As the United States increasingly becomes a service economy, the business assets that become central to business are not the inventory, equipment and machinery of old but the products of mental creativity: the concepts, procedures, software, data, trade secrets, inventions, and creative intellectual products "manufactured" by businesses and their employees and contractors.
This leads to unique issues facing the average business. Where before it was clear who owned inventory or equipment and only customer lists were considered valuable trade secrets of key interest to the average business, now the average business is concerned about its proprietary software and data base, its formulas, concepts, written work product, downloadable information, ideas, and methodology, and a brand new industry has developed engaged in the creation, support and maintenance of those very items. Another industry has emerged seeking to protect businesses from the piracy of their information by third parties and theft by insiders.
Further, the single most profitable export of the United States is now our "creative" product, be it software or art. Business and entertainment software, music, motion pictures and video information, graphic and structural design, etc., form the new valuable products sought eagerly from American industry. While the heavy industries increasingly are moving to countries of less expensive work force, the "intellectual" side of business now predominates in America and this, in turn, has forced both the courts and the businesses to react to the requirement to better define and protect intellectual property.
Intellectual property is simply the property created by mental efforts of a business or its employees or contractors. It can be an artistic or design created primarily for aesthetics such as art, video, writings or music; it can be business or accounting concepts or software; it can be trade names and trade methodology. It refers virtually to anything of value that is created by mental or artistic effort. All of these aspects of property are often subsumed under the legal category of Intellectual Property Law and a working knowledge of it is critical to most businesses in this modern age.
Certain nations now make much of their international income by invading the Internet to download data or order software, and using that information to effectively steal the right to reproduce it and either use it for their own or resell it to the world in packaging that is nearly identical to the original. If a business is on the Internet, it must face such attacks from other continents on a continuing basis and this problem will become much worse as more and more of the poorer nations develop the Internet resources to gain access to such information. If you are a destitute small business in Uganda or Uruguay or Bosnia, or Xian or even South Dakota, it will be difficult to resist stealing such valuable property that can often be obtained with the touch of the mouse.
(In that context, consider how carefully one locks the door to one’s car to protect an asset worth ten or twenty thousand dollars and compare that to placing valuable intellectual property on the Internet which, automatically, can be "broken into" anywhere in the world with a click of the mouse! The moment you have a website you are placing your materials, unlocked, on the streets of Moscow, Calcutta, Chicago, Tokyo, Shanghai, and Nairobi. Clearly a different state of mind is going to have to be developed for the average business person if protection of key resources is to be achieved.)
This can not be emphasized too much. Where previously one could lock the door to the business to protect secrets and sue in the local court to punish those who tried to steal them, now the door is made "permanently open" to the world by modern technology and your relief may have to be sought in an unfriendly country with hostile courts. Thus, a company’s most valuable asset may be at risk in ways never previously encountered just at a time when companies are devoting increased resources to perfecting such assets.
The intelligent business person must learn the ramifications of this rapidly altering business landscape and develop the expertise to understand rights to Intellectual Property and how to enforce said rights on a world wide basis.
The area of Intellectual Property is a broad one and this article will be restricted to the basics of Copyright, Trade Marks, Trade Secrets and some comments on the new laws passed regarding the Internet and Cyberspace. Articles on the Retainer Website will discuss in detail the issues of IP litigation and the ramifications of intellectual property in cyberspace.
TYPE OF INTELLECTUAL PROPERTY PROTECTION
There is different type of protection for different type of intellectual property.
COPYRIGHT is a means of protecting "originality of authorship," and pertains to writings, music, graphic arts, and generally any other form of tangible creation. Software is normally categorized in this area, though patents may be available for certain types of computer software.
PATENTS protect novel inventions or discoveries.
TRADEMARKS protect terms identifying the source of origin of goods and services.
TRADE SECRETS protect proprietary information which is confidential and of use to a business.
It can happen that a theft of intellectual property can act as a violation of several of the categories. For instance, a patent can also be a trade secret and an action to recover damages would lie in pleading both causes of action. Violation of a copyright of a particular manual created by a business also may involve theft of the trade secrets involved, etc.
PATENTS
Patents is the unique area of the law relating to "inventions" and that most often understood by the general public as being protected by law. Such items as new machinery, new devices, new drugs, new ways to build such devices, etc. are what is categorized by this protection and the case law and statute protection of this type of intellectual property is one of the oldest and most protected that exists. (Recall Einstein worked in the Swiss Patent office over a hundred years ago.) Specialist attorneys work in this area of the law and the process to obtain a patent is long and complex, as is the litigation to protect same. Unlike much of the other intellectual property, patents have a long history of being protected worldwide and courts of many lands regularly enforce the rights with effective procedures. Most countries have special courts to hear claims of patent infringement since the question of what constitutes an infringement often requires remarkable expertise in mechanical, electrical, or other specialized areas.
One reason patent law is unique from the other types of protection of intellectual property is that the very act of filing a patent is full disclosure to the world of the information being claimed. One does not keep the information secret, one normally describes the confidential information in such detail that there is no longer any confidential information to protect!
Since access to patent information is world wide, many entities elect NOT to file patent applications (thus avoid disclosing such information) since the result is giving such information to those in the world who may elect to utilize their particular jurisdiction to maintain protection and produce the device with impunity. Much depends on the locale of where the patent will be used, the sophistication required to produce the product, and whether the other types of protections described below could afford roughly equivalent protection since by use of other types of intellectual property protection one may achieve protection without having to disclose to the world the confidential information.
More patent attorneys are having increasing success with applying for software patents though the law is still in flux as to the applicability of such patents, how much they must relate to the ancillary hardware or device, and how broadly the patent will extend. A critical problem is that the essence of patent protection is full disclosure of the details of the program and given the realities of international software piracy, most clients still feel that protection via trade secret or copyright protection, both of which entail less public disclosure, is a better procedure.
This office refers patent matters to specialist counsel after discussing with clients the availability of other types of protection and the details of the product being created.
COPY RIGHT
The key to copyright protection is that one has reduced to a writingor permanentreproducible form an original work. It is important to understand that one can not copyright ideas; only the particular expression of ideas. (For example, if I write a book about the concept of Bolivian Muskrats being environmentally beneficial due to their eating Boll Weevils, I can protect via copyright my article or book but I can not stop others from propounding the same concept or arguing for or against it.)
A work is either "copyrighted" or "in the public domain." If it is in the public domain, it is unprotected and free for anyone to use. If it is copyrighted, only the author may claim property rights in the work.
The United States Copyright Act specifies that copyright pertains to, "original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device."
What do they mean by "fixed in a tangible medium of expression?" It essentially means that one must be able to view or experience the work, either in video, recorded medium, writing, etc. Such original works which are ephemeral (extemporaneous speeches, dancing that is not reduced to writing or taped, etc,) may or may not be protected by the particular state’s common law copyright but are not subject to the protection of the federal copyright statute which has exclusive jurisdiction to all works which are tangible. For those works, one seeks protection in federal court.
The quality of the work is unimportant. All that matters is whether it is original and tangible and whether it can be later communicated.
Typical works covered by copyright would be architectural works, audio works, writings, pantomimes and choreographic works, pictures, photographs, designs, etc, etc. Software normally falls into this category, as do manuals, pamphlets, sketches, graphic designs and cartoons, poems, novels, screen plays, photos, etc. Indeed, this article and this web site would be subject to copyright protection. The definition of a copyrightable work is kept intentionally vague so as to allow the broadest possible inclusion of works. Oliver Wendel Holmes, the great American jurist, put it well when he stated that the key is the original expression of a person, it is irrelevant if it is art. There is no subjective standard, only the question of whether the creation is original.
The American copyright law has existed since the founding of the United States but has been altered repeatedly, most recently by the Berne Convention in 1988 (which had United States law conform more precisely to international law on the matter) and the 1998 Digital Millennium Copyright Act which sought to include the latest technological developments into the law.
The usual contests involving copyrightability pertain to whether a creation is truly "original" in the sense that the aspect sought to be protected must extend beyond mereutility. A good example is a lamp base or the wheel covers for automobiles. In one case, the court held that a sculpture on the lamp base was protectable since it was not just there for utility; in another case the court held that chrome spokes on a wheel cover were not protectable since their primary purpose was utility.
Another typical contest is whether the work is originally created by the defendant. The key is one must prove copying of the work. That means that the work was not independently developed by the defendant. Usually, one must prove access by the defendant to the work and substantial similarity of the work. Access may be (and usually is) proven by indirect evidence (e.g. the work was available to the public in the locale) and then the issue becomes how similar the work is. The more similar, the less access need be proven and vise versa. The question often becomes how a lay person would react as to the degree of similarity. If the similarity is "striking" one usually need not even prove access.
Defenses available constitute the bulk of the reason for litigation. The most common defense is the "fair use" exception (Section 107 exception) which allows works to be copied for teaching, criticism, scholarship, and parody. In that matter, the criteria is whether the taking was educational or commercial, the nature of the work copied, the amount of the original work taken, and the effect on the market.
Other defenses and arguments that often occur in litigation involve public performance rights for music (usually for restaurant and bars); use of matters for libraries and archives; secondary transmissions (radio broadcasts of music); and the First Sale doctrine which means that the person buying a product is allowed to use it...but not copy it for others.
Another common area of contest is who owns the copyright in an employee or independent contractor situation. This is the "Work for Hire" area. Essentially, a work prepared by an employee within the scope of his or her employment belongs to the Employer. (The obvious dispute is whether the person is an employee and whether it was within the scope of employment.) As for independent contractors, if the work falls within one of ten specified categories AND if the understanding is in writing, it may be considered owned by the person hiring the independent contract. Here, the rule is GET IT IN WRITING.
The mechanics of applying for a copyright have been altered in their purpose by the United States adopting of the Berne Convention. No longer is it necessary to place notice of copyright with date or wording such as "all rights reserved" on the work (though this IS permissive and is highly recommended by our office) and registration is entirely permissive, though it remains a prerequisite to actually filing a lawsuit to protect copyright. It is also a prerequisite to obtaining certain types of damages (statutory damages and attorneys fees) and is easily and cheaply accomplished (fees less than fifty dollars, filling in a form and depositing a copy of the work.) There is much to be gained and little to be lost by registering your copyright and we highly suggest you do so.
The duration of a copyright of works after January 1, 1978 is the life of the author plus seventy years. Thereafter, the work is in the public domain. For pre 1978 works, the duration is twenty eight years for the initial term with a renewal term available of sixty seven years.
And precisely what are the rights of a copyright holder? To duplicate, distribute to the public, make derivative works, to perform publically and display publically. Increasingly, there is another "right" that was previously only protected in Europe: the "moral rights" to a copyright which pertain to attribution of the work to the author and the ability to make sure the work is not altered or mutilated (the "integrity of the work") thus protecting the reputation of the author.
TRADE MARKS AND TRADE NAMES
The protection available under the concepts of Trade Marks and Trade Names occur exclusively in a commercial context (unlike patent or copyright protection) and relate to the right to exclusively use a particular design, logo, or name for commercial use. Typical trademarks or trade names are MGM; Denny’s; Mobil; etc, etc. Typical trademarks can be the type seen in logos but also include uniquely associated designs and colors, often carefully designed at tremendous expense and altered as the years go by.
(Consider the Morton Salt design of a young girl walking in the rain with an umbrella and the motto: "When it rains it pours," referring initially to the fact that their salt resisted moisture but through use became associated entirely with Morton Salt. Consider the Coke emblem which was used extensively, altered, but returned to as a classic when the public sentiment seemed to miss it. These objects of property are often worth more than the product itself and quite often huge sums are spent for the right to use a name or logo. Even decor, such as restaurant decor, has been held subject to trade mark protection.)
The legal theory behind trademarks and trade names is to protect consumers: to avoid confusion to the public which can result in purchasing an item or service in error. It is possible to protect the same product both by trade mark (commercial context) and copy right (creative context.) Unlike copy rights, the way to confirm ownership in the United States to trade names is by use in a business context and by registration.
There are four types of trademarks. There are trade marks referring to products (Coke); there are service marks relating to services provided (Merrill Lynch, MacDonalds, etc.); there are certification marks showing a product or service meets a certain standard (UL Listing, etc.); and there are collective marks referring to membership in an association of some kind (UAW; NFL; Sunkist.)
Trademarks and Trade names, in the United States, are protected both by the Federal law (Lanham Act) and each state’s laws. The problem with state protection is the geographical limitation on the protection (within the state) so most entities seek protection under the federal law, thus the Lanham Act.
While one can register a trade name or mark before its actual use in a business context (thus establish priority rights over others), one must swear that you intend to use it in the application and must actually once it within three or so years. Until actual use, your claim to rights is "contingent." Only by actual use does one "perfect" the rights to the trade name. (If registered outside of the United States, use to perfect may not require such stringent time limits and some locales never require use.)
The first to register has priority over all others but a prior user in that area. Assuming no prior use, the question becomes who registered first. ( But recall mere registration without ultimate use can invalidate the registration in the United States.)
TRADE NAMES AND TRADE MARKS OUTSIDE OF THE UNITED STATES
While this area of the law is in flux, essentially each nation has its own system of registering names and marks. Registration in one does NOT protect the trade name or mark in another nation. Most countries require registration within their own nation for any protection whatsoever. (And most countries do NOT require use, merely registration.)
International registration at a single locale is slowly but surely becoming a reality. There is the MADRID PROTOCOL which allows a central registration but for the year 2000 it is not fully implemented and can not yet be relied upon for protection. The European Union also has a single system, (CTM) but since any nation within the system can void that system, the use is problematical.
Nevertheless, it is anticipated that within a few more years there will be a fully implemented international system that will simplify registration and grant much greater and more efficient protection. For now, each company must determine where and how to register which trade marks and given the number of jurisdictions, many companies only protect some of their trade marks in some of the countries. A simple logo which one seeks to protect world wide can easily cost one hundred thousand dollars in registration fees and even if one seeks only to protect it in perhaps two dozen nations, one must allocate perhaps twenty thousand dollars to the registration and also faces the annual cost of checking the market to ensure that no one is seeking to improperly use the trade mark.
WHAT CAN BE A TRADE MARK?
A trade mark must be unique enough to distinguish itself from both pre existing trademarks and generic descriptive categories. (Thus, nondistinctive or functional trade packaging or geographical descriptions can not be trade marked. Such names as "Good Escalator" or "Tasty Hot Dogs" are simply too generic to achieve protection). In terms of what will be mostly easily protected, going from the strongest to the weakest type, are:
- Coined and Fanciful names ("Bozo the Clown")
- Arbitrary Names "(Midas Mufflers")
- Suggestive Names ("Mr. Clean")
- Descriptive ("Wood Working Supply")
- Generic ("Fast Escalator")
Generic are never protected but whether the categories in the list above that can be protected depends on whether use over time makes them unique enough. Once a brand becomes fixed in the consumer’s mind, the name may become unique. ("Bank of America" would not be granted today but after eighty years of use, is now considered unique enough to designate a particular banking institution.)
One can protect sounds, smells, shapes and even colors (the pink insulation for Corning is now protected since it is nonfunctional and creates clear identity in the minds of consumers.) The key, once again, is whether there would be confusion in the minds of the consumer.
ABANDONMENT OF TRADE MARK
One maintains a trademark right for so long as the owner uses it; but if it is abandoned, it is lost and abandonment is presumed if there is a three year non use or stated intention to close the business. Another way to lose a trademark is if the product or service is used (or misused) to such an extent that what was previously a trademark becomes associated in the public mind with an entire category of product. (Good examples are Kleenex; Zipper; )
TRADE SECRET LITIGATION (COMMON LAW AND STATE STATUTE)
Every business knows that many of the most important assets it owns are simply information and data that it has developed over the years which, even if not a creation that is original (for copyright) or connected with the business name (for Trade Mark), or an innovative device or method (for patent) is still proprietary and needful of protection. Such items as unique methodology; customer lists or information; information about the market or competitors; information about suppliers and vendors, etc, etc. are of extreme competitive value. Can they be protected? Yes, they are business assets subject to protection much as any other asset of the business...provided the business has acted in a manner to maintain their unique confidential value.
Most states provide that Intellectual Property not covered by the Lanham or Copyright Act are still assets that may be protected and that improper use of them may be actionable under various tort theories (Interference with a Business Relationship; Breach of Fiduciary Duty; Trade Theft; Theft of Trade Secret; Conversion or even simple theft and embezzlement, etc.) Most of those legal actions allow punitive damages to be awarded and such litigation is becoming common place in the United States and abroad.
The important thing for a business to understand is that unless reasonable steps are made to maintain the confidentiality of a concept, idea, method, etc, then it is no longer a "secret" and not protectable. It is up to the business to make it a secret by taking the appropriate proactive steps and sloppiness in the care and protection of trade secretes effectively gives free reign to others to steal them since they are in the public domain. (A typical example is that data or a customer list is left out on a desk or on a hard drive available to all, or is sent in a relatively public manner to a third party or is seen and taken by a third party, who then defends the action by claiming that it was not secret since anyone wandering by could see it.)
It is also vital to understand that the entity seeking to protect a trade secret must be extremely aggressive in maintaining its exclusive rights to the secret both in court and in the market. Once any third party breaches the exclusivity of the secret, it is no longer subject to protection. Thus, even businesses who are not particularly worried about theft in a particular market must act aggressively to punish the wrongdoer before another entity seizes that opportunity to claim that the secret is now in the public domain. (Again, a typical example is that your secret is stolen and used in Asia in which you do no business so you do not concern yourself greatly; but by letting the Asians use the concept, if it is picked up by your competitor in your own city, you may no longer have the ability to claim exclusive rights to the secret.)
Quite often, the entity seeking to protect the secret will not want to spend money on litigation and thus will grant a limited license to the user rather than litigate: the license, itself, will restrict other uses and maintain the exclusive nature of the secret. (Thus, in the above example, the injured party could license the use of the name in Asia and only in Asia and thus would be in a position to object to any use in the same city as the owner.)
Each state has its own criteria for what is actionable, but all require that proof of the secret and valuable nature of the intellectual property must be established before an action lies.
CYBERSPACE AND TRADE SECRETS
This topic if far too broad to discuss in this general article and the reader is advised to review the article on that particular topic on the Website as well as the more copious articles on the Retainer Website.
Suffice to state that the DIGITAL MILLENNIUM COPYRIGHT ACT (DMCA) of 1998 seeks to enlarge trade secret protection to the new technology and with the World Intellectual Property Organization Treaty Implementation Act it is anticipated that the law will be in effect in most countries in another year or two. (Thirty nations must agree to it, first.)
Key provisions relate to laws prohibiting defeat of technological protections of intellectual property and copying controls and the Act provides separate causes of action independent of those under the Lanham Act or the Copyright Act. The Act also covers other areas of concern, such as prohibiting sale of devices primarily designed for the purpose of circumventing the intellectual property protection of others (the video scanners which allow one to make unlimited movies, etc.)
There is no case law and precious little commentary on these new laws and one can expect an explosion of litigation once the law is adopted in more countries. What appears likely is that the new technology of the Internet will require additional lawmaking and causes of action and that, at least in the United States, such laws are being passed with alacrity at this time.
Related to this is the registration of Domain names which are now subject to the InternetCorporation for Assigned Names and Numbers, a nonprofit organization which has passed its own rules as to when a particular domain name may not be used for a website due to others’ claims of exclusive right to it. Again, the procedures are in their infancy, there are very few cases, and the rules are being promulgated at this time. The basic rule is that the name will not be granted to a petitioner if the domain name requested is identical or confusingly similar to a trademark or service mark or domain name already existing. The methods to reserve names and the complex appeal processes are available for review on the web by contacting the Internet Corporation for Assigned Names and Numbers (ICANN) at www.icann.org.
Cybersquatting is the name now given to those who seek to monopolize the use of names and descriptions on the Internet by reserving wholesale various domain names and waiting until legitimate businesses desire the name and then "selling" the name to the businesses, often at tremendous profit. The Lanham Act has been amended to include provisions aimed at "Cyberpiracy Prevention" called the AnticybersquattingConsumer Protection Act (ACPA). The ACPA provides for statutory damages of up to one hundred thousand dollars per act and requires a showing of bad faith intent to profit from a mark which may be inferred from wholesale registration of domain names, offers to sell same and the lack of real business connected with the various registered domain names. Again, case law is nearly nonexistent since the law is new.
CONCLUSION
There is no area of the law altering as rapidly as the fields of Intellectual Property and the reader is advised to obtain competent legal advice prior to taking any important steps involving protecting such property. Litigation involving Intellectual Property makes up an increasingly large area of the case load in the world’s courts as is to be expected when this type of asset becomes of increasing value world wide.
And, as with all assets available worldwide, the issue of enforcing judgements in often hostile jurisdictions becomes a critical question to be considered by the parties and this, in turn, means that those seeking to use the web must realize that by entering that world wide arena one also opens the door to world wide contests over intellectual property.
Intellectual Property can be protected but such protection requires a carefully developed plan including sophisticated business, technical and legal advice and further requires constant updating as the law and the markets change over time.