As I sat across from my new corporate client, it became abundantly clear that this client was entirely new to the concept of IP, or intellectual property. Nonetheless, there was an urgent desire by the client to set up an IP program into an already existing commercial setting.
What’s the urgency I wondered? Perhaps there is the realization that IP has untapped potential and value. My client no doubt remembered hearing that a well developed IP portfolio could comprise half the value of a company or more.
In spite of the value proposition, the conversation fell silent when I asked the client to identify their existing intellectual property. I thought to myself, the proverbial "black box" of IP still seems to have some dark corners even after the "dot com" era apparently blew the top off the "black box" to have companies emerge with multimillion, nay, multibillion dollar valuations.
At the risk of being presumptuous I launched into my canned IP definition, "Intellectual Property certainly comprises patent, trademarks, and copyrights but it also embodies trade secrets as well. In most instances, intellectual property is intangible property created by the human mind and converted into a legal right through various legal registration requirements. Trade secrets are gatherings of secret information that give a business a competitive advantage and in which reasonable efforts are exerted to maintain the information as confidential. Patents, of course, are inventions, the scope of which are described by various statutes in respective national patent offices. Trademarks are company logos, designs, phrases, and the like. And copyrights are original works of art such as books, pamphlets, or presentations."
This seemed to get the group going. "Can you patent the company name?" one in the group asked. (I thought to myself, "I suppose you can try.") However my reply was much more muted, "You probably want to trademark a company name if you haven’t done so already."
"What you probably want to do is to patent the IP of the company’s technology that is new, useful, and unobvious," I answered. "Of course, this is after sorting the IP into piles of potential patents, existing trade secrets and non-protected proprietary information." Based upon their misguided question and the blank stares I received from the group after I gave them my response, I could see that I was merely reciting foreign words and using them in a context that required a more fertile ground.
Trade Secrets. Perhaps a bit more background into the various areas of IP might prove fruitful. A trade secret is defined by statute in Illinois as "information . . . that (1) is sufficiently secret to derive economic value, actual or potential, from not being generally known 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 or confidentiality. The statute provides that "information" includes "technical or nontechnical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers."2
Trade secret is broadly defined to include all types of information not only various technical information but also includes business information – such as customer lists, business strategies, marketing plans, etc. The ‘catch’ with trade secret information is that once a trade secret enters the public domain (i.e. a fancy way of saying it is publicly available, typically as a publication, like on the internet) it may no longer be a trade secret. Thus the ‘not generally known’ element of a trade secret should be coupled with ‘reasonable efforts to maintain secrecy’ to maintain the trade secret. I thought this would be a good time to mention that, in theory, a very well protected trade secret could be licensed forever. After all, if IP is intellectual property, then a license to that IP is akin to renting that property.
Forever, you say? Excellent! It seems a no-brainer then to adopt a trade secret strategy. Not so fast. Yes, there are benefits to a trade secret strategy. At first, a trade secret strategy can seem to cost you little – until you take into account that you must take reasonable steps to protect the trade secret information. Likely, at some point, you may have to trust employees with trade secret information who may or may not be interested in being part of your company for as long as you would like. Further, there are many items of your company that are trade secret information that may be compromised (including cell phones, memory sticks, computers, and the like). Let’s not forget that a trade secret is a trade secret as long as it is does not become public. Once a trade secret becomes public (presumably through a misappropriation), remedies for compensating the owner for his loss are available, but the bell cannot be "un-rung". Once the secret is out it can no longer be protected. So, at the same time that trade secrets provide potentially unlimited periods of protection they present a real and constant risk of loss. Think of what would happen to the value of Coca-Cola, for example, if their famous trade secret formulation was revealed!
Patents. So what else can be done, in the way of protecting IP? Glad you asked. A patenting approach may be worth considering. 35 U.S.C. section 101 provides: "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 therefore, subject to the conditions and requirements of this title."3
In a world where trade secrets are becoming more and more difficult to maintain, patent rights grant a limited monopoly on the new, useful, and unobvious inventions. The notion is that a deal is being struck with the government in which the inventor(s) are granted a limited monopoly in exchange for full disclosure of the information that enables one reasonably skilled in the area of science or technology to make the invention. The limited monopoly varies from jurisdiction to jurisdiction, but it is one of the few cases where public policy favors a monopoly because it "promote[s] the Progress of Science and useful Arts." Assuming a patent application is pending for three years before it issues into a patent, an issued patent could have a term of seventeen years (this could be more or less depending on the jurisdiction). The patent term in the United States starts when the patent issues (after the patent application has been successfully prosecuted in the U.S. Patent and Trademark Office (USPTO) – three year pendency provides some reference) and the patent term ends 20 years from the date on which the application was first filed4.
What exactly can be patented? New, useful, and unobvious inventions that have a discernable process, machine, manufacture, or composition of matter (or improvements thereof) may be patentable.5 In the U.S., a patent application can be filed by way of a provisional application (relatively inexpensive first filing) that would provide up to a year to file a non-provisional (utility) filing. Alternatively a utility application could be filed first, skipping the provisional step. The filing of the patent application would start what is called the "prosecution" period in which the invention is filed with the USPTO. With some proper guidance, the patent application would issue a granted patent.
As a relational comparison, patents are typically a subset of the larger body of knowledge of a person or organization known as
intellectual assets. Trade secrets comprise yet another subset of the larger intellectual asset pool.
However, patent applications are not a panacea. They have limitations just as trade secrets do. Not the least of these is the fact that, at some point, a patentee is required to disclose his invention to the public – which includes his competitors. In the United States a patent application is published eighteen months from first filing. This means that you have disclosure of proprietary knowledge before you have patent rights. In some cases, the patent rights you end up with may not be as broad as you initially expect. So, patenting proprietary information presents a calculated gamble.
"Wait! Hold up! Are you saying that my competitors are going to know about my newly filed invention before I get a patent on it AND that I can no longer protect it as a trade secret?" Well, yes AND yes. But for instances in which there is only a U.S. (and no other foreign filing), the patent application will not be published until eighteen months after first filing. If your IP strategy changes, mechanisms are in place which allow you to withdraw the application from publication. In addition, the subject matter of the patent application will remain unknown to your competitors until publication. In some instances you may even be able to assert trade secret protections if you withdraw the publication and take other reasonable steps to maintain secrecy.
"So what exactly are you getting with a patent right?" A successful applicant who obtains an issued patent is getting the right to exclude others from making, using, selling, offering to sell, or importing the invention in the US (including U.S. territories, etc.). This is not a right to make, use, sell, offer for sale, or import BUT RATHER a right to exclude others from making, using, selling, offer for sale, or importing.
This distinction may appear to be semantics, but it is at the center of many misconceptions regarding patent protection. Many clients will assert that they are practicing technology according to the "rights" they have under a granted patent. In fact, patents confer no affirmative rights and the fact that you have a patent does not necessarily mean that you do not infringe on another party’s patents. This must be considered as organizations gauge their freedom to operate in a given technology.
Trademarks. What other aspects of intellectual property should be considered? In considering an overall IP strategy, a corporation would be remiss without realizing how trademarks can provide value. Section 45 of the Trademark Act provide that a Trademark includes "includes any word, name, symbol, or device, or any combination thereof (1) used by a person, or (2) which a person has a bona fide intention to use in commerce and applies to register on the principal register established by this Act, to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown."6
Trademarks are essentially the names, words, or symbols with which consumers associate certain goods or services of a given business. In this advertising-based world, we are constantly being bombarded with company names, logos, catch phrases or unique looking devices that are designed to identify either goods or services with a company name, logo, catch phrase, or unique looking device. In fact many advertising dollars are spent each year to reach out to the consumer marketplace to positively identify a company’s goods and services in the minds of would-be buyers. This notion is called building "good will." With enough exposure backed-up with a quality good or service, an intangible value associated with a corporation’s trademark or service mark is created. When you think of coffee, likely you don’t think of coffee alone but rather a type of coffee made by some company with which you associate positive qualities, whether those qualities represent taste, price, or availability. When you think of a car, likely you don’t think of a car alone but rather a type of car made by some company that represents the qualities that you are seeking in a car. When you think of a MP3 player, likely you don’t think of a MP3 player alone but rather a type of MP3 player made by some company whose positive qualities you associate with this product. You get the idea: these are all trademarks.
Some trademarks can have tremendous value, which translate into products or services sold. The problem may arise where once a company has invested advertising dollars to associate with the marketplace, other competitors may try and nudge into the market place with a "me-too" good or service. Of course, the U.S. is built upon a free marketplace economy where competition is encouraged. Nonetheless, trademark protection can provide the right to prevent others from using "confusingly similar" marks (service marks, or trademarks). Trademark rights can be applied for at the USPTO and with the Secretary of State of each state and can be indefinite in term upon successful registration and payment of requisite fees.
Copyrights. In yet another facet of IP protection, it is important to identify copyrights. Copyright provides protection to authors of "original works of authorship" to include: literary (books), art, music, play scripts, and the like – that may be unpublished and published.
Typically, books and other literary works of art can be entitled to copyright protection. A work can be registered at the Library of Congress Copyright Office with the protection term lasting the life of the author plus seventy years (generally). However, if the author is not known the copyright protection lasts ninety-five years from year of first publication or a term of 120 years from the year of the work’s creation, whichever expires first. (Note that the term may vary with publications prior to 1978.7) Less commonly known items that may be worthy of copyright protection are architectural plans, software source code, and the like. However, in a corporate setting, it is important to consider copyright protection for presentation materials, training manuals, and pamphlets.
The copyright right gives the owner of the copyright the exclusive right to reproduce, to prepare derivative works, to distribute copies or recordings of the copyrighted work, to perform the copyrighted work publicly, or to display the copyrighted work publicly (1976 Copyright Act).
Conclusion. Yes, Sir! There it is - intellectual property in quick review. The real fun starts upon inculcating these IP concepts into a corporate setting!
1 The article is written to provide interesting and useful information from the perspective of setting up a new IP department in an already existing corporate setting. The views and opinions contained are those only of the respective authors and not those of any client (past or present) that may currently be or may have been represented by respective author(s). Further, we have written this article based on a fictional new client who has no IP experience. In real life, it is more likely that you will be advising a relatively IP savvy client and various approaches described herein will need to be tailored accordingly. The authors have taken poetic license in the following fictional article and any similarity between the fictional version of the portrayal herein and any actual facts is purely coincidental.
2 765 ILCS 1065/2 (2008).
3 35 U.S.C. § 101.
4 35 U.S.C. § 154.
5 35 U.S.C. § 101.
6 15 U.S.C. § 1127
Vik Panchal is Intellectual Property Counsel for INEOS Technologies, located at the Lisle Executive Center in Lisle, Illinois. In this role, he supports the Ineos Oligomers business with respect to all aspects of intellectual property protection and licensing. Vik has worked in a variety of legal positions since starting his career at the commercial litigation law firm of Robert F. Coleman and Associates. After going in-house in 2003, Vik also obtained his registration to practice with the USPTO. He has been in-house counsel with Cytomedix, Inc. - a biotech start-up, IP Manager with Broin and Associates, Inc, and is currently with INEOS. Vik received a B.S. in Biochemistry from University of Illinois and holds a J.D. from Southern Illinois University School of Law. He has lectured on various IP issues with emphasis on nascent IP program implementation into a commercial setting.
James Drake is Intellectual Property Counsel for Ineos Technologies, located at the Lisle Executive Center in Lisle, Illinois. In this role, he supports the Ineos Polyproylene business with respect to all aspects of intellectual property protection and licensing. James has worked in a variety of patent positions since starting his career at the law firm of Weston, Hurd, Fallon, Paisley and Howley in 1990. He has been a patent attorney at Nalco Chemical Company, IP attorney at BASF Corporation, Business Counsel for the Dowpharma business at The Dow Chemical Company and, prior to taking his current position, was Special IP Counsel for Corning Incorporated. James received a B.S. in Biology from Cleveland State University and holds a J.D. from Cleveland-Marshall College of Law. He has lectured on numerous IP issues, most recently speaking on the topic of protecting IP in strategic alliances for the Practicing Law Institute.