The Top 5 IP Mistakes

Early Growth Companies Make

#IPMistakes

Allonn E. Levy, Esq.Hopkins & Carley

Glenn McCraeEGFS

San Jose

Palo Alto

Burbank

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Mistake #1: I Don’t Need To Register My IP

I’m not looking for a fight I don’t have the money I’ll do it when I need to I have more important things to do I wouldn’t have the money to enforce my

rights anyway It’s OK, I’ve got an NDA

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Consider…

Copyright

Trademarks Trade Secrets

Patents

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What Is a Copyright? A limited monopoly granted to a author/creator by

the U.S. Constitution & Fed. Govt. (Art. I §8 U.S. Const.)

The author is granted an exclusive right in the expression – but not the ideas

The term of the exclusionary right is generally 70 years after the death of the last surviving author. (17 USC §302)

Practitioner Beware: duration differs for anonymous works, pre-1978 works and others

Work For Hire - A SV Favorite Generally: A copyrightable work prepared by an employee within the

course and scope of her employment is a work for hire and the work is deemed authored by the employing company. (17 USC §101, 201)

Employee v. Independent Contractor Generally an independent contractor does not fall within the work for

hire rule… unless she does. (Community for Creative Non-Violence v. Reid, 490 U.s. 730 (1989) [setting forth non-exhaustive analysis for employee / independent contractor analysis]).

Specially Ordered or Commissioned works are presumed not to be works for hire unless specifically Agreed-upon by both creator and employer.

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What Rights Do Copyrights Protect? Right to:

Reproduce works; Prepare derivative works;

Distribute works to the public through sale, license, transfer, rental etc;

Publically Perform the work (for literary, sound and other creative works etc.);

Publically display the work (for graphic, sculpture, motion picture, dramatic works etc.)

(17 USC §103)

17 U.S.C. §204 – requires “an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights comprised in a copyright” to be in writing signed by the author.

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Copyrightable Subject Matter

Original works

Fixed in a tangible medium from which they can be perceived, reproduced or otherwise communicated (written, pictured, sculpted, danced) (17 USC §102(a))

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• Books• Movies• Pantomimes• Some Databases• Computer Programs

• Photos• Websites• Pamphlets• Ads• Music & Lyrics

What Cannot Be Copyrighted? Idea, Process, System, Method of Operation, Concept,

Principle, or Discovery (17 USC §102(b))

Idea/Expression Dichotomy – Plot, Idea, Data within Database, Etc.

Gardens – Kelley v. Chi. Park Dist. 635 F.3d 290 (7th Cir. 2011) (living garden not “fixed” and not “authored”)

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Litigation Benefits of Registration Copyright exists absent registration but….

An author must register in order to file a lawsuit (17 USC §411)

An author may only collect attorneys fees and statutory damages if the work was registered within 3 months of publication or prior to infringement (Oddo v. Reis, 743 F.2d 630 (9th Cir. 1984))

Registration within 5 years of publication creates a presumption of validity for the copyright. (17 USC §410).

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Pre-Litigation Remedies

DMCA Notice & Takedown Provisions

Creates a “Safe Harbor” for On-Line Service Providers (OSPs)

To remain in the “Safe Harbor” the OSPs must comply with proper notices under 17 USC 512c(3)a.

Draft notices carefully: Section 512f – creates liability for any “person” who misrepresents

Yes, lawyers are people too…

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Litigation Remedies Injunctions – pre and post-trial

Actual damages/profits or Statutory Damages Actual losses of owner or actual profits of infringer; $750 - $30,000 per infringement; $150,000 per willful infringement;

Discretionary award of fees and costs

Court impound and destruction of infringing works (17 USC §§503, 504, 505)

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Patents

Article 1, Section 8, of the U.S. Constitution states that Congress is empowered 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“

In exchange for promptly disclosing to the public, the government to provides individuals with legal protection for their inventions

Covered by federal law (Title 35 of U.S. Code)

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What Is a Patent

A limited monopoly granted to a patentee by the U.S. federal government.

The term of the exclusionary right is generally 20 years from the earliest effective filing date.

Patents filed since December 12, 1980 require the payment of maintenance fees to remain effective for their full terms.

What Is an Invention?

The discovery or creation of something new, useful and non-obvious that is recognized as being patentable.

Conception & Reduction to Practice America Invents Act (“AIA”)

First to File Conception & Reduction to Practice No Longer

Relevant as of March 2013

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Types of Patents Utility

“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”35 U.S.C. §101.

Design Whoever invents any new, original and ornamental design for an article of

manufacture may obtain a patent therefor, subject to the conditions and requirements of this title.”35 U.S.C. §171.

Plant “Whoever invents or discovers and asexually reproduces any distinct and

new variety of plant, including cultivated sports, mutants, hybrids, and newly found seedlings, other than a tuber propagated plant or a plant found in an uncultivated state, may obtain a patent therefor, subject to the conditions and requirements of this title.”35 U.S.C. §161.

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Patentable Subject Matter “Anything under the sun that is made by man. ”Diamond v.

Chakrabarty, 447 U.S. 303, 308-09 (1980) Any new, useful, non-obvious:

Process Machine Manufacture Composition of matter Improvement thereof

35 U.S.C. §101 (Utility Patent) Business Method Limitation – In re Bilski

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What Cannot Be Patented

Laws of Nature law of gravity

Physical Phenomenon a new plant found in the wild

Abstract Ideas E = mc2

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That Doesn’t Stop . . .

Goofy Patents

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Pat on the Back ApparatusU.S. Patent No. 4,608,967

A self-congratulatory apparatus having a simulated

human hand carried on a pivoting arm suspended form shoulder supported member.

The hand is manually swingable into and out of

contact with the user's back to give an amusing or an

important pat-on-the-back.

What Is a “Mark?”

TM – A word, phrase, symbol, or design (Trade Dress) or a combination of such elements that distinguishes the source of the good of one party from those of others

SM – A “service mark” is the same as a trademark but it relates to services rather than a product

® – Refers to a mark that has been registered with the U.S. Patent & Trademark Office’

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Establishing a “Mark”

Protectable marks are “inherently distinctive” (arbitrary or fanciful) or “descriptive” + have “acquired a secondary (source-identifying) meaning.” Presumptive protection can be established through:

Registration with the USPTO

Creation of a CA Corporation (Limited Protection)

Sufficient Use to Create Consumer Identification

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Likelihood of Confusion The 8 relevant factors (not exclusive):

(1) strength of the plaintiff's mark; (2) similarity between the two marks; (3) proximity of the goods; (4) evidence of actual confusion; (5) marketing channels used; (6) type of goods and the degree of care likely to be exercised by the purchasers; (7) defendant's intent in selecting his mark; and (8) likelihood of expansion of product lines.

Mallard Creek, 56 Cal.App.4th at 435 (citing Sleekcraft, 599 F.2d at 348-349).

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TM in SV – Domain Name Conflicts Cybersquatting: Intentionally registering another’s

mark;

Diversion Cybersquatting: Intentionally registering a similar or misspelled mark;

Innocent / Fair Comment: “yourTMsucks.com”

Conflicts between competing TM Owners

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Trade Secrets – What Are They Generally

“Information” that derives independent economic value, actual or potential, from not being generally well known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use and which is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

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California’s Got to Be Different

California Civ. Code Sec. 3426.1(d). A trade secret consists of information, including a

formula, pattern, compilation, program, device, method, technique or process that:

(1) derives independent economic value, actual or potential, from not being generally known to the public or 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.

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Trade Secret – Other Attributes Automatic provided that “reasonable efforts” are taken to

keep it secret.

Use agreements (i.e., Confidentiality, Security) and other means (e.g., limited access, need-to-know, exit interview) to maintain the trade secret status.

Lasts indefinitely, as long as it remains secret.

Formula for Coca Cola – kept as a secret

State Law not pre-empted.

Improper Use or Misappropriation – can be criminal

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Misappropriation – What Is It? Misappropriation has a specific legal definition which

includes two distinct types of misuse: 1) the acquisition by improper means, and 2) the use or disclosure of trade secrets. Civil Code section 3426.1.

"Improper means" includes "theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy, or espionage through electronic or other means." Civil Code section 3426.1(a).

The second definition of "misappropriation" under the Code refers to the prohibition of the use or disclosure of trade secret information. Civil Code section 3426.1(b)(2).

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Liability for Misappropriation

Injunction Damages

Money damages for the economic harm suffered as a result of a trade secret violation. This may include the plaintiff's losses resulting from the misappropriation and the defendant's profits derived from it. If the court determines that the defendant acted willfully or maliciously, it may award punitive damages in an amount up to twice its actual damages. Cal. Civ. Code § 3246.

Fees & Costs Attorneys' fees if the defendant acted willfully or maliciously. Cal

Civ. Code § 3246.4 (scroll down).

Statute of Limitations – 3-years in California

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WHAT DO YOU DO?

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Create An IP Strategy

Don’t “back-into” your decisions

Talk to someone smart

Register where possible

Protect where you can’t register

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What About Copyrights, Patents, and Marks? Registration is a good investment –

about $400-5K for copyright $3K-$10K for patents + $1.5K-$2.5K per office

action. $400-$3K for trademarks

Registration gives you leverage in a fight Registration gives you legitimacy Registration creates an asset

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No registration available

Creation is free – just need an NDA

Enforcement is expensive

No legitimacy

Difficult to claim as an asset

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What About Trade Secrets?

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Mistake #2 – Not Doing Your Homework

There Are Tools Other Than Google!

WHAT DO YOU DO?

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Search, Search, Search & Verify

Trade Names/Marks Mark Clearance Cross-Licensing Diligent

Upkeep/Enforcement

Copyrights & Patents PTO Searches Technology Searches Tracing / Documenting

Rights To Use

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Mistake #3 – The Right-Click Conundrum

How could something so easy

be bad?

Just because It’s easy…

Copying a copyrighted work (registered or not) is a copyright violation

The bots are out there…

Its not just YOU we need to worry about…

Your marketing department (which is probably your cousin Hank…) is a liability minefield.

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WHAT DO YOU DO?

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Plan Ahead

Policies Contracts –

indemnification Asking questions Policing your

marketing materials Policing your website

Documentation, documentation, documentation…

Take your OWN pictures

When in doubt DON’T USE IT

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Mistake #4 – Not Reading

The Fine Print

C’mon I Make Deals, I Don’t Have Time To

Read License Agreements!

Talk Is Cheap – The Fine Print IS Your Deal

License Agreements That Don’t Track Your Needs

Indemnification Agreements That Cover any IP Claim That Is Made – whether you are at fault or not.

Stringent Notice Requirements For Termination, Complaints, Non-Payment, Etc.

Agreements That Don’t Protect YOUR IP; Or Don’t Do So Under Different Circumstances (Bankruptcy, Sale, Transfer To Competitor etc.)

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WHAT DO YOU DO?

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Just Read the Damn Agreements! !!

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Mistake #5 – Ignoring the Digital Millennium Copyright Act (DMCA)

Ignoring The wwahhhuh?

DMCA

Safe Harbor - Immunity Grants You Complete

Immunity Even If A Copyrighted Work Is Actually Infringed.

Notice & Takedown The Single Most Powerful

Tool To Immediately Stop Infringement On The World Wide Web

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WHAT DO YOU DO?

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DMCA – What You Need

Safe Harbor - Immunity Do A Safe Harbor Review

17 USC §512(a) Web Sites Networking Services Server Farms / Co-los Content Delivery

Technologies Register & Designate an

Agent

Notice & Takedown Have Your Registrations

Organized and Available. If You Haven’t Registered

Have Clear Documentation Of Creation, Ownership/license status Organized and Available.

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Thanks and Q&A

•

Hopkins & Carley, A Law Corporation70 South First StreetSan Jose, CA 95113T: (408) 286-9800

@HOPKINSCARLEY

Allonn Levy, Esq., Shareholderalevy@hopkinscarley.com

Glenn McCraegmccrae@earlygrowthfinancialservices.com

2033 Gateway Place, 5th Fl.San Jose, CA 95110T: (415) 320-5753

@EARLYGROWTHFS