By Scott Hervey
As 2005 comes to a close, it is time for companies to make resolutions regarding their intellectual property. These resolutions apply both to companies that have never taken serious steps to protect intellectual property, and those companies that have an understanding of the value of intellectual property and take active steps to secure and protect these assets. Just like resolutions to lose weight and stop smoking, these resolutions may be tough to stick with, but if a company does stick with these resolutions it will be a healthier and more robust company.
Resolution no. 1 – Know Your Inventory
Intellectual property is a company asset, just like inventory. You wouldn’t think of running a company where you didn’t know the extent of your inventory. Likewise, it doesn’t make sense for a company not to have a firm understanding of all of its potential intellectual property assets. Even companies that regularly take steps to protect intellectual property through, for example, registering trademarks, or registering copyrights, a yearly review can prove beneficial. Sometimes marketing departments and independent divisions spin out valuable intellectual property assets that, for one reason or another, never made it past the desk of general counsel or a responsible executive. (If your company does not have a general counsel or one executive responsible for understanding the scope and extend of your intellectual property, this should be another new years resolution.)
You would want to review your company’s marketing and promotional materials, and website for trademarks, logos, or slogans that the company is using with frequency. If these trademarks have not been cleared, be sure to read resolution no. 3 below on preventing unintended liabilities. You would also want to look at domain names and toll free numbers, which may also serve as potential trademarks. If your company has changed its product packaging, point of sale displays, or product design, these may also be protectable trade dress. In order for the above to constitute trade dress, the packaging, or product design would have to be more than merely functional.
You would also be wise to take stock of the company assets protectable under the federal copyright laws. For example, a company’s website, marketing materials, manuals, promotional videos, software, articles, white papers, etc. are all protectable under the federal copyright law. Although you may ultimately decide that the cost benefit of securing protection is such that registration does not economically make sense, the company should at least maintain inventory of its copyrightable works.
In addition, a company needs to be mindful of any new inventions that were developed by the company or its employees during the last year. Such inventions may be protectable under federal patent laws. However, unlike copyright or trademarks, an inventor must secure a patent application within a very short period of time in order to prevent the work from falling into the public domain. Companies that routinely produce new inventions should put into place a process which enables inventors to disclose a potential invention to a responsible executive well prior to the invention being disclosed to the general public.
In addition, a company should take stock of those items that it considers proprietary trade secrets. Trade secrets are items not generally known by the public but have economical value and are the subject of reasonable precautions to maintain their secrecy. In general, trade secrets have no duration of protectability and there is not a method for registering a trade secret in the United States. Items that may be protected by state trade secret laws include software source code and related documentation; customer lists, employee knowledge, training and experience; proprietary terminologies or definitions; specially developed customer information; sales practices; negative information such as negative results from research and development projects; and customer and consumer surveys. Each of the above could constitute proprietary trade secrets depending upon whether its owner took reasonable steps to maintain its trade secret status. (See Resolution No. 2 – Taking Steps to Protect Intellectual Property.)
In addition to employee created and company created intellectual property, a company should take stock of its inventory of intellectual property acquired by way of contractual agreements. For example, a company should review agreements with its employees and make sure that these agreements have proper assignment language and confidentiality provisions. In addition, the company should review items that were developed or created through the use of independent contractors, such as photographers, web developers, software developers, advertising agencies, graphic artists, production companies, and the like. If the company intended to own all of the rights, including any intellectual property rights, in the works created by these independent contractors then the agreements with these independent contractors should have proper intellectual property vesting language – such as work made for hire language or an assignment provision. If the company’s agreements were only verbal or did not contain such language, then the company needs to make another resolution: make sure you own the intellectual property you paid for.
Resolution No. 2 – Take Reasonable Steps to Protect Your Intellectual Property
After you have created a working intellectual property inventory list, the next step is to identify those items that are already the subject of active protection efforts (i.e. pending or issued registrations) and those that are not. Then, the company executives, along with corporate counsel and if appropriate outside intellectual property counsel, should review the list of unprotected intellectual property and determine whether taking steps to secure their protection make economic sense. Sometimes, a company might find that the cost to secure protection of an intellectual property asset outweighs the potential economic value of that asset or that protection would be mostly duplicative of another item which is already protected. However, companies should take advantage of the intellectual property protection that costs less to secure. For example, securing copyright registration and trademark registration can be substantially less than securing patent protection. Most often, copyright protection is the least expensive intellectual property protection to obtain and the benefits of securing such protection prior to an act of infringement far outweigh the cost of securing the cost of filing the copyright registration application.
Resolution No. 3 – Prevent Unintended Liabilities
A fair number of clients who become involved in disputes involving intellectual property rights find themselves on the receiving end of a cease and desist letter. Although most don’t intend to infringe, often the infringement occurs either through poor oversight or lack of prior due diligence or investigation. For example, most often in trademark disputes the potential defendant adopts and begins using a mark without having a trademark attorney perform a trademark search. Most of the time clients believe that if a Google web search did not uncover any conflicting references, they are home free. This is not the case. Google does not pick up entries in the federal or state trademark databases. A trademark search performed by an experienced trademark attorney is the only way to go when it comes to clearing a mark for use.
Other unintended liabilities result from the company’s interaction with independent contractors that have been hired to create something for the company. Whether it is a web designer hired to redesign a company’s website, a graphic artist hired to create a new logo or artwork, or a copyrighter hired to write content for company’s documents, a company needs to remember that in the past these types of vendors have been known to take shortcuts and “borrow” from existing sources. Unless a company executive is closely managing these professionals when they do their work, it would difficult to determine whether or not they engaged in acts that may be considered infringement until such time as the comapny receives a cease and desist letter. However, there are precautionary steps a company can take to prevent unintended liabilities. A company should always have written agreements with vendors such as these which unconditionally requires them to indemnify the company for any claims of infringement resulting from the works they were hired to create. Additionally, a company should require these vendors to carry insurance that would provide coverage for such a claim (either E&O or professional liability insurance) and that the company be named an additional insured on the policy. Lastly and most important, the company should have a general understanding of who they are doing business with. A little time spent researching whether the vendor has negative claims with the Better Business Bureau, has licensing issues, generally has satisfied customers, whether there are any lawsuits pending, etc., can tell a company quite a bit about the work habits and ethics of any potential vendor.
Lastly, a company should take a careful look at its data collection practices and make certain that its policies comply with a existing data management laws. There have been some changes in existing laws and the passage of new laws concerning the management of consumer data and companies should make sure that its policies are in line with today’s requirements. If not, a company could potential face both civil and criminal liabilities depending on the circumstances.
Like all resolutions, a company’s IP resolutions can be difficult to keep. It is always the easiest thing to settle back into the routine that we have always known. However, there is a substantial benefit to keeping these intellectual property resolutions, and the benefit can drive directly into a company’s bottom line.