Keep Competitors Off Your Intellectual Property

Posted: 09/1999

Keep Competitors Off Your Intellectual Property

Telecommunications companies, like other technology-related ventures, often base their
businesses on the unique and proprietary nature of their business ideas, processes,
products and services. Indeed, it is these proprietary products and services that allow
many telecommunications businesses to stake out a niche in the marketplace and to
distinguish themselves from the multitude of competing service providers. Yet, despite the
importance of these ideas, processes, products and services to the success of their
businesses, many telecommunications companies do not take the steps necessary to protect
themselves against copycats lying in wait to steal such "intellectual property"
from them, thus gaining access to the market niche they have so carefully developed.

In most cases, they need not let this happen. Service providers can protect their
company’s intellectual property by obtaining appropriate patent, trademark and copyright
protection. This article briefly explains each type of protection, the matters to which
they apply, how to determine if protection is needed and, if it is, the steps necessary to
obtain such protection.

Patents

A patent may be obtained for "any new and useful process, machine, manufacture or
composition of matter, or any new and useful improvement thereof." To be patentable,
the process, machine, manufacture or composition of matter must meet the requirements of
patentability, including novelty and nonobviousness. Thus, for example, software may be
patentable to the extent that it is not merely a mathematical algorithm and is associated
with a practical application. The same is true of a business process: it may be patentable
if it is sufficiently unique, useful, concrete and tangible.

Patent law confers what is called a "negative monopoly." That is, a patent
owner may prevent others from making, using or selling the invention for a period of 20
years from the date the application is filed. The patent owner also can elect to license
the patent to others and to derive often substantial royalties from such licenses.

In determining whether your business has a patentable process or product, it is
important to keep in mind that the United States is the last remaining country in the
world in which the initial patent applicant must be the "first to invent" and
not the "first to file." Thus, even if a competitor has stolen your invention
and has filed first, you still may have the opportunity to secure your rights.

Trademarks

The function of a trademark is to evoke a connection in the minds of the purchasing
public between a product or service offered under the mark with the source of the product
or service or the company that produces it. By using a trademark and making it known in
the marketplace, a company creates a valuable asset: goodwill. Goodwill is a byproduct of
the consumers’ loyalty to a product, as well as their ability to recognize the product,
thereby being able to distinguish just that product from others that are similar.

The best marks to consider are those that are arbitrary and fanciful. For example,
"Kodak" and "Polaroid" for cameras are excellent marks. These
trademarks do not describe the products in any way and are very strong. Trademarks should
not describe products or services. In fact, the U.S. Patent and Trademark Office will not
register marks that are descriptive or that it determines to be generic. Examples of marks
that have become generic are cellophane and escalator.

Unlike patents, trademark registrations do not expire as long as certain statutory
requirements are met. For example, between the fifth and sixth year after the date of
registration, an affidavit of continued use and incontestability must be filed at the
Trademark Office. Also, every 10 years from the date of registration a renewal must be
filed. Thus, with a little thought and planning, you can protect your company’s name and
business identity through the trademark process.

Copyrights

Unlike a patent, a copyright does not protect ideas; it protects the expression of
ideas in original works of authorship in a tangible medium of expression. Thus,
businesses may be able to copyright software (including source code and object code),
promotional materials, databases and related materials.

The beauty of a copyright is that you don’t have to do much to obtain protection, and
you can get the protection immediately. A business automatically obtains copyright
protection by fixing the work in a tangible medium of expression. In fact, a work
expressed in RAM on a computer will be protected by copyright. Notice of copyright is
provided by the placing the copyright symbol ")" on the relevant work, along
with a date of copyright and an indication of the party to whom the copyright belongs. For
an individual, a copyright lasts for the life of the author plus 50 years. For a work
created as a "work made for hire," which is typical in a company setting, the
copyright lasts for 75 years after the first publication of the work or for 100
years from the year of creation, whichever expires first.

A copyright owner, in most circumstances, has the right to exclude others from
reproducing, distributing, displaying or importing infringing copies of the work, or from
making derivative works. Derivative works are works based on the underlying copyrighted
work. For example, certain enhancements to software can be viewed as derivative works.

So if you already have copyright protection in the instant you create the work, why
register it in the Copyright Office? First, it allows you immediate access to the federal
courts in case someone infringes your copyright. Second, it automatically gives you
statutory damages in case of infringement. Third, if you prevail in a copyright
litigation, you automatically will get attorneys’ fees. Litigation is extremely expensive
in this country, and litigation over intellectual property is no exception.

Trade Secrets

A trade secret "… may consist of any formula, pattern, device or compilation of
information which is used in one’s business, and which gives one an opportunity to obtain
an advantage over competitors who do not know or use it." Examples include technical
and nontechnical data, plans, drawings, recipes, financial data, lists of customers and
suppliers and software, which have economic value. Trade secrets can be used in
conjunction with both patents and copyrights.

Trade secrets give you very powerful protection. At the same time, trade secrets are
extremely vulnerable. If you own any trade secrets they must be kept secret or the
protection will be lost. Once this cat is out of the bag, it is out forever. License
agreements involving any trade secret material need not disclose the secret itself, but
must identify that trade secrets exist in the subject matter of the license. Furthermore,
the license must direct the licensee to take sufficient measures and safeguards to keep
the trade secret actually secret.

Unless prohibited under contract or license, reverse engineering is a legitimate means
to let the trade secret cat out of the bag, so contracts and licenses must be drafted with
care. Nevertheless, legal action can be brought for misappropriation of trade secrets. In
such a case, you would have to prove three elements: 1. relative secrecy (e.g., that you
have taken reasonable steps to protect your proprietary rights in the trade secret); 2.
the trade secret’s value to you; and 3. novelty of the trade secret (although a unique
combination of generally known information, or even data in the public domain, still can
constitute a trade secret).

The duration of a trade secret is as long as it is kept secret. Companies would do well
to set up internal safeguards in addition to the external safeguards set forth in their
licensing agreements. The only cost is that associated with maintaining the secrecy.

The best way to determine whether you have assets–e.g., intellectual property–that
need to be protected is to have a qualified attorney perform an intellectual property
audit. We know–when you hear the word "audit" you automatically assume the
fetal position, begin to whimper and to envision long visits with nasty, boring
accountants. In this case, however, the audit will help you protect your business and save
you money.

The intellectual property audit also will help you identify whether your company name,
product names, logos or slogans have trademark or service mark significance. The
intellectual property audit also will investigate and examine whether your company has
documents, software and the like that should be registered with the U.S. Copyright Office.
Finally, the intellectual property audit also will help you consider whether you have
developed anything that could be considered a trade secret, and how you should protect it.

Once the intellectual property audit is completed, you will be in a position to make an
informed judgment as to which of your assets need to be protected and the most efficient
and effective means of obtaining protection. Like many other things in life, a little care
and attention now inevitably will pay substantial dividends later.

Susan E. Colman is founder of the Law Office of Susan E. Colman in Washington. Her
practice includes computer law, information technology law, copyrights and trademarks. She
can be reached at +1 202 775 4937 and by e-mail at [email protected].
Neil S. Ende is founder and partner of Technology Law Group, LLC, a Washington-based
communications law firm. His practice includes telecommunications business, regulatory and
litigation matters. He can be reached at +1 202 895 1707 or by e-mail at [email protected]