Intellectual Property and Licensing: What You Need to

Know About Patents, Trademarks and Licensing Agreements

Sean GarrisonEmily A. BaytonMarch 25, 2011

PART I

Intellectual Property Law Overview

Types of Intellectual Property

• Five Main Types of IP– Patent– Trade Secret– Copyright– Rights of Publicity– Trademark

• Also– Advertising, Privacy, Sweepstakes

Patents

• Protect inventions

• Process, system, method, machine or composition of matter or improvement thereof

• Must be novel, non-obvious and useful

• Granted by national governments

• Federal law

Trade Secrets• Confidential information, formulas, recipes• Kept secret and not generally known• Secrecy gives commercial advantage• Example:

– Inventions– Customer lists– COKE formula

• Protected by State Law• Non-disclosure agreements

Copyrights• Original work of authorship

– Music– Books– Lesson plans – Art– Source code for software

• Covers the expression, not the idea• Exists at creation• Not words or short phrases• Federal law

Rights of Publicity• Commercial Use of Identity

– Image– Name– Voice– Character– Persona

• Differs from state to state• Federal claims - False endorsement• Can exist posthumously

Trademarks• Brands

– Name of a product or service– Logos– Words– Slogans– Colors

• Acquired by use in commerce or registration• Consumer protection – avoiding confusion in the

marketplace• Federal and State law govern

PART II

Trademarks

What is a Trademark?

Choosing a Strong Trademark

Trademark Protection

Trademarks

• Words– COKE– BARBIE– UNIVERSITY OF ARIZONA– NIKE

Trademarks

• Slogans– Get a Piece of the Rock– You’re in Good Hands with Allstate– JUST DO IT!

Trademarks

• Letters– IBM– NFL– USPS– NPR– UA– ASU

Trademarks

• Numbers– 501 (for jeans)– V-8 (for vegetable juice)

Trademarks

Symbols and

Logos

Trademarks• Single Color

– Brown for UPS

Trade Dress• Trade Dress

– Product packaging• Starbucks cup

– Product shape• Coke bottle

– “Look and Feel”• Fridays Restaurants

– Building design– Uniforms and costumes

Trademarks• Sounds

– NBC chimes– MGM’s lion’s roar– D’oh! - as spoken by Homer Simpson

• Fragrance– for sewing thread

Symbols• Registration Symbol

– ®– Federal Registration– Goods/Services in the Registration

• Trademark Symbol– TM– Goods or Services

• Service mark Symbol– SM– Services only

Choosing a Trademark

• Coined - Arbitrary - Suggestive - Descriptive – Generic

• SPECTRUM OF DISTINCTIVENESS

Trademark ProtectionEstablishing Rights• “Common Law” Rights Based on Use of Mark

– Hang up your shingle– Limited to geographic area of use– Limited to goods/services used

• State Registration– Headache prevention

• Federal Registration• International Registration

– By country or territory (European Union)

Trademark ProtectionEstablishing Rights• Federal Registration

– Nationwide priority– Constructive notice– Presumed ownership– Intent to Use procedure– Customs enforcement– Counterfeiting remedies– Basis for International Registration

Trademark Registration

• Whether to file– Protect your core “identity” marks– Protect the marks that will bring in revenue– Protect the marks consumers rely upon– Protect the marks most likely to be infringed– Budgetary considerations

Trademark ProtectionEstablishing Rights• Outside U.S.

– “First to File”• Pirates• Licensees/Distributors

– Madrid Protocol “International Registration”• 80+ Countries• Filed from US• Central Renewal

Trademark Protection Causes of Action• Infringement

– Likelihood of confusion• Similarity of marks• Similarity of services• Channels of trade• Cost• Sophistication of Customers

– Dilution• Famous marks only• Identical or nearly so• Tarnish or dilute distinctiveness

– Suggesting a False Connection to an Institution

Infringements• THIRD PARTY USE• Investigation/Analysis

– Who has superior rights– Strength of case– Business need

• Often addressed through Cease and Desist letter– Federal registrations are persuasive

• Litigation or Trademark Office Action– Temporary Retraining Order– Lawsuit or Opposition/Cancellation

Trademark Protection Maintaining Rights• You have a duty to police third party misuse of your

trademarks• Proper use by you is critical• Trademarks are ADJECTIVES, not nouns• There should be a generic term/noun base to every

trademark (the “APPLE computer”)• Marks should not be put into the plural form or used

descriptively• Sometimes trademarks can become too popular – avoid

genercisim of your brands

Common Trademark Issues• CLEARANCE

– Search and Opinion• Determines availability• Provides useful marketing information• Prevents investment in unavailable or unprotectable mark

– Conduct initial searching in-house• “Google” the term and the term with its generic word• Search TESS database at www.uspto.gov

– If clear, move to “full search” from vendor• Much more comprehensive

Common Trademark Issues

• DOMAIN NAMES– Cybersquatters

• Pornography• Diverting Consumers• Pay Per Click or Fraud

– Redress• Cease and Desist Letters• Uniform Domain-Name Dispute Resolution Policy• Court

– ACPA or Lanham Act claims

Common Trademark Issues• Domain names

– Consider at the Clearance Stage – Take a proactive approach

– Register in all major domains• .com; .net; .org; .biz; .us• country codes if major brand (.cn, .ca, etc.)

– Consider misspellings and hyphenations– Ask yourself

• Do you want it?• Would it bother you if someone else had it?

PART III

Patents

What’s Patentable?

Obtaining Patent Protection

Avoid Compromising Your Rights

What Can Be Patented?

• Supreme Court: “anything under the sun that is made by man.” – Diamond v. Chakrabarty, 447 U.S. 303, 309

(1980).

• Three categories of unpatentable subject matter: “laws of nature, natural phenomena, and abstract ideas.” – Diamond v. Diehr, 450 U.S. 175, 185 (1981).

Kinds of Patents

• Utility – Most common type, addresses functional inventions (e.g. devices, methods, processes, systems)

• Design – Protects only ornamental appearance (but can be powerful)

• Plants and Plant Varieties – e.g. new plants capable of being asexually reproduced (example: roses)

What Rights Do Patents Confer?• ONLY the right to prevent OTHERS from

– Making– Using– Selling/offering for sale– Importing

• … the claimed invention

• NOT the affirmative right to do anything!– Just because you have a patent does not guarantee

you can practice it!

Example: Right to Practice

• A Chair is a Stool with a Back

• You may own a patent to a Chair, while someone else owns a patent to a Stool.

• To make a Chair, you would need to have license from the Stool patent owner

Obtaining Protection: The Genesis• All inventions begin as Trade Secrets

– A Trade Secret is information that is valuable because it is not generally known

– Inexpensive protection from theft, provided you take steps to protect it

– BUT: Most difficult IP right to maintain and enforce

Obtaining Protection: The Genesis• Trade Secrets only become patents if you take an

affirmative step– File Utility or Provisional Patent Application– Might be a case for maintaining Trade Secret Status

• Provisional Applications– No formal requirements, inexpensive to file, best for

initial filing for upcoming publication or new business development

– Automatically expire after 1 year, so formal utility application must be filed within that time

– Pitfall: May trigger PCT filing deadlines

How long does it take to get a patent in the U.S.?

• USPTO publishes monthly statistics on pendency of patent applications:

• Feb 2011 stats show:– 24.5 months from filing to 1st office action– 34 months from filing to final disposition– 200,000 new utility, plant and reissue (UPR)

apps filed– 715,000 UPR apps awaiting 1st office action

Obtaining Patent Protection Abroad

• Patents are national in scope

• Foreign protection = foreign patent apps

• 3 options– File separate simultaneous apps in every

country you want protection– File national app in Paris Convention country

and additional apps within 12 months– File 1 “international” app under PCT

Patent Cooperation Treaty (PCT)

• Administered by WIPO

• Currently 142 member countries

• To claim priority to earlier filed national or regional app, must file PCT app within 12 months

• Trap for the unwary: Provisional Patent Applications trigger PCT filing deadlines

PCT Procedure

• Filing and Payment of Fees– Filing ($1,100-1,300), search ($1,150-2,450) and

transmittal ($240) [$3,500 – $4,000]

• International Search• International Publication• International Preliminary Exam• National Phase

– You choose the countries where you want to proceed

THE PATENT MINEFIELD

Hypothetical: • You’ve invested your time, money, and energy in

developing a successful business• You and your partners are about to become millionaires

when the company goes public tomorrow• Then you receive notice to cease and desist, claiming an

infringement of someone else’s patent

Your big IPO goes bust• Fiction?

– It happened to PayPal!

Would you construct a building on a piece of empty land without buying or renting it first?

Trespass!

• Trespass is to real property as Infringement is to intellectual property

Before putting together bricks and mortar, a business should…• Determine who owns the property• Ensure that the title is valid• Purchase or lease the property• Pay periodic payments such as taxes or rent to maintain the right to stay

there.

Protecting your rights in the patent arena requires a similar, common-sense approach.

IP Strategy Plan

• Create an IP Plan that integrates into Business Plan Think Proactively, not Reactively!

• Assess Your Business Strategy and Goals• Evaluate Current IP Status• Implement an IP Process to Achieve Goals

and Improve IP Status• Continuous and periodic re-evaluation

Patents Are Assets, Like Buildings and Equipment

• They exist at the Nexus of Law, Business, and Technology: Consider all Three!

LAW BUSINESS

TECHNOLOGY

Sample Questions to Ask• Law: • Have I properly secured ownership of the

rights from my employees/contractors?• What is my legal exposure to being sued

for patent infringement? • Are there applicable time limits to file for

patents? • What happens if I wait for a while before

taking action?

Sample Questions to Ask• Business:

• How can I use or develop my IP Assets and how do they fit in?

• How much will protection cost?

• What is the opportunity cost of not obtaining protection, and what is the risk?

Sample Questions to Ask• Technology:

• What is the best way to achieve my business objective?

• Are there better designs that may not be subject to patents?

• Where is the industry headed?

• What can I create or buy?

Evaluating Current IP Status

• Take a hard look at the state of your company’s patent portfolio

IP AUDIT

• Investors and potential acquirers will ask: – What patents do you own?– Are those patents valid?– Are there patent infringement issues?

What should you look for?

• Unfiled inventions that need protection• Is relationship protected between inventors and the

company?– Employees and consultants should have invention agreements

• Procedures in place to prevent patent defeating events from occurring

• Any defects that could impede perfection of IP rights– e.g., failure to assign, failure to disclose prior art, improper

inventorship, inadequate claims• Research title to patents, make sure maintenance fees

paid• Optional step: analyze competitive landscape and map out

offensive/defensive strategy

• Execute employment agreements to require assignment of patent rights

• Educate workforce and harvest patent disclosures

• Examine patent portfolio for “holes” based on IP Audit

• If applicable, build Patent Committee Team (Business, Tech, and Law representatives) to approve patent filings and monitor potential infringing market

Implement an IP Process to Achieve Goals and Improve IP Status

• Disclosed inventions should be reviewed quickly, and if approved, submitted as a patent application– Optional step: perform a search first to determine

patentability, and to generate references to strengthen patent

– Take steps to keep the invention confidential until it is filed.

• Update product/packaging/marketing materials with Patent Pending or Patent No. markings

Implement an IP Process to Achieve Goals and Improve IP Status

WATCH THE PITFALLS

• Inventors leaving the company and taking inventions

• Joint development projects –caution; patent rights may be compromised if not protected in advance– No written agreement or lack of clarity in

agreement– Understanding joint ownership– Use of federal funding

WATCH THE PITFALLS

• Bar dates accruing – especially the “ready for patenting” issue of the on-sale bar.

• Bar dates from publication/public use– Absolute Novelty issues

• No 1-year grace period in foreign countries

Using Patents: Sword or Shield• Patents provide a defensive and offensive

capability– Defensive:

• Best defense is a good offense: big stack of patents to assert against others

• Long list of patents frightens off potential competitors• Provides barter material for cross licensing if you get

sued for infringement

Using Patents: Sword or Shield• Patents provide a defensive and offensive

capability– Offensive:

• Can leverage another party to enter into a license agreement and pay you a royalty for use

• Can sue for an injunction to stop others from infringing or importing

• Can sue for money damages such as lost profits or reasonable royalty

• Value to potential investors/acquirers

APPLYING WHAT WE’VE LEARNED

• Consider an actual case – Paragon Trade Brands

• As we review, think about what could have been done differently

CASE STUDY: PARAGON TRADE BRANDS

• February 1993 Paragon Trade Brands, Inc. has Initial Public Offering

• From revenue raised, transfers $240 million to Weyerhaeuser. Receives from Weyerhaeuser intellectual property, including a patent for a disposable diaper.

• Goes into business making private-label disposable diapers – Wal-Mart, Target, CVS, Toys 'R' US, et al.

• Became largest manufacturer of trade brand disposable diapers in the world, third largest overall (behind P&G, Kimberly Clark)

CASE STUDY: PARAGON TRADE BRANDS

• January 1994 Paragon sued by rival Proctor and Gamble for patent infringement of two patents

• October 1995 rival Kimberly Clark sues Paragon for patent infringement. – Paragon ultimately settles this suit for $115

million.

CASE STUDY: PARAGON TRADE BRANDS

• 1997: Paragon Ordered to pay Procter & Gamble $178 million for patent infringement– Included double damages for willful

infringement of P&G’s patents.

• Court Prohibits Paragon From Selling Any More Infringing Diapers

Paragon Fires Back

• Paragon attempts to assert its patent against P&G

• Court found P&G’s diapers did not infringe the claims of Paragon’s purchased patent

Paragon Fires Back

• Worse Yet: Court found Paragon’s patent to be invalid and unenforceable– Lack of novelty– Inequitable conduct – inventors purposely

avoided disclosing a known prior art reference.

• A TRUE KNOCK OUT!

Paragon’s Death Spiral

• 1998 Paragon makes minor product modifications to attempt to avoid infringement of P&G’s patent– Slapped with contempt order for violating

injunction.– P&G adds additional claims > $1B

• Paragon Declares Bankruptcy• December 2001 bankruptcy case closed,

purchased by Tyco Conglomerate

5 Things You Should Be Doing Right Now• Evaluating your own IP Status

• Pursuing an IP Protection Program– Internal Policies– Internal Education– Active Patent Portfolio Management

12 Ways to Lose Your Patent Rights

• (1) Waiting Too Long To file for a patent• (2) Waiting Too Long To send a notice of

infringement• (3) Waiting Too Long to sue for infringement• (4) Discussing new products at a trade show• (5) Advertising your product for sale, even if it

hasn’t been built• (6) Using your product in public

12 Ways to Lose Your Patent Rights

• (7) Sending out samples of the product/distributing Beta copies of software

• (8) Selling a product• (9) Obtaining a secured loan• (10) Ignoring inventors• (11) Jointly developing a product with someone else• (12) Hiring employees or contractors to develop a

product without a contractual agreement to assign

To Avoid Compromising Rights, Until You File For a Patent:

• Do not publish, disclose, or speak about invention to anyone not under an obligation of confidentiality, or use your invention in public– Non-disclosure Agreement (NDA)– Better yet, just don’t talk about it!– Possible experimental use exception

• Do not offer your invention for sale, even at its earliest phases

To Avoid Compromising Rights:

• Make sure you have all employee inventors under a written obligation to assign their inventions

• Periodically review work to ensure all developed IP is being disclosed to the relevant corporate authority (e.g. Patent Committee)

• Execute assignments ASAP!

To Avoid Compromising Rights:

• If you know about a patent that might anticipate your business approach, obtain an opinion of counsel regarding infringement or non-infringement– Usually effective in reducing liability

• Do not accept ideas submitted from outside sources without prior agreement

To Avoid Compromising Rights:

• To maximize the amount of money damages you could receive if you prevail in a patent infringement lawsuit against an infringer:– Proper marking with with “Patent Pending” or

Patent Number as appropriate– Early notices of infringement

• But BEWARE of the Declaratory Judgment Response

To Avoid Compromising Rights:

• Statute of Limitations:– You cannot obtain damages for patent

infringement that occurred more than six years ago

• Laches– If you wait six years or longer before suing for

infringement of your patent, you are at risk of having the suit dropped for Laches (waiting too long)

Q&A

PART IV

LICENSING

Trademark Licensing Considerations

Patent Licensing Considerations

Trademark Licensing• Trademark Licenses

– Allows someone other than the owner to legally use a trademark

– Exclusive licenses must be in writing

– Oral licenses are allowed if non-exclusive

– Types

• Manufacturing

• Marketing

• Advertising

• Merchandising

• Co-branding

• Product Placement

Trademark Licensing/Franchising

• CAUTION– Traditional Franchising

• Trademark• Significant control or assistance in method of operation• Required payment as a condition of obtaining the franchise

– Business Opportunity Franchising• Right to sell goods/services supplied by seller• Location assistance• Required payment

Trademark Licensing/Franchising

• Franchise Rules (heavily regulated)– Federal Trade Commission

– State Laws

– Strict Requirements & Penalties for Non-compliance

Trademark Licensing

• TM Specific Licensing Issues– Defining the Trademarks

• Where– Recitals (be sure to incorporate)

– Body of Agreement

– Exhibits

• How– Use Federal Serial/Registration numbers if available

– Include logos, typed form, colors

– Co-created marks?– Marks developed in the future?

Trademark Licensing• Scope

– Territory– Type (exclusive, non-exclusive)– Term

• Purpose– Permitted uses– Excluded uses

• Use – Must “inure” to the TM owner’s benefit– Internationally – License Registration/Recordal – Right to sub-license?

• Royalty or royalty-free?

Trademark Licensing• Acknowledgement of owner’s rights

• Agreement not to interfere– During or after term– Use or registration– No aiding or abetting

• Domain Names– Registration– Use– Territory

Trademark Licensing• QUALITY CONTROL

– Essential• Avoid Naked Licensing and Abandonment

– Say what you do … do what you say– Pre-license approvals – Periodic review and approvals– Site visits

Trademark Licensing• TM Usage Guidelines

– Exhibit or “provided from time to time”– Do not modify, change colors, typeface– Do not use with other marks, logos– Use of TM, SM or ® – Use of ownership legends– Use as an adjective, not a noun– Do not make plural

• Packaging Guidelines

Trademark Licensing

• Registration and IP Protection– Duty to register and maintain the trademarks?– Pursue infringements?– Recourse – litigation required?– Who pays?– Who reaps benefits?– Requirement to assist?

Trademark Licensing• Representations, Warranties & Indemnifications

– Licensor/Owner• Ownership• IP infringes third party rights

– Licensee • Misuse causes IP infringement• Products/services cause harm

Trademark Licensing

• Termination and Expiration– Effects

• Return of property and confidential information• Disposition of licensed items

– Destruction– Return– Sale, loan, give-away– Bargain bins

• Timing considerations (mid-production)

Trademark Licensing

• Remedies – Injunctive relief– Damages

• Compensatory damages and profits of infringer• Damages trebled for willful infringement• Attorneys’ fees only for extraordinary situations

Patent Licensing

• Type of Agreement

• Scope: Slicing and Dicing

• Exclusive versus Non-exclusive

• Warranty Issues

• Indemnification

• Royalties

Patent Licensing: Agreement Type

• Simple License Agreement

• Cross-licensing Agreement

• Product Distribution Agreement

• Product Manufacturing Agreement

• Joint Development Agreement

Patent Licensing: Scope

• What rights are being granted?– Make, have made, use, sell, offer to sell,

import

• What is the territory?– Local, regional, national, worldwide

• What is the duration?• Licensing inventions versus patents• Incorporation of other IP rights

Patent Licensing: Exclusivity

• Exclusive license precludes patent owner from practicing the invention

• Typically will command higher royalty

• Performance standards for exclusive licensees– Gross sales minimums– Royalty minimums– Failure of licensee to meet the standards

Patent Licensing: Warranties

• Non-infringement

• Ownership/right to grant the license

• “Best knowledge” warranties

• Limitations of Liability– Type of damages (indirect, special, punitive)– Amount of damages– Actions that void the warranty

Patent Licensing: Indemnification

• Against infringement– Limit to U.S. or other country’s patents– Limit to existing patents and published apps– Are combination claims covered?

• Conditions on indemnity obligation:– Prompt notice of infringement claim– Cooperation by licensee– Right to control defense and settlement

• Right to procure license or replace• Exclusive remedy

Patent Licensing: Royalties

• One time or upfront license fee

• Ongoing royalties– Sales– Units

• Royalty reports

• Right to audit

• Anti-stacking provisions

Q&A