INTELLECTUAL PROPERTY PROTECTION

Michael E. Sellers

Luedeka Neely & Graham, P.C.

"Intellectual property" is a broad term which is used to refer to the results of various types of intellectual effort, including ideas, inventions, computer programs, formulae, industrial processes, brand names, written works, artistic works, and many others. Our legal system recognizes certain rights in such intellectual effort by affording the intellectual property owner protection in the form of patents, trademarks, copyrights, and trade secrets. While each recognized form of intellectual property is designed to protect a particular type of intellectual property, one or more of these forms can often be combined to increase the amount of protection that would otherwise be available.

Intellectual property, in whatever form, is a valuable business asset which can and should be protected. Like any other business asset, intellectual property can be assigned, sold, or otherwise transferred. For some forms of intellectual property, rights arise merely from an act of creation or use of the subject matter. Other forms of intellectual property require additional acts before rights can exist. However, for every form of intellectual property, the owner must take some kind of action in order to maximize protection. Inaction will almost always result in loss of valuable rights.

The following provides a general framework for understanding the four basic forms of intellectual property protection, how each arises, and how each can be protected.

Patent Rights

A patent gives the patent owner the right to exclude others from making, using, selling, offering for sale, or importing the patented invention. In effect, it is a legalized monopoly. The monopoly is limited, however, in time (20 years for a utility patent, 14 years for a design patent) and territory (must be made, used, sold, or offered for sale in the United States).

Unlike copyright and trademark rights, patent rights do not arise through mere use or creation of the subject matter. No patent rights exist unless and until the government issues a patent to an applicant based upon an appropriate application claiming patentable subject matter. For a utility patent (which protects the functional aspects of an invention), patentable subject matter is defined as "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." Patentable subject matter for a design patent (which protects the ornamental aspects of an invention) includes any "article of manufacture." Once a patent has been issued, and as long as the patent is deemed valid, the patent owner is protected against any independent discovery or reverse engineering of the patented invention.

The U.S. Patent Office recently released a new set of examination guidelines addressing the patentability of computer software. The new guidelines define three examples in which patentable subject matter can be found in a computer program. First, a computer or other programmable apparatus whose actions are directed by a computer program or other form of software is a statutory machine. Second, a computer readable memory that can be used to direct a computer to function in a particular manner when used by the computer is a statutory article of manufacture. Third, a series of specific operational steps to be performed on or with the aid of a computer is a statutory process. Thus, the new guidelines make clear that computer programs are considered patentable subject matter and are to be treated as such during examination of the application. Indeed, the issuance of these so-called "software patents" is now common.

Before applying for a patent, a "prior art" search of the Patent Office records is typically conducted to determine the chances of obtaining a patent. This search will identify documents in the Patent Office which are relevant to the technical field of the invention so that the state of the art can be ascertained. Based upon the results of the search, an evaluation is made of the chances of obtaining a patent and a written search report is prepared.

If the results of the search are positive and it appears that the invention should be patentable, a patent application is prepared and filed with the Patent Office. The patent application is a technical document which includes a detailed description of the invention, formal patent drawings, and formal patent claims defining the scope of protection being sought by the applicant. The search results often dictate the breadth of the claims. In addition to the application, certain other formal papers must be filed with the application.

After the application is filed with the Patent Office, it is submitted to a patent examiner for action. The patent examiner will conduct a search of the Patent Office records much like the search that was conducted by the applicant prior to filing. The examiner's search typically includes both U.S. patents and foreign patents, and sometimes catalogues and other literature addressing the state of the art. Often, the examiner will initially find some reason that the patent claims submitted with the application will not be allowed. If so, the examiner will state his opinion in a document called an "Office Action." The Office Action is then evaluated by the applicant and the applicant's patent attorney and an appropriate response is fashioned, which may include an amendment of the claims to more properly define the scope of protection allowable over the prior art cited by the examiner. Appropriate arguments can also be presented in the response to distinguish the claims from the prior art. The Office Action and Amendment procedure is called the "prosecution" of the application and will continue until the examiner decides the invention is patentable or until his rejection of the claims is made final.

If the applicant is successful during prosecution and the examiner agrees that the invention is patentable, a patent will be issued once the government issue fee is paid and any residual matters are resolved.

In order to keep a patent in force after its issuance, the government now requires that a "Maintenance Fee" be paid at certain time intervals on issued patents. A fee is due at 3 ½ years, at 7 ½ years, and at 11 ½ years after the date the patent is issued. If the fee is not paid in a timely manner, the patent will lapse.

Trademark Rights

A trademark is any word or symbol which is used to identify one's goods/services and to distinguish them from the goods/services of others. A trademark also indicates the source of goods/services, even if that source is unknown to the purchaser. When a trademark is used to identify one's goods/services, common law rights may arise automatically. Thus, the manner in which trademark rights arise differs from the manner in which patent rights arise since the trademark owner need only use a trademark in order to create rights in that trademark.

Another difference between patents and trademarks is that the rights created through use of a trademark may exist in perpetuity, so long as the mark is not abandoned and does not become generic. A trademark can become a generic term for the goods/services if it is not adequately protected. Famous examples of generic terms which were once used as trademarks include "aspirin", "thermos", "cellophane", and "escalator". Each of these terms were initially used by their owners as valid trademarks but became so commonly (and inappropriately) used that the owners of the marks lost their trademark rights in these terms.

While the general rule is that rights in a trademark arise from use, federal registration with the U.S. Patent and Trademark Office (PTO) of a trademark provides important procedural and substantive advantages. For example, registration of a trademark on the Principal Register of the PTO serves as prima facie evidence of the mark's validity and ownership. This creates an important procedural advantage for the trademark owner since anyone wishing to refute the validity and ownership of a federally registered mark must bear the burden of proof. Federal registration also gives the registrant the exclusive right to use the trademark nationwide in connection with the goods/services for which the mark is registered. This means that anyone who began using a confusingly similar mark after the filing of the registrant's application must yield to the registrant when the registrant begins doing business in the junior user's trade territory. If the mark is used continuously for a period of five years following registration, the registrant may obtain an "incontestible" status for the registration, which provides further procedural advantages for the registrant.

A trademark may be registered on the Principal Register at the PTO if it: (1) has been used in interstate commerce (an application for registration may be filed prior to actual use, but use of the mark is required before the registration will issue); (2) is not generic or merely descriptive of the goods/services; and (3) is not confusingly similar to a mark which is the subject of a pending application or registration. Prior to registration, the mark is published in a widely distributed government document to give others an opportunity to oppose the registration. If the mark is not successfully opposed, a Notice Of Allowance will issue in due course.

Copyright protection is available for any original work of authorship fixed in any tangible medium of expression. Examples of works of authorship subject to copyright protection include computer programs, photographs, books, sound recordings, motion pictures, architectural works, blueprints, and others. A work is considered to be original if it is the author's own independent work. This means that two separate entities may each enjoy copyright protection in identical works of authorship, so long as each entity created the work independently of the other (i.e., there was no copying). This is true regardless of who created the work first.

The amount of originality required is surprisingly minimal, and copyright protection does not depend on the artistic merits of the work. The only requirements are that there must be some minimal degree of originality and the work must be fixed in a tangible medium of expression. Ideas are never copyrightable since they are not fixed in a tangible medium of expression - only the expression of an idea is subject to copyright protection. Additionally, processes, methods of doing business, and facts cannot be the subject of copyright protection.

The owner of a copyright has the exclusive right to:

1. Reproduce the copyrighted work (i.e., to copy it);

2. Prepare derivative works based on the copyrighted work;

3. Distribute copies of the copyrighted work to the public; and

4. For certain literary, musical, and dramatic works, to display or perform the copyrighted work publicly.

Copyright protection is similar to common law trademark rights since copyright protection arises by operation of law. Contrary to popular perception, no affirmative act is required to gain this form of protection - it arises automatically at the moment of creation of the copyrighted work.

A significant advantage of copyright protection is the rather extensive term of protection enjoyed by the copyright owner. For works created on or after January 1, 1978, a copyright lasts for the life of the author plus 50 years. For works made for hire, the term of copyright is 75 years from first publication or 100 years from creation, whichever is less.

Although registration of a copyright with the U.S. Copyright Office is permissive and not a condition of copyright protection, in order to institute an action for infringement of the copyright the plaintiff must at least apply for registration of the copyright in the Copyright Office. Applying for registration of a copyright is a relatively simply procedure which essentially involves completing a one or two page fill-in-the-blank application form and submitting a $20 application fee at the time the application is filed.

Another common misconception about copyright is that publication of a work without a copyright notice results in loss of the copyright. While this may have been true under previous versions of the law, the Copyright Act of 1988 no longer requires the presence of a copyright notice on publicly distributed copies of the work as a condition to retention of copyright. In other words, first publication of a work without a copyright notice after March 1, 1989, does not forfeit copyright protection. However, omitting notice can dramatically diminish the monetary recovery in the event of a lawsuit. It is therefore highly recommended that copyright notice be included on all published works.

Confusion as to ownership is another common problem. While someone obviously owns the copyright which comes into existence upon creation of the work, the question of who owns the copyright can be very difficult to resolve. Most controversies about ownership stem from the "work for hire" doctrine, which is a legal fiction making the employer the "author" and owner of the resultant copyright, absent an agreement to the contrary. The issue of whether a work was created in a work for hire relationship is determined according to the laws of agency. Most problems related to ownership can be easily avoided by a written agreement executed at the time the person creating the work is hired.

Trade Secret Rights

A trade secret is defined as information, including a formula, pattern, compilation, program, device, method, technique, or process which:

1. Derives independent economic value from not being generally known or readily ascertainable by others; and

2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Trade secret protection extends to ideas, and it does not require reduction to a tangible medium of expression. The term of protection for a trade secret is perpetuity, so long as the owner maintains it as a trade secret and others are unable to reverse engineer or independently derive the information.

Factors for determining whether a process or product merits trade secret protection include:

1. The extent to which the information is known outside of the trade secret owner's business;

2. The extent to which the trade secret is known by employees and others involved in the owner's business;

3. The extent of measures taken by the trade secret owner to preserve its secrecy;

4. The value of the information to the trade secret owner to preserve the secrecy of the information;

5. The amount of time, effort, and money spent by the trade secret owner in developing the information; and

6. The ease or difficulty with which the information can be independently developed or properly acquired by reverse engineering.

Thus, a trade secret is distinguishable from a patent in the sense that a trade secret need not be patentable. To qualify as a trade secret, the subject matter generally must be kept secret and it must provide some commercial advantage to the holder over competitors who do not know or use it. Examples of information which qualify for trade secret protection include a business's future plans, its customer lists, supplier lists, employee lists, financial information, process technologies, computer programs, and a wide range of other types of internal information affording a demonstrable competitive advantage, if kept confidential, generally qualify for trade secret protection.

Measures taken to preserve secrecy should include restrictions on visitors to sensitive areas, limiting disclosure to those with a need to know, and explicit written agreements between employer and employee, buyer and seller, licensor and licensee, and similar relationships. The trade secret owner should also stamp the word "CONFIDENTIAL" on documents embodying the secret.

While a trade secret does not need to be patentable to be protectable, a patentable invention may be a trade secret so long as the subject matter cannot be "reverse engineered" or otherwise ascertained from an examination of the product. In this connection, it is important to note that all applications for patent are kept in confidence by the Patent and Trademark Office and no information concerning the same may be disclosed without the authority of the applicant or owner. However, once the patent issues, the file is opened to inspection and copying by any member of the public.

Thus, trade secret rights in the subject matter of a potentially patentable invention are not lost merely by filing an application for patent in the Patent and Trademark Office containing the trade secret information. However, if a patent issues the trade secret rights will be lost and the subject matter can only be protected under the Patent Act. Accordingly, the option of protecting the subject matter of a potentially patentable invention as a trade secret can be retained up until the time of issuance of the patent. If the applicant desires to go the trade secret route, the application can be dropped by not paying the issue fee. The file will then be stored away and cannot be accessed by the public.

So why would anyone opt for 20 years of patent protection when trade secret protection may endure perpetually? The answer is two-fold. First, a trade secret is only protected against misappropriation. This means that someone must have actually taken the information from the trade secret owner. Independent derivation or prior knowledge of the information is a complete defense to a claim of trade secret misappropriation. In contrast, a patent will be infringed when anyone without the permission of the patent owner makes, uses, sells, or offers for sale subject matter falling under the scope of the patent. For purposes of determining liability, it makes no difference whether the defendant was aware of the patent or not. Second, given the modern-day mobility of employees, the ease with which information may be transferred and developments in analyzing products, there is a belief that trade secret protection is becoming a less meaningful way of controlling access to a particular technology or market.

A recent development in the law may make trade secret protection more attractive as a means of controlling misuse of confidential or proprietary information by competitors. The Economic Espionage Act (18 U.S.C. § 1831 et seq.) was signed into effect by President Clinton on October 11, 1996, making misappropriation of trade secrets a federal crime. The penalties are substantial - fines up to $10,000,000 or imprisonment up to 15 years. A principal impetus for this legislation is a desire to curtail information theft via computer or other electronic means.

Conclusion

Intellectual property is a valuable business asset which, like any valuable property, must be protected. Patent protection enables the patent owner to exclude others from making, using, selling, offering for sale, and importing any infringing product (or other subject matter) falling within the scope of the patent for a period of 20 years from the date the patent application was filed. Trade secret protection can also be a very broad form of protection for intellectual property, so long as the owner maintains it as a trade secret and others are unable to reverse engineer or independently derive the information. A significant advantage of a trade secret is that protection may last in perpetuity. A copyright protects the expression of an idea (i.e., the idea must be fixed in a tangible medium of expression) and gives the copyright owner certain exclusive rights, including the exclusive right to copy the copyrighted work, to distribute the copyrighted work, and to prepare derivative works of the copyrighted work. Finally, no matter what form of intellectual property is relied on to gain an advantage over competitors, it is always beneficial to establish name recognition and good will among customers by offering the goods or services under a trademark. Regardless of how well an idea is protected, the trademark will always remind the customer of the original source of the product or service.

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Michael E. Sellers, Esq., P.E.
Luedeka Neely & Graham, P.C.
P.O. Box 1871
Knoxville, Tennessee 37901
423-546-4305 (Phone)
423-523-4478 (Fax)

e-mail address: sellers@usit.net