The four most important things to do to protect your intellectual property
August 2015 | SPECIAL REPORT: TECHNOLOGY IN BUSINESS
Financier Worldwide Magazine
In today’s ‘digital age’, protecting a company’s intellectual property is more important than ever. It is good business practice because companies may need to defend their assets from unauthorised infringement by competitors, or enhance their assets to make them more desirable for buyers.
Intellectual property is generally classified into four categories: (i) patents, which are rights granted to inventors; (ii) trademarks, which are rights granted to owners of brand names; (iii) copyrights, which are rights granted to owners of original, creative works of authorship; and (iv) trade secrets, which are rights granted to owners of formulas which are not generally known and which can be used to obtain economic advantages over competitors. A company’s IP is a critical part of its bottom line; however, protecting each category has its own challenges. For example, the US Patent Act defines an inventor as an individual. A company cannot be an inventor under the Patent Act. So, only the inventor can file for patent protection. On the other hand, the US Trademark Act and the US Copyright Act permits a company to be the owner and applicant of trademarks and original works of authorship. Given these challenges, the first thing a company should do is identify all of its strategic IP.
Identifying strategic IP
Before a company can determine the steps it should take to protect its IP, the company must first identify what IP it has and what part of its IP needs to be protected. Clearly the brand name of its products needs to be federally registered, but what about the company’s slogans? Do these need to be federally protected also? What about the company’s advertising copy and its website? Do these need to be registered with the US Copyright Office? An IP audit will systematically identify all of a company’s IP. Once the company identifies its IP, it can determine what needs to be federally protected.
Secure statutory protection for strategic IP
Inventions are protected by the US Patent Office. Brand names and company names are protected by the US Trademark Office. And original creative works of authorship (including software) are protected by the US Copyright Office. There are, however, no federal trade secret protections. The company itself is tasked with providing adequate protections to keep its trade secrets a secret. As referenced above, the company is the owner and can file for federal trademark and copyright protections, even though an employee may have created the brand name or copyrightable work. On the other hand, only the person (or persons) who conceived and created the invention can file for the patent. If a company’s strategic IP includes inventions or if any other IP is created by independent contractors, it is critical that the IP creators sign agreements that contain provisions transferring these rights to the company.
Secure written transfers of strategic IP
One of the most misunderstood principles is the ‘work made for hire’ doctrine, codified in the US Copyright Act. Firstly, it does not apply to inventors, and secondly, by and large it does not apply to independent contractors. For instance, it is common today for a company to hire a website developer to create the company’s website. Unless the website development agreement clearly and unambiguously transfers the rights in the website to the company, under current US law, the developer owns the copyrights in the website, not the company, even though the company paid for it. In short, the copyright rule is ‘author is owner’, not ‘buyer is owner’. The fundamental principle under the US Copyright Act is to grant to an author the ownership rights in its originally created work. The exception to the rule is when the author is an ‘employee’ of a company whose job description is to create original works. In that case, the ‘work made for hire’ doctrine says that the company, not the author, is the owner of the rights in the work. While companies can generally rely on this doctrine to protect themselves from employees who are creating original works, the same cannot be said for any inventions created by employees or other strategic IP created by independent contractors. In these cases, it is vital that the company has written agreements with any employees creating inventions or any independent contractors creating other strategic IP that transfer the ownership over to the company. These written agreements are also extremely important in protecting trade secrets.
If strategic IP is a trade secret, keep it secret
Every company today has information that it considers proprietary and confidential, i.e., business plans, sales projections, customer lists, etc. While it is important to keep these confidential, none of these rise to the level of trade secrets. A trade secret is defined as any formula that: (i) provides its owner with a competitive advantage in the marketplace; and (ii) is sufficiently protected against public disclosure. It is commonly recognised that the most famous trade secret in the world is the formula for Coca-Cola. To protect its trade secret, Coca-Cola keeps this formula locked in a bank vault that can only be opened by a board of directors’ resolution. At any one time, only two Coca-Cola employees know the exact formula, their identities are never revealed and they are forbidden from flying on the same plane at the same time. A company that has trade secrets as part of its strategic IP does not have to go to these extreme lengths to keep the information secret, but it does need to have adequate safeguards against disclosure. Typically the company’s precautions will include stamping documents as ‘trade secrets’, limiting the information to only key employees with a need to know, keeping the information locked up or computer protected after business hours and protected through use of nondisclosure agreements.
By following these four simple, proactive steps, a company can identify and secure its IP rights to give it a sturdy defence against an IP challenge, and avoid costly legal disputes or to enhance the company’s bottom line assets for end game objectives.
Eric J. von Vorys is a shareholder and chair of the Intellectual Property practice group at Shulman Rogers Gandal Pordy & Ecker. He can be contacted on +1 (301) 230 5242 or by email: email@example.com.
© Financier Worldwide
Eric J. von Vorys
Shulman Rogers Gandal Pordy & Ecker