Intellectual Property:Patents, Copyrights, Trademarks

and Trade Secrets

Robert S. MacWright, Ph.D., Esq.

Executive Director and CEO

University of Virginia Patent Foundation

What do we mean by “Intellectual Property”?

• Of the intellect; created in the mind

• Intangible; value is derived from concepts, not a physical existence

• Subject to protection under the law

IP Rights Are Provided For in the U.S. Constitution

Article I, Section 8: “The Congress shall have power to …promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries”

The Key Forms of IP Protection• Patents cover compounds, machines and processes

– Give the right to exclude others from making, using, offering for sale, selling, importing

• Copyrights cover works of authorship reduced to a tangible means of expression– Give exclusive rights to copy, distribute, perform,

display, make derivative works• Trademarks indicate source of goods and services

– prevent others from “passing off”• Trade Secrets are legally protected secrets

– misappropriation is unlawful, but reverse engineering is fair game

Patents• Contract theory: the Government gives an inventor

a period of exclusive use in exchange for full disclosure of the invention to the public

• Gives the right to exclude all others from making, using, offering for sale, selling, or importing– Does NOT give a right to make or sell a product, e.g., a

patent on making illegal drugs doesn’t make them legal

• Patent awarded only if invention is found useful, novel, and non-obvious

• Expire 20 years after the patent was applied for• Cover U.S only; foreign patents may be needed

Types of Patents• Utility Patent: issued to protect “any new and

useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” (USC 35 §101)

• Plant Patent: Asexually reproduced varieties of plants that are novel, distinct and nonobvious, e.g., hybrid corn

• Design Patent: issued to original, novel, nonobvious ornamental designs for articles of manufacture (term is only 14 years from date of issue).

What is Patentable?“Anything under the sun made by the hands of man”• New chemical compounds, e.g., drugs, pesticides• Methods of producing new compounds• New uses for old compounds• Purified natural materials, e.g., DNA, enzymes• New formulations or mixtures, e.g., alloys, shampoo• Transgenic animals or plants (excluding humans)• Methods of performing a function by computer

software • Methods of doing business• Methods of processing digital signals• Tire tread pattern, clothing (design patents)

How to Get a Patent• You may file a provisional patent

application, which gives you a “priority date” you can rely on for up to 1 year

• Two strategies:– If you only want a U.S. patent, file a regular

patent application in the US Patent and Trademark Office (PTO)

– If you want US and foreign patents, file a Patent Cooperation Treaty (PCT) application

Deadlines, Deadlines, Deadlines!

• To benefit from the provisional application, you must file within 1 year of its filing date

• You must “convert” the PCT application into individual U.S. and foreign applications within 30 months of the earliest filing date

• You must respond to PTO correspondence within 3 months (but you can “buy” up to three one-month extensions!)

Parts of a Patent “Specification”• The “Written Description” (35 USC §112)

– Must describe the invention and “the manner and process of making and using it”

– Must be “clear, concise, and exact” – Often includes examples and figures

• The “Claims”– Numbered formal paragraphs at the end that

define the boundaries of the “patent monopoly” you seek

– The claims are the battleground of examination!– Whatever is not claimed in the final patent is

“dedicated to the public,” and anyone can use it for free

What a Patent Examiner Looks For• Utility: Demonstrated use or proposed use

one of “ordinary skill in the art” would believe (§101)

• Novelty: Not fully described in one patent or publication > 1 year before you filed (the “prior art”) (§102a)

• Non-obviousness: One of ordinary skill not motivated to combine prior art to reach the invention (§103)

• Enablement: One of ordinary skill can carry it without “undue experimentation” (§112)

• Best Mode: Gives best known way of making and using it when application was filed (§112)

A Typical Examination Process• 1-4 YEARS before they read it!• First “office action” rejects all claims • Your “amendment” “traverses” rejections • A FINAL office action rejects most claims again

– some for old reasons, some for new reasons• You file a “Request for Continued Examination,”

and amend the claims to overcome the rejections• Another FINAL office action rejects most claims• You request an interview with the examiner to

haggle out some compromise claims• You finally get a “Notice of Allowance”• By now, it may be 3-6 YEARS since you applied!

Patenting Costs are BIG!• $1,000 to $10,000 to file a provisional• $7,000 to $15,000 to prepare and file a PCT

application• $2,500 to nationalize in the US

– $3,000 each for Canada, Australia– $5,000 for Europe, $7,000 for Japan– Over $100,000 to convert in all developed countries!

• Downstream prosecution costs in the US, $5,000 to $10,000; and similar amounts in other countries!

• Issue fees of several $ thousand per country – each country in Europe collects separately!

• Escalating maintenance fees of $450-4,000 in the US; annual annuities in most foreign countries!

Patent Term• Utility and plant patents last until 20 years

after your earliest filing date• If it takes 3-6 years to get your patent, it

lasts 14 to 17 years• You automatically get extensions for

unreasonable PTO delays• You can apply for extensions for delays in

the FDA approval process

So, How Does a Company Benefit?

• Market exclusivity justifies big investments in producing the patented product– New drugs are said to cost $400 million!– New factories are sometimes needed

• Claims that go beyond the planned product provide “blocking” to prevent others from making similar products

• Customers attracted by the proprietary product may buy other goods

Patents Are Often Licensed

• A license is a contract in which the patent owner allows a company to make, use, offer for sale, sell, and/or import the patented article or use the patented method

• In exchange, the “licensee” company pays the patent owner royalties (usually a % of sales) and other payments (e.g., up-front, milestone fees)

• Even big companies today license out their un-used patents, through internal “intellectual asset management” (IAM) programs

• Royalties on huge products can be huge!

What CAN’T a Patentee Do?

• “Patent Misuse” is requiring a licensee to:– Buy staple articles of commerce from the

patentee (“Tying”)– Pay royalties after the patent expires– Agree not to sell competing products– Include in the license patents they don’t want– Charge a certain price– Restrain resale rights of buyers

• All of these give the patent owner more market power than the patent laws intend, and may also violate the antitrust laws

Types of Patent Infringement

• Direct Infringement: to make, use, offer to sell or sell a patented article in the U.S., or import it into the U.S., during the term of the patent.

• Inducement: acting to cause, encourage or enable someone else to infringe (e.g., promoting a generic drug by saying it can be used for a patented use.)

• Contributory Infringement: Selling a component of a patented machine, knowing that it is specially adapted for use in infringement

Infringement Lawsuits• The only way to protect your patent rights• “Compulsory counterclaim” of invalidity• At “Markman Hearing,” judge interprets claims

– often results in quick settlement• Legal fees for each side will be $2-4 MILLION!

(Which is why 98% of patent suits get settled)• If you win, you get:

– “reasonable royalty” damages– “lost profits” damages– An INJUNCTION (some settle to get a license)– If infringement was willful, TRIPLE damages!

Avoiding Common Problems• Search for patents before you develop products (

www.uspto.gov)• Get a patentability opinion before you file your

patent• Get a clearance opinion to identify any patents that

may be in the way of selling a particular product• If a patent is in your way,

– Get a non-infringement and/or invalidity opinion – Take a license– “Invent around”

• REMEMBER, PATENTS CAN OVERLAP!– JUST BECAUSE YOU HAVE A PATENT DOESN’T

MEAN YOU AREN’T INFRINGING ANOTHER PATENT!

What Copyrights Cover (17 USC §102)

• Cover original works of authorship, e.g., literary works, music and lyrics, dramatic works, pantomimes, pictures, sculpture, motion pictures, sound recordings, architectural works, computer software

• Must be “fixed in a tangible medium of expression,” e.g., printed book, sound recording, videotape, script, handwritten notes (like yours!)

• Does NOT cover any “idea, procedure, process, system, method of operation, concept, principle, or discovery”

Duration of Copyright

• Subsists from the moment of creation• Term:

– For works by individual author(s), • For the author’s life and 70 yrs after death

– For works for hire, anonymous or pseudonymous works, • 120 yrs from creation or 95 yrs from first

publication, whichever expires first

Rights Under Copyright Law(17 USC §106)

• Reproduce the work in copies or phonorecords• Prepare derivative works• Distribute copies or phonorecords by sale, rental,

lease or lending• Perform the work publicly (e.g., movies, songs)• Display the work publicly (e.g., sculpture, photos)

Copyright Notice Basics• Notice is optional, but is advisable• Serves as a “no trespassing sign”• One mark covers everything – no need for many• Several appropriate forms:

2005 UVA Patent FoundationCopyright 2005 UVA Patent FoundationCopr. 2005 UVA Patent Foundation

• Adding “ALL RIGHTS RESERVED” may provide greater protection, e.g., in South America

Copyright Registration

• Not required to protect copyright, which exists from the moment of creation

• Required prior to filing an infringement lawsuit• If you file registration BEFORE infringement

occurs, you can– Obtain “statutory damages” up to $200K – Obtain award of attorney’s fees

• Very cheap! Fee is only $40

How to Register• Simple – you can do it yourself!

– A two-page form– Must send in 2 copies of most works

• One for deposit, other for Library of Congress

• See Copyright Office website for forms, instructions (www.loc.gov/copyright)

• Cheap insurance - File on each new version or edition

Copyright “Fair Use”

• Exempts certain acts from copyright infringement• Applies to criticism, comment, news reporting,

teaching, scholarship, or research• Applied on a case-by-case basis, considering:

– Commercial or non-commercial purpose – Nature of the work– Substantiality of portion used– Effect on potential market for the original work

Copyright Infringement Lawsuits• Central issue: The copyright owner must prove

derivation, e.g., that their work was copied• Often clear-cut, e.g., “bootleg” music recordings,

internet MP3 file sharing• Sometimes very complicated!

– Sophia Stuart sued Warner Bros. and 20th C. Fox, saying her 41-page story “The Third Eye” was basis for the “Terminator” and “Matrix”

– The 1971 Beatles hit, “My Sweet Lord” was found to infringe the 1962 Chiffons song “He’s so Fine” due to “subconscious copying”

Music Copyrights

• Subject to compulsory licensing: others can perform your songs, subject to paying you a royalty, which is determined by a “Royalty Judge”

• If you play a radio in your restaurant, you have to pay royalties for each song!

• Royalties are policed and collected by ASCAP, the American Society of Composers, Authors and Publishers– calculated statistically, based on type of music

played

Trademarks• A trademark is a word, phrase, symbol, design,

slogan, or combination thereof• It identifies and distinguishes the source of goods

or services • Protected under State law and under Federal law

– “TM” marking is a “no trespassing sign” under State common law

– “SM” indicates a state law “service mark,” usually a slogan

indicates Federal registration has been granted

Some Well-known Tradmarks

• McDonalds, WalMart, IBM, GM, Mariott, Delta, Microsoft, Domino’s, Budweiser, Polo, Mattel

• The “Golden Arches,” an apple with a bite out of it, five interlocking rings, 2 overlapping “R”s

• “You deserve a break today,” “The Greatest Show on Earth,” "All the world loves a Coke,” “The Big Apple,” “What's up, Doc?“, “Got Milk?”

• Shape of the Heinz catsup bottle, shape of the original Coca-Cola bottle (“trade dress”)

Unusual Trademarks• Owens Corning has a trademark on the color pink

for fiberglass insulation• AOL has a trademark on the sound of “You’ve got

mail” when e-mail arrives• American Family Life Assurance Co. has a

trademark on the sound of a duck quacking "AFLAC”

• In 1991 the first trademark registration was issued on a smell! The trademark on scented sewing thread and embroidery yarn describes the smell as "a high impact, fresh, floral fragrance reminiscent of plumeria blossoms."

Federal Trademark Registration

• Granted only if:– there is no “likelihood of confusion” – mark is unique or has “secondary meaning”

• Covers limited categories of goods and services

• “Trumps” State law rights of others

• Must be renewed every 5 years

Federal Registration (Cont’d)

• Only for important marks with wide-spread or long-term value

• Not cheap: $370 or$740 fee just to file, plus attorney’s fees

• See www.uspto.gov for Forms and instructions• Decide which classes, subclasses you want• Probably best to hire a trademark lawyer

– Simple forms, complex rules– Rejections require formal written answers

Trademark Clearance

• Before adopting a mark, SEARCH• Trademark registry (at www.uspto.gov) ,

phone books, internet• Thompson & Thompson searches are the

gold standard, and not too expensive– Consider “likelihood of confusion”– Check to see if they are active or expired– Consider contacting owners of close marks

about a “concurrent use agreement”

(Hint - you may want to clear the mark you pick for the company in your class project!)

Pick Your Own Marks Carefully!• Poor picks are expensive in the long run

– Challenges can be stressful and expensive– Changing later means lost good-will, reputation

• Ask friends about how marks “sound”• “live” with a few before choosing• Watch out for un-intended meanings!

– The Chevrolet Nova didn’t sell in South America

Types of Trademarks• Descriptive – need “secondary meaning”

– e.g., “International Business Machines”

• Suggestive – few good words to use– e.g., “Chrysalis Records”

• Arbitrary – strong marks, but odd at first– e.g., “Apple Computers”

• Fanciful – strongest, hardest to create– e.g., “Exxon”

Trademark Marking

• Use TM or SM anytime! No permission needed

• Look at strong trademark users to see how to mark; e.g., McDonald’s, Microsoft

• Use only after Federal registration has issued; illegal to use before then!

Trademark Lawsuits

• Trademark Infringement, aka “Passing Off”– e.g., Ed’s cola sold with a Coca-Cola trademark

• Trade Dress Infringement– e.g., selling “Ed’s Catsup” in Heinz-like bottles

• “Dilution” of a “Famous” Trademark by– "Blurring“ - connection between the mark and

goods or services is weakened– "Tarnishment“ - use of mark in an unsavory or

unwholesome way, or associating mark with inferior products

Trade Secrets

• Defined by the Virginia Trade Secrets Act:Information that ''derive[s] independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use”

You Must Keep them Secret!• You must use reasonable means to keep

your trade secrets confidential, such as:– Confidentiality and non-compete terms in

employment contracts– Non-disclosure agreements with outsiders who

you need to tell them to– Employee-only areas – Employee ID badges and visitor’s badges– Locked file cabinets, safes– Exit interviews

Limitations and Benefits

• Aren’t protected from reverse-engineering; so, if others can study your products to figure out your secrets, patents are better

• They can “bleed out” over time– Many current and former employees disclosing

bits and pieces over the years eventually tell all

• But if well protected, they can LAST FOREVER!

The Most Famous Secret!The Formula for Coca-Cola

• The key flavor mixture is "Merchandise 7X“• Formula kept in a bank vault in Atlanta, Georgia• Only 2 executives know the formula: some say

each only knows half of it, and they are not allowed to travel together.

• Some say factory workers are rotated out frequently during the mixing process

• Until 1991 you could not buy Coca-Cola in India because old Indian law required that trade-secret information be disclosed

• The secret has been kept since 1886!

Remember the Differences!• Patents cover compounds, machines and processes

– Give the right to exclude others from making, using, offering for sale, selling, importing

• Copyrights cover works of authorship reduced to a tangible means of expression– Give exclusive rights to copy, distribute, perform,

display, make derivative works• Trademarks indicate source of goods and services

– prevent others from “passing off”• Trade Secrets are legally protected secrets

– misappropriation is unlawful, but reverse engineering is fair game