cannot be illegal or immoral; the patent must be novel to prior art in the field (it cannot be known and used in other countries and it's not patented elsewhere or described in a publication before patenting); and it must not be obvious to a person of ordinary skill in the field - the corps look to prior art in the field to see if it's obvious.
Design Patents Design Patents are ornamental designs of things such as jewellery, furniture, beverage
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containers, and computer icons. A patent for any new and not obvious ornamental design for an article that is manufactured is a Design Patent. It doesn't protect an invention - it protects the way an article looks. The design must be ornamental rather than primarily functional. It must be novel and not obvious to a designer of ordinary skills. Design Patents typically have a life of 14 years from the date of their grant.
Plant Patents The last type of patent is the Plant Patent. Examples include a new color rose, a drought-resistant corn, a disease-immune orange tree, etc. Just like a Utility Patent, a Design Patent lasts for 20 years.
International Protection of Patents The Patent Corporation Treaty (PCT) An international protection of patent system exists and is indeed effective. It's called the Patent Cooperation Treaty (PCT). The PCT is an international treaty administered by the World Intellectual Property Organization (WIPO), and more than 140 Paris Convention countries have signed it. The PCT makes it possible to seek a patent protection for an invention simultaneously in each of a large number of countries by filing a single “international” patent application instead of filing several separate national or regional patent applications. However, the granting of the patents remains under the control of the national or regional patent office, which is called the National Phase.
Outline of the PCT Procedure - Filing, International Search, and International Publication In order to acquire an international patent, the first step is to file an international application complying with all of the formalities. It only has to be completed in one language and there is only one set of fees to be paid. In the second step, an “International Searching Authority” (ISA), which is one of the world's major patent offices, will identify the published documents which may have an influence on whether the invention is patentable and establishes an opinion on the invention's potential patentability. The next stage is international publication (as long as your invention can be patented) - after the expiration of 18 months from the earliest filing date, the content of the international application is disclosed to the world. Like any patent, an international patent takes time, work, money, and effort. However, at the end of the process the patent will be protected in over 140 countries and that includes all of the world’s key markets.
Trademarks
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A company's trademarks are often one of its most important identifying assets. A trademark is a distinctive sign which identifies certain goods or services as those produced or provided by a specific person or enterprise. The system helps consumers identify and purchase a product or service because of its perceived nature and quality indicated by its unique Trademark. Marks immediately conjure up certain feelings and images in the minds of consumers that companies have worked extremely hard to achieve. The worldwide nature of the Internet and increasing globalization of business have made protection and enforcement of these assets both more important and more difficult. A trademark provides protection to the owner of the mark by ensuring the exclusive right to use it to identify goods or services, or to authorize another to use it in return for payment. Trademarks can generally be a combination of words, letters, and numerals. They may consist of drawings, symbols, three dimensional signs such as shapes and packaging of goods, audible signs such as music or vocal sounds, and even fragrances and colors are distinguishable features. The period of protection varies, but a trademark can be renewed indefinitely on payment of corresponding fees. Trademark protection is enforced by the courts, which in most systems have the authority to block any trademark infringement.
Types of Trademarks General Trademark, Service Mark, Collective Marks, and Certification Marks There are generally four kinds of trademarks that can be identified. There is the generic or General Trademark, which is a word, name, symbol, or device to identify and distinguish one's goods and services and to indicate their source. An example of this is the McDonalds golden arches or the “swoosh sign” for Nike. There is also the Service Mark, and this is used to identify services or intangible activities performed and to distinguish them from others. Examples include United Airlines symbols and Sprint Telecommunications symbols. There are also Collective Marks, which are marks used to distinguish a cooperative, association, or union. Examples are the American Bar Association and Lions Club Associations. Last but not least, there are Certification Marks - marks used to certify quality, accuracy, or some other characteristic. An example is the ISO accreditation, which many must be familiar with.
Trademarks in International Law Like any national law, Trademarks apply only to their applicable country or jurisdiction - a quality which is sometimes known as territoriality. However, there are systems which facilitate the filing, registration, or enforcement of a trademark right in more than one jurisdiction. For trademarks, it's the Madrid Protocol.
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Madrid Protocol The major international system for facilitating the registration of trademarks in multiple jurisdictions is known as the Madrid System. Madrid provides a centrally administered system for securing trademark registrations in member jurisdictions by extending the protection of an international registration obtainable through the World Intellectual Property Organization (WIPO). The primary advantages of the Madrid System is that it allows a trademark owner to obtain protection in many jurisdictions by filing one application in one jurisdiction with one set of fees.
“Well-known Status” in International Trademarks Trademarks don't just begin and end internationally their protection with their Madrid Protocol. There is something known as the Well-known status doctrine. The Well-known status doctrine is pursuant to Article 6 of the Paris Convention. That means that well known trademarks will be recognized even where they are not registered or approved of by some authority. In addition to standard grounds for trademark infringement (the standard grounds are the same or similar mark, a mark applied to the same or similar goods and services, and the likelihood of confusion arising), the Well-known doctrine also applies and makes it an infringement to take unfair advantage of a “well known” mark or cause detriment to it. A well-known mark does not have to be registered in the jurisdiction to bring a trademark infringement action. Consequently, not only big companies but also SMEs may have a good chance of establishing enough goodwill with customers so their marks may be recognized as well-known marks and acquire protection without registration. Just one caveat - it is wiser to register the trademark because it is better to be safe than sorry.
Trade Secrets Companies generally have a wealth of information that is valuable to them that, if known to their competitors, would afford their competitors an advantage in the marketplace. This type of information is known as a Trade Secret. Nearly any type of information may qualify for protection. From customer lists to product sales information, financial forecasts, and methods by which the company conducts its business. Broadly speaking, any confidential business information which provides an enterprise with a competitive edge can qualify as a Trade Secret. It may relate to technical matters such as composition or design of a product, a method of manufacture, or the know-how necessary to perform a particular operation, but it doesn't necessarily have to be technical.
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Common items that are protected as trade secrets include: Trade Secrets apply to almost anything one can think of. Common items that are protected as trade secrets include manufacturing processes, product formulas, market research, consumer profiles, importantly lists of supplies & clients, business plans, price lists, advertising strategies, marketing plans, distribution methods, blueprints, designs, and computer source codes. While conditions vary from one country to another, some general standards do exist in order to qualify as a trade secret. The general standard is the information must be confidential or secret. Therefore, any information which is generally known or readily ascertainable is not protected as a trade secret. The TRIPS Agreement helps one to determine what can and should be a trade secret. The TRIPS Agreement is a world trade organization agreement on trade related aspects of Intellectual Property rights. There are three aspects in article 39 that define a Trade Secret: it is not generally known to the public; it confers some sort of economic benefit on its holder; and it's the subject of reasonable efforts to maintain its secrecy. The owner of a trade secret can prevent others from improperly acquiring, disclosing or using it. However, trade secret law does not give the right to stop people who acquire or use information in a legitimate way without using legal means or violating agreements of state laws. If it's done legally, then one can't really do anything about it. The law for protection of trade secrets has been really slow to develop, but it's starting to improve a little these days.
The Duration of Trade Secrets Trade secrets may be protected indefinitely as long as the information remains secret. If the secret is revealed, trade secrecy protection ceases. However, there are many ways in which a trade secret may lose its secrecy. These are disclosure by employees to competitors or the public at large; non-confidential disclosure by the company itself; independent invention or discovery of the trade secret by accident; and reverse engineering by competitors (the process of taking something apart and analyzing how it works in detail with the intent to construct a new or similar device or program).
Legal Protection of Trade Secrets Legal protections for trade secrets includes Non-disclosure Agreements (NDA) and Non-compete clauses (NCC). In exchange for the opportunity to be employed by the holder of a secret, an employee may sign an agreement not to reveal the employee's proprietary information. An employee may also surrender or assign to his employer the right to his own intellectual work produced during the course or as a condition of employment. Violation of such agreements generally carries the possibility of heavy financial penalties. These penalties operate as a disincentive to reveal trade secrets. Proving the breach of a non-disclosure agreement against a former employee who is legally working for a competitor can be difficult depending on the circumstances.
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The holder of a trade secret may also require similar agreements from other parties they're doing business with such as vendors or licensees. That way there's a mutually binding agreement that’s made and discloses the secrets of the other. A company can protect its confidential information through Non-compete and Non-disclosure contracts with its employees.
Copyright Copyright is a legal concept enacted by most governments that grants the creator of an original work the exclusive rights to its use and distribution usually for a limited time with the intention of enabling the creator of intellectual wealth to receive compensation for their work. The area of copyright confronts some of the most widely publicized intellectual property law issues today such as issues like software piracy, music file sharing, film, and video game piracy, etc. Technological advancements such as digitization and the Internet have made reproduction and global distribution of copyrighted works both easy and inexpensive. As a result, copyright enforcement has become an issue of primary concern for businesses around the world. Every business has materials that are protected by copyright. In addition, businesses will also want to avoid infringing the copyrights of others. Contrary to popular belief, copyright protection extends only to the tangible expression of the idea and not the idea itself. Some common business materials protected by copyright include brochures, instrument manuals, catalogs, logos, advertising, websites, etc. Most businesses have an awful lot of copyrighted material that they may not even be aware of.
Copyrights Rights – Moral and Economic Moral Rights Copyright as rights have two factors – there are moral rights and economic rights and the two should not be confused. Moral rights refer to the idea that a copyrighted work is an expression of the personality and humanity of its author or creator. This includes the right to be identified as the author of the work, the right of integrity (the right to forbid big alteration, mutilation or distortion), and the right of first divulgation (making it public for the first time). Be aware that moral rights cannot always be transferred by the creator to a third party and some of them do not expire in certain countries.
Economic/Exploitation Rights The second and equally if not more important aspect of this bundle of rights is economic or exploitation rights. These rights recognize the right of the holder to authorize the use of, or to prohibit the use of a work, and to set the conditions for its use. There are different specific
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uses and the different specific uses can be treated separately. That means the rights holder can deal with each right - using, transferring, licensing, or selling the right - on an individual type of use basis. Economic rights typically include the right of reproduction (i.e.: making copies via digital or analog means); the right of distribution by way of tangible copies (selling, renting, lending copies); the right of communication to the public (including public performances, public displays, and dissemination of the digital networks); and the right of transformation (the right to adapt or translate a text of work).
How to Protect Copyrights - Registration of Copyright Although registration of Copyright is not required, many countries do have registration systems. In many of these countries, registration makes it easier for a copyright owner to prove copyright infringement cases in court. Do take note that in the United States, one has to have a registered copyright in order to initiate a case in U.S. courts. Thus, if one has something that they believe is copyrighted, they'll have to go and register before they can take enforcement action. Copyright registration reflects the date on which the author established ownership.
Duration of Copyright World Trade Organization (WTO) members are obligated to provide a minimum term of protection of life of the author plus 50 years. However, there are several and a growing number of countries that are establishing longer terms of copyright protection. In the United States and European Union, the duration is life plus 70 years.
International Protection for Copyright There is also a means to protect copyright. While no creative work is protectable worldwide, there are international treaties which provide protection automatically for all creative works as soon as they are fixed in a medium. For copyright, it is the Berne Convention.
The Berne Convention The Berne Convention originated in 1886 and it has been ratified by more than 160 countries. The Berne Convention is administered by the WIPO and sets a minimum standard for the protection of rights of the creator of copyrighted works around the world.
Recognition The Berne Convention requires signatories to recognize the copyrighted works from authors
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from other signatory countries in the same way that they would recognize the copyright of its own nationals.
Automatic Copyright under the Berne Convention must be automatic. It is prohibited to require formal registration even in the United States. One of the basic principals is that automatic protection means that the copyright protection exists automatically from the time a qualifying work is fixed in a tangible medium such as paper, film, or a silicon chip, etc.
Copyright term The Berne Convention also covers cinematic works as well as architectural works. All works other than cinema or photography has a copyright term of the life of the author plus 50 years. The copyright term for photography is 25 years after the photo was created. For cinema, it's 50 years after its first showing. Evidently, the Berne Convention does really help us very much in terms of copyright and it covers just about everywhere one can think of.
Non-Solicitation Clauses In today's information-based economy many companies have one primary asset — their employees. Losing workers through solicitation by others is a significant threat to profitability. Moreover, many employers (such as computer consulting companies) routinely place their employees on client sites. As a client gets to know the employee, they might poach them and hire them themselves. Similarly, once an employee leaves for another company, the other company may offer them a referral bonus to bring other employees along with them — a financial inducement few can resist. Companies need to protect their employees from being poached by clients, suppliers, and even other employees. The only way to protect against such activity is through the use of the non-solicitation clause. A non-solicitation clause can appear as part of an employment agreement within a mutually signed offer letter or employee manual or handbook, or as part of a non-disclosure agreement. Because nearly all companies should use and do use Non-disclosure agreements, the clause is probably best placed in such an agreement.
Non-solicitation clause Tips If the clause restricts the other party only from hiring a business’ employees, they may be able to solicit the business’ independent contractors. So please include language relating to both employees and contractors. Make sure that the phrase “directly or indirectly” is used when referring to solicitation activities. If a business forbids only direct solicitation, the other party may be able to use an intermediary to poach the business’ employees.
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Generally, non-solicitation clauses work best with clients when they are mutual. Clients are far more likely to agree not to solicit your employees if they know you are promising them the same. The term of the non-solicitation clause should be reasonable, and is usually six months or a year. Courts are reluctant to enforce long non-solicitation agreements. If employees introduced to clients are highly skilled and one has recruited and trained them at great cost, it may be possible to use a slightly longer term. Some other tips are when hiring employees, ask them whether they are bound by non-solicitation agreements. If so, remind them of their obligations and not to poach coworkers from their former place of employment. Additionally, when an employee leaves a company, remind them of the obligation not to encourage other workers to leave the company.
Non-Disclosure Agreements Non-disclosure agreements are commonly known as confidentiality agreements, and by the acronym NDA. They are used in a variety of business relationships. A prospective employee, independent contractor or consultant or business, will and should be asked to sign one as a condition of being hired. Two companies considering doing business with each other (strategic-business partners) will want to protect any confidential information that they share with each other during their courtship and especially in the event that any deal or agreement or joint project falls through. A business that relies on third-party vendors, suppliers and subcontractors who will have access to the company secrets will also want an NDA to be signed with each prospective party.
Non-Disclosure Agreements – Issues and Tips The first question usually that comes to mind is whose secrets are being protected? An NDA can be set up so that it is only protecting the confidential information of one party but it is better if it's a two-way agreement that protects each party’s information in the hands of the other because a mutual NDA is more likely to be enforced. However, be careful that the mutual NDA is not too slanted to the interests of one side. That one side is usually the side that is drafting the document so it should be jointly drafted. Second question to ask is what's being protected? Most NDAs have a long section at the beginning which defines what is considered to be “Confidential Information” that must be kept secret and not disclosed. It usually starts with a long laundry list of items such as trade secrets, customer lists, pricing information, patents and patent applications, software source documentation, etc. However, at the end of this laundry list, it is wise to insert a catch-all clause that underlines Page | 12
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that any information that would be considered confidential in the normal circumstances of business should also be protected under this agreement.
“Confidentiality Stamp” Some NDAs require the disclosing party to label any information that they want to protect with as “Confidential” before sharing it. Otherwise, it's fair game. Please avoid this trap. Confidential information means ANY and ALL information “that would reasonably be expected to be considered “confidential" by the disclosing party.
Means of Transmission Another issue to be aware of is the means of transmission. It shouldn't just be defined in writing or by email; even verbal communication should be included. Word of mouth should be sufficient as a means of transmission. Make sure the NDA covers all of these scenarios.
What should not be protected? Information that becomes generally available to or known by the public through no fault of the receiving party or information that was disclosed to the receiving party by someone else that had the right to do so should not be protected. Any information that is independently developed by a party without resort to the other party's confidential information should also be excluded.
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Such an agreement usually lasts for the duration of the relationship and for some period of time after it ends. Be clear that during the existence of the relationship that the NDA applies, and then extend it to 1 or 2 years after the relationship ceases. Some people fail to do this; they only talk about what happens after the relationship. Both are important.
Non-Compete Agreements (NCC) Employees with special skills or knowledge can be precluded from working for an employer's competitors after they leave the original employer. Restrictions prohibiting such postemployment competition generally are called “restrictive covenants”. However, be aware
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that because restrictive covenants can significantly limit an employee's ability to earn a living, courts will not enforce them unless they serve a valid business purpose of the employer. They must also be reasonable in scope, geographic area, and duration. Generally however, rest assured that courts will uphold “the legitimate interest an employer has in safeguarding that which has made his business successful and to protect themselves against deliberate surreptitious commercial piracy”. Non-compete agreements are a valuable business asset which is entitled to protection so employers are protected from unfair competition even if they are based on a restrictive covenant.
Categories of Restrictive Covenants There are a few types of restrictive covenants. There are covenants not to compete with the business of the former employer. There are covenants not to solicit business from or provide services to clients of the former employer. In addition and sometimes, there are covenants not to solicit or hire employees of the former employer.
Factors Determining Enforceability To enforce a restrictive covenant, an employer must usually show that the covenant meets the following requirements: it is designed to safeguard a protectable interest of the employer; it must be reasonable in scope and duration; it must not be harmful to general public policy; and it must not be unreasonably burdensome to the employee.
Protectable Interests Courts have recognized the following protectable interests of an employer, and these include trade secrets; confidential customer information; confidential customer lists; the goodwill of the business; clients or customer relationships; and Non-Solicitation of the Employees.
Reasonableness There's also a general doctrine of reasonableness. To be enforceable, a restricted covenant must be reasonable as to scope, geography, and time. It must not be oppressive. The restrictive covenant must serve to protect against “unfair and illegal” conduct and not merely to insulate the employer from competition. Be aware that time and geographical restrictions are to be viewed as intertwined and inverse considerations: a restriction covering a large area may be reasonable if in effect for a brief amount of time, while a restriction covering a small area might be reasonable for a longer time. The rule of thumb is that more than three years is usually thought to be unreasonable.
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