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AV and Intellectual Property Roundtable

Chicago, IllinoisMay 2, 2006

Dean A. Pelletier, ShareholderMcAndrews, Held & Malloydpelletier@mhmlaw.com(312) 775-8128 (direct)

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“Imagination is more important than knowledge.”— Albert Einstein

Intellectual property (IP) is the product of your imagination, as well as your knowledge and hard work.

If properly (1) protected, (2) maintained and (3) managed IP can provide you with a competitive advantage as well as greater self-satisfaction and an enhanced reputation.

Why We’re Here

Motivate and Educate

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Topics

Certain Aspects Of An Audio-Visual (AV) System

Examples Of Types Of IP Protection Available In The United States

Exemplary IP Issues Facing Members Of The AV Industry (Including The Use Of Contracts Establishing IP Ownership)

What If There Is No Contract Establishing IP Ownership? … Other IP Ownership Rules

Other Examples Of IP-related Contracts

Fair Use Of IP

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Certain Aspects Of An AV System

1. Software/code

a) control systems pre-packaged software and

b) control systems custom software (written by a member of the AV integration team, the AV consultant, the control manufacturer or a third-party programmer)

2. Images and designs (e.g., graphical user interfaces)

3. AV system design drawings and specifications (e.g., one-line signal flow drawings with a set of specifications)

(Audiovisual Best Practices, pp. 120, 137, 162.)

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Examples Of Types Of IP Protection Available In The United States

1. Patent Utility

Design

2. Copyright

3. Trademark/trade dress

4. Trade secret

Such IP protection exists for, e.g., products, processes, writings, designs, words, terms, symbols and information.

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U.S. Utility Patent

Protects any new, non-obvious and useful product or process (e.g., software). 35 U.S.C. §§101, 102, 103.

Term (generally): 20 years from the application’s filing date (or priority date). 35 U.S.C. §154.

Co-inventors Need not physically work together or at the same time

Need not make the same type or amount of contribution

Need not make a contribution to the subject matter of every patent claim

35 U.S.C. §116.

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Example of Software-related U.S. Utility Patent – “Video Teleconferencing Assembly And Process”

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Example of Software-related U.S. Utility Patent – “Web-Based Apparatus And Method For Enhancing And Monitoring Picture Archiving And Communication Systems”

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U.S. Design Patent

Protects any new, non-obvious, original and ornamental design for a product. 35 U.S.C. §171.

“A design patent protects the non-functional aspects of an ornamental design [as seen as a whole and] as shown in the patent.” KeyStone Retaining Wall Sys., Inc. v. Westrock, Inc., 997 F.2d

1444, 1450 (Fed. Cir. 1993).

Term: 14 years from the date of issue. 35 U.S.C. §173.

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Graphical User Interfaces and Design Patents “Good user interfaces are crucial to the success of control systems and

even entire projects in many cases[.]” (Audiovisual Best Practices, p. 120)

Certain aspects of a graphical user interface may be functional: User interfaces should “function as intuitively as possible” (Audiovisual Best

Practices, p. 163)

The ICIA “Dashboard For Controls” effort seeks “standardization on some basics of user interface design and identification of fundamental AV system functions” (ICIA Dashboard For Controls Design Guide, p. 2)

However, a given graphical user interface may still be or include a patentable design(s).

What if persons collaborate on the design of a graphical user interface? (Audiovisual Best Practices, p. 145)

They may be co-inventors. As to a design patent, each co-inventor must contribute to the claim (i.e., figures).

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Example of U.S. Design Patent – “Graphic User Interface For A Medical Monitor”

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Example of U.S. Design Patent – “User Interface Icon For A Portion Of A Display Screen”

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Example of U.S. Design Patent – “Video Teleconferencing Center”

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Example of U.S. Design Patent – “Video Teleconferencing Center With Full Screen”

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Example of U.S. Design Patent –“Video Conferencing Terminal”

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Copyright Copyright protection exists for “original [i.e., independently created] works of

authorship fixed in any tangible medium of expression[.]” 17 U.S.C. §102(a); Apple

Computer, Inc. v. Microsoft Corp., 35 F.3d 1435, 1445 (9th Cir. 1994).

“Copyright protects only expression of ideas[.]” Amini Innovation Corp. v. Anthony California, Inc., 439 F.3d 1365, 1369 (Fed. Cir. 2006).

Copyright protection does not exist for “any idea, procedure, process, system, method of operation, concept, principle, or discovery[.]” 17 U.S.C. §102(b).

Merger doctrine: where there is only one way to express an idea, its expression cannot be covered by copyright. ATC Distrib. Group, Inc. v. Whatever It Takes Transmission & Parts, Inc., 402 F.3d 700, 707-08 (6th Cir. 2005).

Term:

Generally, “life of the author and 70 years after the author’s death.”

“Work made for hire:” “95 years from the year of [the work’s] first publication, or a term of 120 years from the year of its creation, whichever expires first.”

17 U.S.C. §302 (a),(c).

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Examples Of Works Subject To Copyright Protection

Literary works, such as software (i.e., program code)

Graphic works, such as “[t]echnical drawings, including architectural plans”

Audio-visual works, such as software-generated displays, i.e., graphical user interfaces/ “look and feel” (including the layout, menus, commands and functions)

17 U.S.C. §§101, 102(a); Apple, 35 F.3d at 1439; Qad, Inc. v. ALN Assoc., Inc., 974 F.2d 834, 838-39 (7th Cir. 1992).

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Trademark/Trade Dress A trademark is, e.g., a word, term, symbol, design, shape, color or combination thereof that

functions as a source identifier, i.e., a symbol of origin. McCarthy on Trademarks, §16:40, p. 16-64.3–64.4; §16:41, pp. 16-66-67.

Trade dress can be or include: (1) product packaging or containers, (2) the design of the product and (3) some or all of the total image or overall appearance of a product or service when used to identify the source of the product or service. McCarthy on Trademarks, §8:1, pp. 8-2-3; §8:4, p. 8-15; Publications Int’l, Ltd. v. Landoll, Inc., 164 F.3d 337, 338 (7th Cir. 1998).

A product’s trade dress includes tangible things, such as size, shape, color, texture, design and graphics. AM Gen. Corp. v. DaimlerChrysler Corp., 311 F.3d 796, 814 (7th Cir. 2002); McCarthy on Trademarks, §8:4, pp. 8-15-16.

Trade dress cannot be functional. 15 U.S.C. §1052(e).

If the trade dress is a product design, the product design must have (i.e., acquire) secondary meaning (i.e., the design’s primary significance must be to identify the source of the product, not the product itself). The same secondary meaning requirement exists where the alleged trademark is a single color. McCarthy on Trademarks, §8:12.1, p. 8-52.

Rights in a trademark or trade dress are acquired through use. However, a federal (U.S.) registration provides the most complete bundle of domestic rights.

Term: can be perpetual (a trademark/trade dress registration may be renewed every 10 years). 15 U.S.C. §1059.

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Trade Secret A trade secret is “information, including but not limited to, technical or

non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers, that:

(1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and

(2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.”

765 ILCS 1065/2.

Term: Can be perpetual (if properly maintained).

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Exemplary IP Issues Facing Members Of The AV Industry

1. Who owns the IP?

2. What can you do to protect your IP?

3. Why protect your IP?

4. How can you utilize your IP?

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Who Owns The IP?

Generally, the creator or inventor, but the contract controls.

“Common sense tells us that agreements should routinely be put in writing.”

Effects Associates, Inc. v. Cohen, 908 F.2d 555, 557 (9th Cir. 1990).

As to contracts, you can save time and money if you:

Think ahead (as to potential issues)

Define your relationship (e.g., as to IP ownership and licensing)

Are, generally speaking, consistent (e.g., in terms of contract language and in terms of the persons with whom you enter into contracts)

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How And Why To Use A Contract To Establish IP Ownership

Contracts: Are a product of the cooperation between/among the

parties; cooperation is typically easier to generate at the outset of a project.

Generally, should be directly between/among the affected parties (e.g., programmer and owner) (See Audiovisual Best Practices, pp. 73-75, 188)

Should address IP rights and issues, including ownership,

licenses, etc.

More specifically:

A programmer could, by contract, establish his or her ownership in all of the code, and license all of the code to the owner/end-users under specific conditions (e.g., an archival copy of the source code could be maintained by the owner and used only when the system is updated or reconfigured; additional licenses for use within the facility could be obtained for a specified amount). By maintaining ownership of the code, the programmer should be able to freely utilize his or her code on future projects.

(See Audiovisual Best Practices, pp. 73-75.)

(programmingcontract)

Example of the parties involved in an AV project:

(Audiovisual Best Practices, p. 47.)

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What can you do to protect your IP?

Identify it (e.g., through laboratory/research notebooks or invention/discovery/creation disclosure forms).

Establish and fortify ownership of it (e.g., through registrations (i.e., for patents, copyrights, trademarks, trade dress) and contracts).

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Why protect your IP (through registrations and contracts)?

For example:

Benchmarking can provide significant benefits. (See Audiovisual Best Practices, pp. 86-87,102)

However, imitation (that may result from overreaching benchmarking) may not be the highest form of flattery; it may be an infringement upon your IP rights or, worse yet, your unprotected IP rights.

1. Commercially sound practice that can:

a) Help you to prevent others from:

i. taking and using what is yours (without your permission) and

ii. attempting to stop, or stopping, you from using what is yours

b) Lead to financial rewards (e.g., through increased sales and/or licensing)

c) Stimulate technological advancements (e.g., improvements or design-arounds by you and others)

As to patents:

d) Intangibles (e.g., pride of inventorship/authorship; greater self-satisfaction; enhanced reputation)

[T]he competitor can use, exploit, commercialize (outside the patent term) or improve upon and design around (within the patent term) as much of the invention as it cares to make.

Enzo Biochem, Inc. v. Gen-Probe Inc., 323 F.3d 956, 981 (Fed. Cir. 2002) (emphasis added).

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How can you utilize your IP?

Practice it

License it (or sell it)

Enforce it (e.g., exclude others from using it (through litigation))

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What If There Is No Contract Establishing IP Ownership?… Other IP Ownership Rules

1. Patents

2. Copyrights

3. Trademarks/Trade Dress

4. Trade Secrets

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What If There Is No Contract Establishing IP Ownership?… Other IP Ownership Rules

A shop right is not necessarily limited to a formal employer-employee relationship -- i.e., may exist where the developer is an independent consultant or contractor. McElmurry, 995 F.2d at 1583, n.15.

Patents

“The general rule is that an individual owns the patent rights to the subject matter of which he [or she] is an inventor, even though he [or she] conceived it or reduced it to practice in the course of his [or her] employment.” Banks v. Unisys Corp., 228 F.3d 1357, 1359 (Fed. Cir. 2000).

“[T]wo exceptions to this rule: first, an employer owns an employee’s invention if the employee is a party to an express contract to that effect; second, where an employee is hired to invent something or solve a particular problem, the property of the invention related to this effort may belong to the employer [through, for example, an implied-in-fact contract, which is based on the parties’ conduct].” Banks, 228 F.3d at 1359; see also Teets v. Chromalloy Gas Turbine Corp., 83 F.3d 403, 407 (Fed. Cir. 1996).

[W]hen the [totality of the] circumstances demand it, under principles of equity and fairness, [an irrevocable, typically non-exclusive and typically non-transferable shop right] entitl[es] an employer to use [in and have manufactured for its business] without charge an invention patented by one or more of its employees without liability for infringement.

McElmurry v. Arkansas Power & Light Co., 995 F.2d 1576, 1580, 1581-82, 1583-84 (Fed. Cir. 1993); Chisum on Patents, §22-03, pp. 22-11, 22-47.

There is also the shop right doctrine (a defense to patent infringement):

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What If There Is No Contract Establishing IP Ownership?… Other IP Ownership Rules

Copyrights

Copyright “rests initially in the author or authors of the work. The authors of a joint work are co[-]owners of copyright in the work.” 17 U.S.C. §201(a).

“In the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author…, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.” 17 U.S.C. §201(b).

“A ‘work made for hire’ is –

(1) a work prepared by an employee within the scope of his or her employment; or

(2) a work specially ordered or commissioned for use… as a part of a[n] audiovisual work,… if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.”

17 U.S.C. §101.

“Absent an express transfer of ownership, a contributor who is not an employee retains ownership of his copyright.” Effects Associates, 908 F.2d at 558.

“[T]he ‘shop right’ doctrine of patent law is not applicable to copyright.” Nimmer, §5.03[C], p. 5-56.9.

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What If There Is No Contract Establishing IP Ownership?… Other IP Ownership Rules

A trademark or trade dress is owned by the company or person “who is in fact using the mark [or trade dress] as a symbol of origin.” McCarthy on Trademarks, §16:35, p. 16-61; §8.1, p. 8-4.

“If an employee designs a mark in the course of employment and the employer uses it, it would seem clear that the employer is the ‘owner’ of the mark.” Id., §16:36, p. 16-62.

Rights in a trademark “cannot be obtained through discovery or invention alone.” Arvelo v. American Int’l Ins. Co., 875 F. Supp. 95, 101 (D. P. R. 1995).

As between manufacturer and distributor, there is a rebuttable presumption (absent an agreement) that the manufacturer owns the trademark used on or in connection with the goods. McCarthy on Trademarks, §16:48, pp. 16-82-88.

Trademarks and Trade Dress

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What If There Is No Contract Establishing IP Ownership?… Other IP Ownership Rules

Generally, the principles used to determine ownership of a patent will be applied to determine ownership of a trade secret.

A shop right may exist for a trade secret.

Trade Secrets

Milgrim on Trade Secrets, §5:02[4], pp. 5-64.11, 5-80-82.

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Other Examples Of IP-related Contracts

1. Covenant Not To Compete

2. Non-Disclosure Clause or Agreement (Confidentiality Clause or Agreement)

3. Joint Development Agreement

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Covenant Not To Compete Generally disfavored (under Illinois law), i.e., will be strictly construed.

Requirements

1. Part of an otherwise valid contract (typically, between an employer and an employee)

2. Supported by “adequate consideration” (e.g., initial, continued or extended employment)

3. Reasonable and necessary to protect an employer’s legitimate business interest (e.g., (1) near permanent customer relationships and but for the employee’s association with the employer, the employee would not have had contact with the customers or (2) employee acquired trade secrets or other confidential information through his/her employment and then tried to use them or it for his/her own benefit).

“[A] near-permanent relationship with clients is inherent in the provision of professional services” and “generally absent from businesses engaged in sales [of fungible goods].”

4. Reasonable in duration and scope. For example:

Cannot be permanent (except to protect trade secrets); generally, 2 years is reasonable greater than 2 years might be unreasonable

Applicable to only certain customers -- e.g., only those customers with whom the employee was involved

Effective in only a certain geographical area (e.g., cannot be worldwide (except to protect trade secrets); no competition within 25 miles of employee’s home office or within employee’s defined territory may be reasonable)

Quixote Transportation Safety, Inc. v. Cooper, 2004 U.S. Dist. LEXIS 3879, *8-*13 (N.D. Ill. March 12, 2004); Siemens Building Technologies, Inc. v. Camacho, 168 F. Supp. 2d 425, 426-427 (N. D. Ill. 2001). See also Outsource International, Inc. v. Barton, 192 F.3d 662, 666-669 (7th Cir. 1999).

The Agency, Inc. v. Grove, 839 N.E.2d 606, 615 (Ill. App. 2005).

What can a departing employee take to his or her new job? “[G]eneral skills and knowledge acquired during the course of his employment[.]”

“[M]ay not take confidential particularized information disclosed to him during the time the employer-employee relationship existed which are unknown to others in the industry and which give the employer advantage over his competitors.”

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Non-Disclosure Clause or Agreement (Confidentiality Clause or Agreement)

“It is appropriate for the owner to require all project personnel to sign non-disclosure agreements that ensure the protection of intellectual property.” (Audiovisual Best Practices, p.

143.)

In fact: A non-disclosure clause or agreement may be used with an

employee or consultant or in connection with soliciting bids or pursuing collaborators

All IP owners should consider using a non-disclosure clause or agreement in their commercial pursuits

Generally, the same analysis (e.g., requirements) as a covenant not to compete

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Joint Development Agreement

Used where two or more entities (affiliated or not) will collaborate and combine resources to develop a new product, process, etc. (A formal joint venture may or may not be involved.)

Should account for all IP issues (e.g., ownership, licenses, etc.)

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Fair Use Of IP

1. Patents

2. Copyrights

3. Trademarks/Trade Dress

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Fair Use Of Patents, i.e., Experimental Use1. Experimental use by the inventor(s)

A person shall not be entitled to a patent if, e.g., “the invention was … in public use or on sale in [the United States], more than one year prior to the date of the application for patent in the United States.” 35 U.S.C. § 102(b).

However, “[i]f the [consummated] sale [or public use] was primarily for experimentation [e.g., to refine the invention or assess its value relative to the time and expense of prosecuting a patent application] rather than commercial gain, then the sale is not invalidating under § 102(b).” Electromotive Div. of General Motors Corp. v. Transportation Systems Div. of General Electric Co., 417 F.3d 1203, 1210, 1213 (Fed. Cir. 2005).

To establish experimentation:

1. Customer “must be made aware of the experimentation [i.e., tests];”

2. Inventor must control the testing;

3. Detailed records of the testing should be kept;

4. Inventor should inquire about and monitor the testing and/or receive sufficiently detailed reports about the test results; and

5. Financial terms for experimental goods (e.g., the prices for experimental goods) should generally be better than the corresponding financial terms for non-experimental commercial goods.

Id. at 1212-1215, 1217.

Experimental use defense (or exception) asserted by a third party“[V]ery narrow and limited to actions performed [solely] for amusement, to satisfy idle curiosity, or for strictly

philosophical inquiry” and “use does not qualify for the experimental use defense when it is undertaken in the ‘guise of scientific inquiry’ but has ‘definite, cognizable, and not insubstantial commercial purposes.’” Madey v. Duke Univ., 307 F.3d 1351, 1362 (Fed. Cir. 2002).

Use having the “slightest commercial implication” or use, regardless of commercial implications, that “keep[s] with the legitimate business of the alleged infringer does not qualify for the experimental use defense.” Id.

2. Experimental use defense (or exception) asserted by a third party “[V]ery narrow and limited to actions performed [solely] for amusement, to satisfy idle curiosity, or for strictly

philosophical inquiry” and “use does not qualify for the experimental use defense when it is undertaken in the ‘guise of scientific inquiry’ but has ‘definite, cognizable, and not insubstantial commercial purposes.’” Madey v. Duke Univ., 307 F.3d 1351, 1362 (Fed. Cir. 2002).

Use having the “slightest commercial implication” or use, regardless of commercial implications, that “keep[s] with the legitimate business of the alleged infringer does not qualify for the experimental use defense.” Id.

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Fair Use Of Copyrights

For example: making a copy of software as part of an effort to make compatible products may be a fair use. Sega Enterprises, Ltd. v. Accolade, Inc., 977 F.2d 1510, 1518 (9th Cir. 1992).

“[T]he fair use of a copyrighted work…, for purposes such as criticism, comment, news reporting, teaching… scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include -

1. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

2. The nature of the copyrighted work [e.g., factual or fictional; published or unpublished];

3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole [including the value of the portion used]; and

4. The effect of the use upon the potential market for or value of the copyrighted work [including the effect of unrestricted, widespread use].”

17 U.S.C. §107; Campbell v. Acuff-Rose Music, Inc. 510 U.S. 569, 586 (1994); Harper & Row v. The Nation, 471 U.S. 539, 564-65 (1985); Sony Corp. v. Universal City Studios, 464 U.S. 417, 451 (1984).

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Fair Use Of Trademarks/Trade Dress

2. “Nominative fair use”

“[U]se of another’s trademark to identify, not [his or her] goods or services, but the [trademark owner’s] goods or services.”

For example: comparative advertising.

Generally, “nominative fair use” also requires that:

a. The product or service in question not be readily identifiable without the use of the trademark;

b. Only so much of the trademark be used as is reasonably necessary to identify the product or service; and

c. The user must not do anything that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark owner -- i.e., must not be any likelihood of confusion.

See 15 U.S.C. §1115(b)(4); McCarthy on Trademarks, §11:45, pp. 11-88, 11-102-103, 11-112, 11-113-114, 11-116-119; §23:11, pp. 23-54-55, 23-56-57.

Two types of fair use of another’s trademark:

1. “Classic fair use”

A person’s use of a descriptive, geographically descriptive or personal name designation not in a trademark sense (i.e., not as a source identifier) but, rather, in a fair and good faith manner “only to describe [some characteristic or broader overview of his or her] goods or services, or their geographic origin, or to name the person involved in running the business.”

May be “classic fair use” even with “some degree of confusion”

For example: advertising the qualifications and experience of key employees by truthfully referring to the employees’ former employers; promoting oneself by truthfully referring to an award that you have received

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Thank you. . . any questions?

Dean A. Pelletier, ShareholderMcAndrews, Held & Malloydpelletier@mhmlaw.com(312) 775-8128 (direct)