Trade Secrets, Trademarks and Copyrights

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©2009 Prentice Hall9-1

Technology Strategy

for Managers and Entrepreneurs

Chapter 9

Trade Secrets, Trademarks,and Copyrights




Learning Objectives

1. Identify the role that secrecy plays in protecting intellectualproperty

2. Explain when secrecy tends to be an effective mechanism for deterring imitation

3. Define a trade secret

4. Explain why non-disclosure agreements are an important part of efforts to maintain trade secrecy

5. Define a copyright

6. Describe how a copyright is obtained

7. Define a trademark

8. Describe how a trademark is obtained

9. Explain the major differences in intellectual property acrosscountries, and their effect on technology strategy




Secrecy

• Prevention of imitation can be obtained by

keeping things secret and reducing the

diffusion of information about products or

services or how they are produced




When Does Secrecy Work?

• When there are few sources of the information about thenew product or service

• When a new product or service is complex

• When the process of creating a new product or service is

poorly understood• When the information that is being kept secret involves

tacit knowledge – the knowledge about how to dosomething that is not documented in written form

• When there are limited numbers of people capable of understanding the information that is being kept secret

• Works better for processes, inputs, and materials thanfor products that are observable-in-use




Trade Secrets

• Trade secrecy is a special case of all

efforts to keep a new product or service

secret

• Trade secrecy laws provide for legal

remedies if someone benefits from one’s

trade secret without one’s consent




Conditions to Have a Trade Secret

• Three conditions must be met for the

courts to hold that something is a trade

secret:

1. The information must be known only by

people in the company

2. The information must have economic value

3. Must take reasonable measures to keepthe information secret


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9-7

Secrecy as a Strategy

• Offers a longer time horizon of protection and it does not discloseinformation to competitors

• If the product is well suited for secrecy• Generate customer interest because people are more interested in

things that they can’t know about than things that they can

• Requires the adoption of secrecy policies• Delay the efforts to work with other companies• Inhibits efforts to sell products to many business customers, who

need to know about new products long in advance of their release tofit them into their own plans

• Risks the independent discovery and exploitation of the inventions



9-8

Trade Secrets Versus Patents



9-9

Non-Disclosure Agreements

• Trade secrecy is enhanced by havingemployees sign a legal document called non-disclosure agreements that must: Specify exactly what information is to be kept secret

Provide consideration - employees must receivesomething of value, like their salaries, in return for non-disclosure

Specify legitimate uses for the information

State what must be done with any documents or materials that are transferred to the employee, bothduring employment and after the termination of anemployment relationship




Enforcing Non-Disclosure

Agreements

• Many companies are willing to sue the

employees and others who help them

because the only remedies for violation of

non-disclosure agreements come throughlegal action




Non-Compete Agreements

• Trade secrecy is enhanced by having the

employees sign non-compete

agreements, which bar them from working

for competitors for a period of time after their employment has ended




Enforcing Non-Compete Agreements

• Non-compete agreements help to protect

the company’s intellectual property, but

they are hard to enforce

• Need to be of limited length and limited

geographic breadth because they will be

declared invalid if they keep people from

earning a living in their chosen field




Non-Disclosure/Non-Compete

Agreement




Ownership of Intellectual Property

• The rights to technologies that employees

develop during their employment at a

company reside with employees unless

the company require them to assign therights to them




Copyrights

• Copyrights give the authors of original

works the right to distribute, duplicate and

provide derivations of that work, and to

preclude others from doing the same




What Can Be Copyrighted?

• A variety of things can be copyrighted: Literary works Dramatic works Audio and video recordings

Computer software• Works composed of common property cannot be

copyrighted along with: Intangible things

Titles, names and slogans Ideas Methods Principles




Who Gets a Copyright and

How Do They Get It?

• A copyright can be obtained:

By the author of any completed original

artistic, literary or musical work, unless the

work is done for hire, then the copyright goesto the entity commissioning the work

By putting the work into tangible form or by

registering the work at the USPTO• Registration provides the right to sue for

copyright infringement




Enforcement Through Litigation

• Courts usually conclude that copying has

occurred if the new work is substantially

similar to the copyrighted work, and the

defendant had access to the copyrightedwork

• The statute of limitations on copyrights

only lasts three years




A Copyright Application Form




Recent Developments to

Strengthen Copyrights

• File-sharing software poses an important threat to

copyrights on recorded music, and its rise has led

to a number of infringement lawsuits

• Recent laws have strengthened the position of copyright holders by allowing them to use physical

tools to prevent duplication of their work; however,

these physical tools have had problematic side

effects




Software Copyrights

• Copyrights can be used to protect the source code,object code, microcode and screen displays in software,but not the ideas, mathematical formulas or equationsbehind them

• Because it is impossible to show the exact link between

the expression of an idea and the process underlying it,courts interpret the “look and feel” of software to evaluateinfringement

• Copyrights also are much easier to obtain than patents,and are a much less expensive form of protection.

• Copyrights offer 70 years of protection from the time of the author’s death, while patents offer only 20 years of protection from the time of invention




Trademarks

• Trademarks are devices to identify the

provider of a product or service

• Offer much less intellectual property

protection than patents, copyrights, or

trade secrets

• Do help companies to protect their brand

names




What Can Be Trademarked?

• Trademarks can be obtained on any non-

descriptive, non-generic word, number, symbol,

phrase, color design, or even smell that

distinguishes the products and services of onecompany from those of another

• The same mark can be used by more than one

company if that use will not cause confusion

amongst consumers about the provider’sidentity, and does not dilute the value of another

party’s trademark




Obtaining a Trademark

• One can obtain a U.S. trademark by using

the mark, or by registering it with the

USPTO

• Registration facilitates the ability to obtain

similar rights in other countries and allows

the inventor to sue to enforce the mark




Many Companies Obtain a Large

Number of Trademarks



©2009 Prentice Hall 9-27

Enforcing a Trademark

• Trademarks provide a negative right andmust be enforced through legal action,which is often more difficult for start-ups to

undertake than for established companiesto conduct

• Trademarks are lost through Cancellation proceedings

Abandonment

If they take on generic meaning




Domain Names

• The names used on Web sites to identify

an organization providing a good or

service

• They are protected through legal action




Use of Domain Names




International Issues in

Intellectual Property

• There is no such thing as international

copyrights, trademarks, or patents

• These forms of intellectual property

protection must be obtained in each

country where a company would like to

obtain such protection




Top 20 Countries for

Patent Applications




Differences in Intellectual

Property Regimes

• Major differences exist across countries in

laws governing patenting, including

whether they award patents to the first-to-

invent or the first-to-file, their policies onthe timing of disclosure, and their

requirement to manufacture




First-to-Invent

• The United States is one of only two

countries in the world that awards a patent

to the first person to invent a technology

• Must prove that one invented the technologybefore anyone else

• Failure to act quickly to apply for patents in

other countries may deter from obtainingpatents outside the United States




Disclosure

• The United States allows inventors who

publish information about an invention up

to one year before applying for a patent to

be eligible to obtain one

• Many European countries, and in Japan,

prior publication at any time will keep

inventors from obtaining a patent




Requirement to Manufacture

• The United States imposes no

requirement that an inventor actually

produce a product or service that uses the

patented invention within the country

• In many countries, one may obtain patent

protection only if willing to manufacture the

product in that country




Intellectual Property in

Developing Countries

• Developing country governments often do not

enforce intellectual property laws vigorously

because companies in those countries generate

little value from intellectual property andbecause weak intellectual property laws reduce

the cost of many products

• Weak intellectual property laws in developing

countries lead to widespread piracy, and requirecompanies to formulate strategies that are

effective under such conditions



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International Agreements on

Intellectual Property

• Several international agreements make it easier to obtain intellectual property protection inmultiple countries

• The most important of these agreements are: The Berne Convention

The Madrid Protocol

The European Patent Convention

The Paris Convention The Patent Cooperation Treaty

The Trade-related Aspects of Intellectual PropertyRights Agreement

Trade Secrets, Trademarks and Copyrights

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