azci commercial reality start up session protecting and managing your intellectual property

A Legacy of Integrity and Trust

AZ Center for InnovationCommercial Reality Commercial Reality StartUpStartUp SessionSession

Protecting and Managing your Protecting and Managing your Intellectual PropertyIntellectual Property

Sean [email protected]

602 239-7434

Flavia [email protected]

602 262-0244

www.lewisandroca.com

Types of Intellectual PropertyTypes of Intellectual Property

• Patents• Trade secrets• Trademarks• Copyrights • Rights of publicity


IP Portfolio Development and ManagementIP Portfolio Development and Management

• 50% - 85% of corporate value derived from IP and intangible assets

• Budget Management– Planning and allocation to various IP assets– Patents, trademarks, trade secrets, copyrights

• Strategic Planning– Competitive Planning– Exit Strategies


Intellectual Property PolicyIntellectual Property Policy

• Policy should address not only the intellectual property owned by the company but also the prohibition of the unauthorized use of third party intellectual property

• Patents, copyrights, trademarks, trade secrets• Reasonably concrete description of the types of

information the company regards as its trade secrets


Intellectual Property PolicyIntellectual Property Policy

Supplement the general policy with specific policies regarding the use of equipment and technology:

– Employee use of computers, e-mail, social media and the Internet

– Employer’s right to monitor employee’s use– Employee use of copy/scan/fax machines – Document retention policy (hard copy and electronic)– Policy and procedures to identify risks of disclosure and to

report violations


IP ValuationIP Valuation

• Three valuation approaches:– Cost – What would it cost to develop/purchase a similar

replacement asset at current prices?Problem in applying to IP – does not account for the economic benefits to be enjoyed from the asset or the period of time over which those benefits may last

– Income – What is the present value of the future stream of income that can be derived from the asset?

Problem in applying to IP – May be difficult to reasonably estimate proper income, economic life of the asset or proper discount rate

– Market – What is the value of comparable assets that have been purchased/licensed by third parties?

Problem in applying to IP – Comparable assets may not exist


IP Valuation IP Valuation –– Royalty RatesRoyalty Rates

• Determining proper royalty rates for IP assets involves a number of factors:– Barriers to market entry– Capital investment requirements– Market size and potential degree of market penetration– Commercialization costs– Likely profit margins– Comparables and available alternatives– Exclusivity v. non-exclusivity


PATENTSPATENTS


Patents and Patent Portfolio Patents and Patent Portfolio

• Invention Disclosures and Assignments– Requirement in employment or other contract– Invention disclosure forms for documentation

• Periodic Patent/technology review meetings– As grow larger, may need to form a committee– Documentation– Forum to discuss patent protection and competitive landscape– Involve your patent counsel


PatentsPatents

• Provisional patent applications– Placeholder for priority until utility application is filed– Must file utility patent application within 1 year– Not always a good strategy and often not appropriate– Starts the clock for international filings

• Public use, disclosure or sale of inventions– Only in U.S. – can file patent application within 1 year– Precludes patent protection in foreign countries– Use of non-disclosure agreements with vendors, customers,

investors


PatentsPatents

• Patent/Prior Art Searching– Novelty searches– Freedom to operate searches– Validity– Infringement

• Searching not required• Searching can help build a stronger patent application


TRADE SECRETSTRADE SECRETS


Proprietary, Confidential and Trade Proprietary, Confidential and Trade Secret InformationSecret Information

• What do we mean by these terms?• Proprietary - means really just means ownership• Confidential - not for public disclosure• Trade Secret - Confidential and derives economic value

from not being generally known to or readily ascertainable by others who can obtain economic value from its disclosure or use


Identifying Protectable InformationIdentifying Protectable Information

• What information do you have that others do not such that it gives you a competitive advantage?

• What types of research and development do you perform?– Product– Sales and marketing– Technical– Competitors– Customers and potential customers


Identifying Protectable InformationIdentifying Protectable Information

• Other areas of potential trade secret information:Processes Profit MarginsFormulae Vendor informationFinancial Information Customer listsTechnical Information DiagramsQuality Control data Sales ForecastsPrototypes Marketing studiesProprietary software Business plansCost and pricing data Employee information


Levels of ConfidentialityLevels of Confidentiality

Determine the level of secrecy and relative value of the information– Investment of time and money to develop– What particular advantage is conferred?– What aspects, if any, are known to the public or to

competitors?– Who within the company knows this information?– What is the consequence of disclosure?


Security MeasuresSecurity Measures

• Types of security measures– Educational - Physical– Contractual - Policies – Electronic - Biometrics

• Assign measures appropriate to the level of secrecy of the information


Trade Secret AgreementsTrade Secret Agreements

Three types of contractual provisions:(1) Covenants not to compete

– Post termination– Pre termination

(2) Anti-solicitation agreements– Employees– Customers

(3) Non-disclosure agreements– Limitations on use of information– Obligations of return/destruction


Covenants Not to CompeteCovenants Not to Compete

• One size does not fit all• Who would truly hurt the company if he/she quit and

went to work for your competitor?– High level employees– Employees with R&D responsibilities– Sales agents– Customer service representatives


Covenants Not to Compete Covenants Not to Compete

For each type of employee ask:– What are the employee’s specific responsibilities?– What interests am I trying to protect?– In what ways might this employee damage those

interests?– How long will it take to find, train and bring a

replacement up to speed?– What is the competitive landscape for the particular

interests I want to protect?


Covenants Not to CompeteCovenants Not to Compete

• Restrictions must be narrowly tailored to the interests to be protected

• Document the reasons why particular limitations are selected and discuss them with the potential employee

• Overly broad restrictions are invalid• Arizona courts will not rewrite overbroad

provisions


AntiAnti--Solicitation AgreementsSolicitation Agreements

Customers– Restriction should be limited to those customers

with whom the employee had contacts and/or supervisory duties

– Limited in duration until employee’s replacement can shore up the customer relationship

– Limited in scope to contacts designed to interfere with and/or terminate the company’s relationship with that customer


AntiAnti--Solicitation AgreementsSolicitation Agreements

Employees– Restriction need not be limited to employees with whom

former employee had a relationship but should focus on key employees whose exit from the company would damage the company

– Consider a restriction that goes beyond mere solicitation for competitive purposes where intensive training required for new employees

– Consider liquidated damages for a successful effort to hire away an employee through direct or indirect means


NonNon--Disclosure AgreementsDisclosure Agreements

• Provide a reasonably concrete definition of the information subject to confidentiality

• Explain the reasons why confidentiality is imperative and the potential harm that could befall the company if the information is disclosed

• Define the limitations of use• Define the obligations to return or destroy the

information upon the termination of the relationship or the project


Employee EducationEmployee Education

• Pre-hiring• Orientation• Periodic meetings• Written memos and electronic reminders• Prominent posted notices• Performance reviews


The Exit InterviewThe Exit Interview

• Every employee should receive an exit interview upon the termination of employment

• Review terms of executed agreements• Discuss types of confidential information and

duty to keep information confidential• Return all physical items containing confidential

information – USB devices; memory cards • Employee should execute an acknowledgment• Forensic exam of untrustworthy employee’s

computer


TRADEMARKSTRADEMARKS


Process of Selecting a TrademarkProcess of Selecting a Trademark

• Brainstorming• Registrability• Availability • Registration


Selecting a MarkSelecting a Mark

• Distinctiveness Spectrum

The more distinctive the mark, the greater its level of legal protectability.


Trademark SearchesTrademark Searches

• International screening search• Country-specific search

– Trademark registers (federal and state)– Common-law uses – Internet, domain names– Corporate names


How Are Trademark Rights Obtained?How Are Trademark Rights Obtained?

Rights are obtained either:

- By use; or - By registration


CommonCommon--Law Rights vs. RegistrationLaw Rights vs. Registration

Common Law• Bound by the geographic area in which the product or

service is marketed.• Protection generally begins only after the product or service

is actually available for sale on the market.• Rights can be lost after deciding on a mark and before

bringing a product to market if someone begins commercial sales first.


Common Law Rights vs. RegistrationCommon Law Rights vs. Registration

U.S. Federal Registration

• Valid in the whole country • Priority based on date of application• “Intent to Use” application allows applying for a mark

before using it• Gives trademark owners the ability to expand at their

own pace • How long and how costly is the process• Notice of registration: ® ™ SM

• Renewals, Continued Use, Policing


Protecting Your Mark AbroadProtecting Your Mark Abroad

• Rights are acquired on a country-by-country basis, so you should obtain a trademark registration in all countries where you do business.

• Most countries are First-to-File Countries, which grant rights to those who file trademark applications first, as opposed to those who use the mark first. Beware of trademark pirates.

• International Registrations – One U.S. based application/registration can be extended to any country member of the Madrid Protocol (83members), upon payment of additional fees

• Community Trademark Registrations – One registration covers all 27 members of the European Union



• Advantages of Filing Trademark Applications via Madrid Protocol vs. Filing on a Country-by-Country basis– Cost savings– Simplified renewals, assignments, recordals of change of

address– One simplified filing process as opposed to multiple countries

filing processes– No need to engage counsel in several countries to file the

application



• Disadvantages of Filing Trademark Applications via Madrid Protocol vs. Filing on a Country-by-Country basis– An International Registration must mirror the base U.S.

application/registration– All foreign extensions from an International Registration

remain dependent on the base U.S. application/registration for 5 years, thus, if the base U.S. application/registration fails, all foreign extensions fail


Proper Use Proper Use —— Avoiding GenericideAvoiding Genericide

• Use the ™ and ® symbols where appropriate• Always distinguish from surrounding text by

using:Quotation marks – “Mercedes Benz”Larger-sized print – Mercedes BenzAll capital letters – MERCEDES BENZ Initial capitals – Mercedes BenzDistinctive print – Mercedes Benz

Color – Mercedes Benz


Proper Use Proper Use –– Avoiding Avoiding GenericideGenericide

• Always use the mark followed by a noun:e.g., KLEENEX tissue, Q-TIP cotton swabs

• Never pluralWrong: Two DELLS Correct: Two DELL computers

• Never possessiveWrong: POST-IT’s qualityCorrect: POST-IT note pads’ quality


Proper Use Proper Use —— Avoiding Avoiding GenericideGenericide

• Never a verbWrong: Xerox a documentCorrect: Photocopy a

document on a XEROX copier

• Proper spellingWrong: COCACOLACorrect: Coca-Cola


Domain Names and TrademarksDomain Names and Trademarks

• Registering a domain name does not create a trademark or trademark rights– But a domain name can be a trademark if advertised and

used that way (i.e. - Amazon.com, Buy.com)

• A domain name registration is an indication of a potential prior user that may conflict with your trademark

• If name is available, consider registering DNs in all main gTLDs

• Consider registering typos and XYZsucks


COPYRIGHTSCOPYRIGHTS


CopyrightsCopyrights

• What it protects and what it does not protect– Protects original, creative expression– Does not protect ideas, concepts, functionality, or titles– Protects against unauthorized copying but not against

another’s own independent creation (even if the resulting work is identical)

– For software: Protects the expression by the programmer in the written software code and perhaps the design, selection and arrangement of how portions of the code fit together (if not dictated by function)But does not protect the overall idea, function or output of theprogram



• Registration is not required for protection– Copyright attaches at the moment the protected

expression is fixed in a tangible medium (i.e. the source code is written)

• In the U.S., registration is a prerequisite to filing a suit for infringement– Can register after learning of an infringement and still file a

lawsuit– But it must pre-date the infringement for certain remedies

to be available (statutory damages and attorney’s fees)



• Employee v. Independent Contractor– A frequent trap for the unwary– If an employee creates a copyrighted work within the scope of her

employment, the employer is considered to be the author/owner and the creation is a “work for hire”

– If a contractor is retained to create a copyrighted work, the contractor is the author and owner of the copyright unless she assigns it in writing to the company

In the absence of a written assignment, the company will only have a limited license to use the work for the purpose for which it was createdMost likely, the company won’t be able to modify, make enhancements to or create new works from the original work of the contractor

– If you hire a contractor to create a work and need to own all rights in the work, you must spell that out in a written contract assigning the copyright in the work to you


Building Your WebsiteBuilding Your Website

• Although it is relatively simple to create and publish a website, there are legal ramifications you should be aware of:

– Website content and risk of copyright infringement- make sure you have the right to use all photographs, images, language and other copyrightable materials shown on your website.

– Privacy Policy and Terms and Conditions- Privacy laws mandate that websites disclose what type of viewers’ information is collected by the site, how it will be used, who it will be shared with, etc.

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