A Patent Primer

I am often asked what is a patent?  Well, a patent is essentially a grant by the U.S. Government of a monopoly for a limited period of time.  The idea behind this is that the government wants to encourage invention and creativity while allowing an inventor/creator to reap the rewards of his/her/its research and development and give him/her/it a head start over the competition. Yet, the head start is limited eventually allowing others to copy the invention and, hopefully, build upon that invention to create something better. 

There are three types of patents recognized by the United States Patent and Trademark Office (“USPTO”): utility, design, and plant.  A utility patent is the catch-all type of patent and includes all new, nonobvious, useful inventions that fall into five categories: a process, a machine, a manufacture, a composition of matter, or an improvement of an existing idea.  A design patent is a new and original design that ornaments a manufactured article (e.g. new shape for a bottle).  A plant patent is the least frequently used type of patent and includes any asexually or sexually reproducible plants (i.e. flowers) that are both novel and nonobvious.  The period of patent protection for utility and plant patents is 20 years after the application date.  For a design patent it is 14 years after the issuance of the patent.  Certain items are not patentable like products of nature, laws of nature, physical phenomena, scientific truths, and abstract ideas, printed forms, atomic weapons, and business methods and mental steps (unless they are useful and produces a tangible result).

In determining whether an invention is patentable, the USPTO will ask whether the invention is a new development in at least one or more of its constituent elements. That is to say, is it novel?  A patent is not novel if it is known by others in the United States, used by other in the United States, patented by another in the United States or any other country, or is described in another’s printed publication in the United States or another country.  I had a client who obtained a United States patent that was invalidated because the technology was described in a Japanese publication prior to the company obtaining the patent.  This was a huge blow to my client who was asserting his patent rights against another company. 

If the answer is that the innovation is not novel, then the USPTO asks whether the invention is nonobvious.   In other words, would someone skilled in the field of the invention consider the invention to be an unexpected or surprising development?  If the invention is both novel and nonobvious, then it may obtain patent protection. 

If the invention meets these requirements, then it gains patent protection.  The right conferred by the Patent Act is a negative right: it is the right to exclude other from making, using, offering to sell, selling, or importing the patented invention in the United States during the period of enforceability. 

Obtaining a patent is not cheap and it takes some time—anywhere from 2-3 years.  A new business should consult a patent attorney to determine whether seeking a patent registration is more advantageous to seeking trade secret protection for the same thing. 

Trademark Basics

I was reading an article the other day about a small business owner who says she lost the use of her name when she took on partners for her company.  In the article, she said that she did not register her trademark (her name).  According to the article, she lost the ability to use her name when the company dissolved.  She says that she should have registered the trademark and licensed it to the company.  This would be a sound policy, but a trademark can exist without a registration. 

Trademark law is a subset of the law of unfair competition.  “Unfair competition” is not easily defined.  Indeed, it is purposely broad in order to allow courts to fashion relief to entirely new, possibly unheard of situations created by the ingenious, yet unscrupulous competitors.  In California, the unfair competition statute starts with Business and Professions Code section 17200.  That statute defines “unfair competition” as and including “any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.”  Trademark infringement (i.e. violating the rights of the owner of a trademark) is a form of unfair competition.  A claim for unfair competition at common law is an equitable doctrine that protected against the inequitable pirating of the fruits of another=s labor, and then either Apalming off@ or Apassing off@ those benefits as one=s own or gaining unearned economic benefit from them.  Palming off was defined as passing off or attempting to pass off one person=s goods or services as the goods or services of another.  Essentially, common law unfair competition is a cause of action for trademark infringement. The Federal Trademark Act, known as the Lanham Act, also has an unfair competition component. 

A person or entity may obtain common law trademark rights simply by using the mark as a trademark.  This begs the question as to what exactly is a trademark and what is a trademark’s purpose.  A trademark is any word, name, symbol, or other designation used to identify and distinguish one’s goods from others.  In other words, it must identify the source of the goods of one person and distinguish that source from its competitors.  Accordingly, the function of a trademark is four-fold:  (1) to identify one seller’s goods and distinguish them from others; (2) to signify that all goods bearing the trademark come from or are controlled by a single source; (3) to signify that all goods bearing the trademark are of an equal level of quality; and as a prime instrument in advertising and selling the goods.  For example, a consumer who bought a pair of Nike shoes and had a good experience with those shoes (e.g. they were of high quality, lasted a long time, etc.) sees the Nike name or Swoosh on items of apparel will expect the same high quality as from the shoes because the apparel items are from the same source as the shoes.  Thus, simply by using a name or symbol in this way, you can obtain common law trademark rights.  However, protection for a common law trademark can be limited.  Common law trademarks are only protected pursuant to the law of unfair competition.  Thus, if you have a trademark that you use only in San Francisco (e.g. “ABC Gizmos”), you may not be able to prohibit the use of the same or similar mark in Los Angeles.  Common law trademarks are only protected to the extent that they are recognized as trademarks. 

Now, if you registered your mark “ABC Gizmos” with the State of California, then you would have statewide protection, subject to some limitations that are outside the scope of this article.  The California trademark law starts at Business and Professions Code section 14200.   Oftentimes a company or person will register their mark with their state while awaiting federal registration.  Nevertheless, a trademark that is registered with the state generally has broader protection than a common law trademark. 

Of course, the broadest protection available is national protection afforded by registering your trademark with the United States Patent and Trademark Office (“USPTO”)—there are avenues for international protection, but that is beyond the scope of this article.  Federal registration is more expensive than state registration and can take longer to obtain, but once registered it can garner you or your company nationwide protection.  Also, unlike its state and common law counterparts, you can file what is called an “intent to use” (“ITU”) application with the USPTO. This is an effective way to “save” the name or symbol until you or your company actually begins using the mark in association with your goods/services in commerce.  In essence, an ITU application goes through the same process as a conventional application except that the USPTO will not issue the registration until the mark is used in commerce. 

In sum, there are three ways to obtain trademark rights.  Each of these ways has its benefits and risks.  If you are thinking about obtaining a trademark or want to protect your trademark, it would be wise to contact an attorney to discuss the details of each.  This article is a brief overview of the types of protections and there are other issues which may arise to not allow you to register or assert your trademark rights. 

Trade Secret Primer

I.          What is a Trade Secret?

            In California, a trade secret is: "[I]nformation, including a formula, pattern, compilation, program, device, method, technique, or process," that has value in being kept a secret and must be subject to efforts to maintain its secrecy. Cal. Civ. Code § 3426.1(d).  Accordingly, the trade secret must not only have value to the holder of the secret, but the information must also have value to a competitor, such that if it knew the information, it could put it to beneficial use.[1]  There are several types of information that qualifies as a trade secret.  For example, courts have found the following types of information to be a trade secret:

Ø  “Know-how” (methods, procedures, and expertise that are not patentable)[2]

Ø  Internally developed techniques, formulas, and specifications regarding industrial or consumer products[3]

Ø  Information relating to any research, development, tests, reports, or studies regarding a particular product or customer (this list can include customer lists)[4]

Ø  Information concerning a customer’s business plan, including financial goals and strategies for manufacturing, production, marketing, packaging, and distribution of products[5]

Ø  Computer software and databases[6]

            As such, an employer and company should conduct an audit of its information to identify its trade secret information and then set up ways to protect the information from disclosure and theft.  There are several ways for a trade secret owner to protect itself.  The most common is via confidentiality, nondisclosure, and nonsolicitation agreements.  Other methods include labeling or marking documents containing the information, limiting access to the information whether it is on a computer or on the shop floor, and limiting the number of persons who have access to the information. 

            The amount of protection varies and the company should consult an attorney with experience in developing trade secret protection plans.  If the information is the company (e.g. the recipe for Coca-Cola), then the company may want to implement as many ironclad ways to protect the trade secret as possible.  On the other hand, if the information is the type that it will not have value in a short period of time, then the company may want to enlist lesser options of protection.  the cost of the protection may also play a factor, as well as the accessibility of the information to employees or third parties. 

            One fairly easy way to protect a company's information is to remind an outgoing employee of their obligations to maintain the secrecy of the company's trade secrets pursuant to a nondisclosure agreement.  If there is no such agreement in place, then the company may ask the outgoing employee to sign one during the exit interview.  In some cases, the employer may want to inform the outgoing employee's new employer of the former employee's nondisclosure obligations.  While this option has been fairly common in the technology sector (everyone wants to protect their trade secret information), this last measure should be done after consulting an attorney in order to make sure that the company is not running afoul of any rights or laws of the former employee.  For example, the company should not threaten litigation based on the new employment, somehow prohibit the employee's ability to move to a new company or career, defame or otherwise make misrepresentations about the former employee. 

            A new employer can also proactively protect itself from potential liability for trade secret misappropriation by discussing with the new employee any confidentiality agreements with prior employers or the possibility that the new employee knows of his/her former employer's trade secrets. 

            When advising employers and employees about trade secrets be very careful to impress upon them the consequences of their actions or inaction.  Trade secret protection is lost with very little effort.  Also, for an employer, designating too much information as a trade secret can work against you. 

            Overall, while this is a very brief overview of trade secrets and how to protect them, it is clear that both employers and employees should work together to avoid the loss of a trade secret.  Once a company stops protecting its trade secrets or otherwise discloses the trade secret to others, that company can lose the trade secret.  That is why a company should be vigilant in maintaining and improving its trade secret protection plan. 

---

[1] See Abba Rubber Co. v. Seaquist, 235 Cal. App. 3d 1, 18 (1991).

[2] See Surgidev Corp. v. Eye Technol., Inc., 648 F. Supp. 661, 687 (D. Minn. 1987), aff’d 828 F. 2d 452 (8^th Cir. 1987) (applying both the California and Minnesota version of the UTSA).  This includes “Negative know-how” or “negative research.”  See Courtesy Temporary Sev., Inc. v. Camacho, 222 Cal. App. 3d 1278, 1287 (1990). 

[3] See Schlage Lock Co. v. Whyte, 101 Cal. App. 4^th 1443 (2002).

[4] See Abba Rubber, 235 Cal. App. 3d at 18; Daniel Orifice Fitting Co. v. Whalen, 198 Cal. App. 2d 791 (1962).

[5] See PepsiCo, Inc. v. Redomond, 54 F. 3d 1262, 1265 (7^th Cir. 1995). 

[6] See MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 520 (1990) (applying California version of UTSA).

The Change of Branding to Fit the New World

                A recent TIME article discussed the move by companies to a "kinder, gentler logo."  In particular, the article discusses Starbucks' removal of the words "Starbucks Coffee" from its logo, which according to Vikas Mittal, a Rice University professor who studies logo redesigns and brand commitment, "will have an added benefit as Starbucks begins to expand in Asia."[1]  According to the article, a recently published paper posits that rounded logos are more appealing in countries like India and China which have "cultures that tend to be more interdependent and collectivist." 

                The removal of words from these logos will lessen or eliminate issues of unfavorable connotation when translated to a foreign language.  For example, the word "Pik" in Danish is a common word for male genitals.  "Water" is translated to "vand" in Danish.  So, "Vandpik" in Danish is a term to describe a morning erection.   As such, Waterpik had to come up with a different name for its products in Denmark.  Another example is the Ford Pinto.  "Pinto" in Brazilian Portuguese is slang for male genitals.  No wonder Brazilian men did not want to buy or be seen driving a Ford Pinto!

                In the TIME article, there are several examples of the evolution of a company's logos.  While it is important for a company to keep evolving and to rethink its branding designs, such changes should be considered carefully.  In the case of Gap, Inc., the company changed its logo and many consumers voiced displeasure with the new logo (akin to the outcry when Coca-Cola came out with "New Coke").  In response, Gap, Inc. reverted to its old logo to appease its consumers. 

                The trademarks highlighted by the TIME article all show a modernization and simplification of the logos.  This makes sense in this day and age of Facebook and Twitter.  As a consumer's attention span decreases, it becomes more and more important for a trademark owner to make sure that their trademark is recognizable easily and quickly. 

                Fifty years ago, televisions were in approximately 10% of the homes of the United States.  Now, we have a television in every room.  Fifty years ago, television and radio ads were 60 seconds in length.  In the 1960's and 1970's, companies began to create branded content.  For example, there was "Kraft's Television Theater," "Mutual of Omaha's Wild Kingdom," and "Colgate's Comedy Hour."  These shows were essentially a whole hour of advertisements for the sponsoring company who had a fairly captive audience.  These shows increased viewership which, in turn, put additional demands on content.  As the viewership grew, there was an increase in the amounts of companies paid to advertise.  From there, we have those wonderful, late night infomercials.   

                From those beginnings, came technological advances like TiVo®, the internet, Facebook®, and now Twitter®.  These technological advances created competition for the consumers' attention which meant that the advertisers had less and less time to get their ads to message to the consumers.  As a result, the ads began to decrease from 60 seconds, to 30 seconds, to 5 seconds. 

                The name of the game is no longer content, but how many times the advertiser can get its brand in front of a consumer.  This means that the brand takes on more importance for a company.  Gone are the days that an advertiser can simply provide the consumer a "message."  That takes too long, consumers no longer have the attention span to listen to such a message--or, they simply change channels, fast forward, or otherwise skip the "message." 

                Psycologist Jon Kabat-Zinn, notes in his book Coming to Our Senses, that we suffer from a "consistent and constant state of partial attention."  We've all experienced this state.  When you are at the store and are compulsively checking your Smartphone.  Or, you are at your kid's game and you are talking on the cell phone.  Query whether you are really at your kid's game in that scenario. 

                As such, a company must carefully design its trademark, logo, or brand with an understanding of the overwhelming competition from others in today's social media.  In addition, a company must design its trademark, logo, or brand with an eye towards international expansion.  The simplification of a company's logo will help in both of these areas. 

---

[1] Josh Sanburn, "Circles and Swooshes What's behind the trend toward kinder, gentler logos?," TIME Magazine, March 14, 2011, at Page 62-63.

Making Sure You Understand and Profit From All of Your Intellectual Property

The loss of proprietary information has both short and long term effects.  Sometimes, the “loss” of intellectual property derives from a failure to exploit or protect it.    If you are the person responsible for the bottom line numbers of your company, it is up to you to make sure that you maximize and leverage all of your company’s assets.  A company should identify and aggressively protect its intellectual property.  Doing so, will allow the company to use all of its assets and give your company an edge over your competition. 

Intellectual Property Audit

The first step to take in protecting your company’s intellectual property assets is to comb your company for intellectual property assets.  While it is easy to identify the patents or patent applications, the trademarks, or the copyrights (presumably, all are registered with the appropriate authority), it is more difficult to find the trade secrets or other items of intellectual property that provide value to your company. 

Typically, an intellectual property audit (“IP Audit”) allows the company to assess and value its intangible assets (i.e. its intellectual property).  It also includes evaluating the steps taken to protect the intellectual property.  This is particularly important with trade secrets.  The audit may also assist a company in improving upon its protection and maximizing of its intellectual property.  The IP Audit can also give the company ideas on where there are issues involving third party rights and how to minimize any exposure or risk involving those third party rights.[1]  Finally, the IP Audit may allow the company to evaluate whether they would like to seek trade secret protection rather than patent protection. 

The patent versus trade secret challenge involves making a determination of the type of technology involved and the length of time that the technology will be the company’s core business.  Another inquiry in this regard would be whether the company wants the assured protection of a patent with its time limitation, or to seek protection of its intangible asset for a longer period of time.  Of course, the trade secret protection is not assured as is the patent protection, so the company should way the pros and cons of seeking to protect its invention in this manner, including understanding that it may lose trade secret protection of the information. The costs associated with each type of protection should also be a part of this equation. 

Depending on the size of the company, the audit may be performed by in house or with the help of outside counsel.  Eitehr way, the company’s in house legal counsel should be involved.  It is also helpful, before conducting the audit to prepare an audit plan defining the scope of the audit, the audit’s timing, who is responsible for each task, and the information to be provided in the report. 

An IP Audit of this magnitude should be much more than simply listing the company’s patents, trademarks, and/or copyrights and ensuring that all the paperwork for registering or maintaining these intangible assets with the appropriate governmental office.  Moreover, a company should conduct an IP Audit regularly. 

With regard to trademarks, your company should ensure that the company’s logos or trade dress (shapes or designs of products that identify your company as the source of that product) send positive messages to potential consumers.  Additionally, the IP Audit should evaluate the “recognizability” of any names, logos, tag lines, or trade dress.  It would also behoove the company to evaluate any competitor names, logos, tag lines, or trade dress in order to make sure that your company’s trademark assets stand apart from theirs. 

Do not ignore copyright protection for non-trademark related artistic elements of your company’s product, or software, or business plans, or other similar materials used by your company.  Copyright protection may be the most overlooked intangible asset for companies not in the entertainment industry. 

Protection and Action

Now, that you and your counsel have performed the IP Audit and completed the IP Audit Report, it is time to protect those intangible assets that the audit uncovered as  not protected.  To the extent that the IP Audit uncovered errors in any patent, trademark, or copyright applications, then the company should correct those errors.  In many instances, this will mean filing patent, trademark, or copyright applications.  Or, it may involve a cost-benefit analysis as to whether it would be more cost effective for the company to seek trade secret protection rather than apply for a patent or seek common law or state registration for a trademark rather than file an application with the United States Patent and Trademark Office. 

If the IP Audit revealed system-wide deficiencies in identifying and protecting the company’s intangible assets, then the company should begin improving or implementing procedures to do so.  Likewise, if the IP Audit revealed ownership defects in the company’s intellectual property (e.g. consultants did not assign the rights to the intellectual property developed for your company), then the company should cure any such defects.  In order to avoid this problem in the future, the company may also implement an ownership transfer plan. 

Of course, in the event that the IP Audit revealed potential infringement risks—that is potential infringement of a third party’s rights--the company should remedy this situation as soon as possible.  Similarly, if the IP Audit provides a basis to assert rights against a third party, then the company should consult with counsel regarding asserting those rights. 

Conclusion

As an intangible asset, it is easy to overlook or not appreciate the value of a company’s intellectual property.  However, intellectual property can be as valuable or more valuable than a company’s tangible assets.  As such, a company would do well to conduct an IP Audit frequently, implement policies and procedures for identifying and perfecting intellectual property rights, and aggressively protect those rights against third parties. 

---

[1] While the scope of an intellectual audit can range depending on the situation, this article will focus on a broad audit rather than one in response to a threat of litigation.