Transcript Document

Intellectual Property and its Due Diligence
Or
How to Become a Lawful Monopolist for Fun and Profit
by
Michael M. Ratoza
© 2009 BHB
Why is IP a Big Deal?
U.S. GDP (2007): $13.8 million million (IMF)
Why is IP a Big Deal?
Why is IP a Big Deal?
• Owner of IP has power of exclusive use
– Owner of IP has power to exclude use by others
• Exclusive right is protectable (civil and criminal)
in U.S. and most foreign states
Types of IP (U.S.)
• Patent
• Trademark
• Copyright (including boat hulls, mask works,
DMCA anti-circumvention, fashion design ?)
• Trade secret, sort of
• Others, sort of: computer theft, satellite
interception, cable theft, alcohol labeling, Customs
marking, etc.
Patents
• New, novel, useful, non-obvious:
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Process
Machine
Manufacture
Composition of matter
Improvement
Design (new, original, ornamental)
Plant varieties and seeds
Patents
• Limitations:
– Not known or used by others
• Not previously described or published
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Issued to inventor or assignee
Rights limited by claim description
On sale bar (US – 1 year; foreign states – 0 year)
Must be issued (unissued patent and “patent pending” is
not a patent)
Patents
• Term:
– Utility:
• Pre-1995 - 17 years from issuance
• Post-1995 - 20 years following date of application
(some right to extend, particularly with drugs)
– Design: 14 years from grant
Patents
• Particular issues:
– On sale bar:
• In U.S, 12 months from first sale, offer for sale,
publication, pre-marketing communication, public
use (trade show problem)
• Outside U.S., no grace period, but less restriction as
to what constitutes a first sale or offer of sale
– First to file (outside U.S.) vs. first to invent
(U.S.)
Patents
• Particular issues:
– Provisional filing in U.S. – designed to obtain
early filing/priority date; must file regular
application in 12 months
• Can file PCT or direct foreign filing within 12
months of provisional to secure priority date in
foreign states
Patents
• Particular issues:
– Foreign filing by foreign partner
• 18 month “window of evil”
• Remember, first to file rule applies in most foreign
states
– Some harmonization with foreign law, but
major differences remain
Patents
• Rights:
– Prevent others from:
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Making
Using
Offering
Selling
Importing (Customs importation order)
Inducing another to infringe
Trademarks
• Purpose #1: Identify and distinguish one producer’s goods
or services from another
• Purpose #2: Identify source-origin of goods or services
• Regulated by both federal law (Lanham Act) and state
trademark laws
• Harmonization with foreign law, but major differences
remain
Trademarks
• Any word, design, symbol, device, term or name that designates
to public the source, affiliation, sponsorship, approval,
characteristics, qualities, or origin of goods or services
– Ford v. Chevy v. Lexus
• Right based on use on goods or services, not registration (nonregistered mark is OK)
• Not based on new, novel, non-obvious (same mark can generally
be used by others for non-competing goods or services)
– Ford cars v. Ford Modeling Agency v. Ford Restaurant
Trademarks
• Term:
– Unlimited, so long as use continues and
periodic maintenance filings are timely made
Trademarks
• Examples:
– Coca Cola (word mark)
Trademarks
• Design mark:
Trademarks
• Product
package
aka “trade
dress”:
Trademarks
• Mexican restaurant:
– Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763
(1992):
• Operator of chain of Mexican restaurants sued
operator of a similarly styled chain. Trade dress of
Mexican restaurant can be inherently distinctive and
protectable under the Lanham Act
Trademarks
• Categories of trademarks:
– Generic (CAR for an automobile)
• Not protectable
– Descriptive (YELLOW BUG for a VW car)
• Must acquire “secondary meaning” – usually 5 years
– Arbitrary (APPLE for sound recordings)
• Inherently distinctive and protectable
– Coined (XEROX for photocopy goods)
• Inherently distinctive and protectable
Trademarks
• Descriptive marks:
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Easy to develop
Easy for consumers to understand
Don’t need to market as hard
Harder to register and protect
Potentially less valuable
• Distinctive marks:
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Harder to develop
Harder for consumers to understand
More marketing needed
Easier to register and protect
Potentially more valuable
Trademarks
• Rights:
– Prevent others from using the same or similar
trademark on competing goods or services
– If trademark is “famous,” potential right to
prevent any other use of trademark even as to
non-competing goods
Trademarks
• Types of trademark applications:
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1(a) – actual use
1(b) – “intent to use”
44(a) – registration through Madrid Protocol
44(d) – foreign application given priority in
U.S. if filed in U.S. within 6 months
Trademarks
• Remedies (if registered):
– Statutory damages:
• Up to $200,000 for non-willful infringement per
goods/services
• Up to $2 million for willful infringement per
goods/services
– Potential attorney’s fees
– Impoundment-destruction-injunction
– Customs non-importation order
Trademarks
• Particular issues:
– “Fraud” on the trademark office
• Wrong designation of: owner, date of first use,
descriptions of goods or services
• ITU as to large scope of goods or services with an
intent only to use on narrow scope of goods or
services
• Void ab initio
Trademarks
• Particular issues:
– Distinctive vs. descriptive.
– A descriptive mark may require 5 years of use in order to be
registered.
– Foreign applications can “move to the head of the line” if filed
within 6 months.
– Search, search, search – don’t allow your mark to infringe an
earlier user’s rights.
– Just because a trademark is registered does NOT mean that the
owner has the right to the domain name!
Copyrights
• Any original work of authorship fixed in a
tangible medium of expression
– Novelty and uniqueness not required
– A low level of creativity is sufficient
Copyrights
• Applies to:
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Literary work (text, computer programs)
Musical works (advertising jingle)
Dramatic works (plays)
Pantomimes and choreographic works
Pictorial, graphic and sculptural work
• Graphic arts, maps (plat plans), diagrams
• Special rules for sculptural work
– Motion pictures and AV works
– Sound recording
– Architectural works
• Creative architectural designs and features
Copyrights
• Also applies to:
– Boat hulls
– Mask works (the design of a printed circuit)
Copyrights
• Does NOT apply to:
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Ideas
Procedures
Systems
Methods of operation
Concepts
Principles
Discoveries
Copyrights
• Does NOT apply to:
– Names, titles
– Features of nature
– Useful articles (but the design of a useful article
can be protected)
Copyrights
• Exclusive right to:
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Copy
Prepare derivative work
Distribute
Perform
Display
Copyrights
• Term:
– Post 1-1-1978:
• Life of author + 70 years
• Work for hire: 95 years from first publication or 120
years from creation
– Pre 1-1-1978
• Various:
– Published before 1923 – public domain
Copyrights
• Term and Termination:
– Grant (transfer-assignment) can be terminated:
• After 35 years
• Other termination periods based on creation-publication date
• Prior to renewal term in certain cases
– Certain foreign works previously terminated in the U.S.
can be revived under certain instances
Copyrights
Registration NOT required in order to create a
copyright, however:
– Registration usually required in order to sue !
– Failure to register within three months of publication
can cause loss of statutory damages and attorney’s fees.
– Failure to register within 5 years of publication causes
loss of prima facie evidence of validity of copyright and
accuracy of statements in certificate.
Copyrights
• Remedies:
– Actual damages
– Or, statutory damages
• Innocent infringement: $750 to $30,000
• Willful infringement: up to $150,000
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Attorney’s fees
Court costs
Impoundment and destruction
Injunction
Trade Secrets
• Generally state law issue, not federal law
• Any information that has independent value from
not being generally known to the public:
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Formula
Customer lists
Sales
You name it
Trade Secrets
• Basis of trade secret violation is misappropriation.
– It is not enough that a secret is taken, it must be taken improperly.
• Physical security
– Reasonable efforts to maintain security-secrecy
– Marking documents
• Duty of security
– NDA
– Employment agreement, employee manual
• Reverse engineering
– Is reverse engineering possible?
• Independent development
Some Due Diligence Issues
• Is there IP? If not, why not?
– Copyright filing fee: $35
– Trademark filing fee $275
– Patent filing fee:
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Provisional-large entity (> 500 employees): $220
Provisional-small entity (< 500 employees): $110
Full patent-large entity: $330 + 540 +220 = $1,090
Full patent-small entity: $165 + 270 + 110 = $545
– Plus maintenance fees and attorney’s fees
Some Due Diligence Issues
• Ownership:
– Patent: who is the inventor? Employee or independent contractor?
• Obtain a written assignment
– Trademark: who is the user?
– Copyright: who is the author? Employer, employee or independent
contractor?
• Obtain a written assignment
– Include IP ownership clause in employment agreement, in NDA, in
joint work agreements and in feasibility studies.
– Who owns the domain name?
Some Due Diligence Issues
• Marking:
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Is there a patent marking? [U.S. Pat. Reg. No.]
Is there a trademark marking? ®
Is there a copyright marking? © 2009 BHB
Failure to use markings may create a defense regarding
infringement liability. Prior to 1998, lack of copyright
marking caused loss of copyright !
Some Due Diligence Issues
• Transfer, Grant, Assignment:
– Written document required for copyright
transfer – no exception !
– Does the transfer adequately deal with
community property interest ?
– Right to early termination under copyright law.
Some Due Diligence Issues
• Timely Registration:
– Preserves remedies. Late or no registration may cause loss of
remedies or prevent lawsuit
• Securitization-Collateralization of IP:
– Patent: File UCC-1 with Secretary of State (County Recorder for
crops) and with Patent Office
– Trademark: Cannot collateralize a trademark absent transfer of
goodwill
– Copyright: File UCC-1 with Sect. of State for unregistered
copyright; with Copyright Office for registered copyright.
Some Due Diligence Issues
• Trademark Filing:
– Make certain that the information in the
application and registration is accurate: date of
first use, owner, description of goods/services
– Conduct a pre-use and pre-filing search, both
inside U.S. and outside U.S. (6 month rule).
– Has a trademark registration – for all relevant
goods and services – been obtained in all
important countries?
Some Due Diligence Issues
• Copyright Filing:
– Verify what is being registered. Obtain a copy
of the filed specimen !
– Register within 3 months of publication, or at
least within 5 years of publication.
– Has a copyright filing been made in all
important countries?
Some Due Diligence Issues
• Patent Filing:
– Has a patent application been filed in all
important countries?
Some Due Diligence Issues
• Trade Secret:
– Is it really a secret?
• What systems have been put in place to preserve
secrecy?
• Has the secret material been properly identified?
• Does the NDA – employment agreement – protect
improper disclosure, improper use, improper
competition?
Some Due Diligence Issues
• Reverse Engineering:
– Prohibited to an extent under copyright law and
patent law.
– Contract and trade secret law may be
applicable.
YOU can become a lawful
monopolist with proper planning.
Just Do It !
THE END
Michael M. Ratoza
Bullivant Houser Bailey PC
888 S.W. Fifth Avenue, Ste. 300
Portland, Oregon 97204
503 228 6351