Trade Secrets, Trademarks and Trade Secrets, Trademarks and CopyrightsCopyrights

SecrecySecrecyPrevention 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 When Does Secrecy Work? Work? When there are few sources of the information

about the new product or serviceWhen 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 do something 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 than for products that are observable-in-use

Trade SecretsTrade SecretsTrade Secret: information that belongs to a

business that is generally unknown to others. ◦Firm can protect proprietary product or process as

trade secret without disclosing detailed information that would be required in patent.

◦Enables broad class of assets and activities to be protectable.

◦To qualify: Information must not be generally known or

ascertainable. Information must offer a distinctive advantage to the firm

that is contingent upon its secrecy. Trade secret holder must exercise reasonable measures

to protect its secrecy.

Trade Secrets 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 Conditions to Have a Trade Secret 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

keep the information secret

Secrecy as a StrategySecrecy as a StrategyOffers a longer time horizon of protection and

it does not disclose information to competitors If the product is well suited for secrecyGenerate 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 policiesDelay 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 to fit them into their own plans

Risks the independent discovery and exploitation of the inventions

Trade Secrets Versus Trade Secrets Versus PatentsPatents

Non-Disclosure Non-Disclosure AgreementsAgreementsTrade secrecy is enhanced by having

employees sign a legal document called non-disclosure agreements that must:◦ Specify exactly what information is to be

kept secret◦ Provide consideration - employees must

receive something 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, both during employment and after the termination of an employment relationship

Enforcing Non-Disclosure Enforcing Non-Disclosure AgreementsAgreementsMany companies are willing to

sue the employees and others who help them because the only remedies for violation of non-disclosure agreements come through legal action

Non-Compete AgreementsNon-Compete AgreementsTrade 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 Enforcing Non-Compete AgreementsAgreementsNon-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 Non-Disclosure/Non-Compete AgreementAgreement

Ownership of Intellectual Ownership of Intellectual PropertyPropertyThe rights to technologies that

employees develop during their employment at a company reside with employees unless the company require them to assign the rights to them

CopyrightsCopyrights◦Copyright: a form of protection granted to works

of authorship. Copyright prohibits others from:

Reproducing the work in copies or phonorecords Preparing derivative works based on the work Distributing copies or phonorecords for sale, rental, or

lease Performing the work publicly Displaying the work publicly

Work that is not fixed in tangible form is not eligible.

Copyright is established in first legitimate use. However, “doctrine of fair use” stipulates that

others can typically use copyrighted material for purposes such as criticism, new reporting, teaching research, etc.

Copyright for works created after 1978 have protection for author’s life plus 70 years.

CopyrightsCopyrightsCopyrights 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 What Can Be Copyrighted?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 Who Gets a Copyright and How Do They Get It?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 goes to 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 Enforcement Through Litigation 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 copyrighted work

The statute of limitations on copyrights only lasts three years

A Copyright Application A Copyright Application FormForm

Recent Developments to Recent Developments to Strengthen CopyrightsStrengthen CopyrightsFile-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

Fair UseFair Use

Software CopyrightsSoftware CopyrightsCopyrights can be used to protect the source

code, object code, microcode and screen displays in software, but not the ideas, mathematical formulas or equations behind 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 evaluate infringement

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

Copyright Protection Around Copyright Protection Around the Worldthe World

◦Copyright law varies from country to country.

◦However, the Berne Union for the Protection of Literary and Artistic Property (“Berne Convention”) specifies a minimum level of protection for member countries.

◦Berne convention also eliminates differential rights to citizens versus foreign nationals.

Trademarks and Service Trademarks and Service MarksMarks

◦Trademarks and Service Marks: a word, phrase, symbol, design, or other indicator that is used to distinguish the source of goods form one party from goods of another (e.g., Nike “swoosh” symbol) Rights to trademark are established in legitimate use of

mark; do not require registration. However, marks must be registered before suit can be

brought over use of the mark. Registration can also be used to establish international

rights over trademark.

◦Two treaties simplify registration of trademarks in multiple countries: Madrid Agreement Concerning the International Registration of Marks, and the Madrid Protocol. Countries that adhere to either or both are in Madrid Union (77 members)

TrademarksTrademarksTrademarks 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 What Can Be Trademarked?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 one company 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’s identity, and does not dilute the value of another party’s trademark

Obtaining a TrademarkObtaining a TrademarkOne 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 Many Companies Obtain a Large Number of TrademarksNumber of Trademarks

Enforcing a TrademarkEnforcing a TrademarkTrademarks provide a negative

right and must be enforced through legal action, which is often more difficult for start-ups to undertake than for established companies to conduct

Trademarks are lost through◦Cancellation proceedings◦Abandonment◦If they take on generic meaning

Domain NamesDomain NamesThe names used on Web sites to

identify an organization providing a good or service

They are protected through legal action

Use of Domain NamesUse of Domain Names

International Issues in International Issues in Intellectual PropertyIntellectual PropertyThere 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 Top 20 Countries for Patent ApplicationsPatent Applications

Differences in Intellectual Differences in Intellectual Property RegimesProperty RegimesMajor 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 on the timing of disclosure, and their requirement to manufacture

First-to-InventFirst-to-InventThe 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 technology before anyone else

Failure to act quickly to apply for patents in other countries may deter from obtaining patents outside the United States

Disclosure 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 Requirement to Manufacture 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 Intellectual Property in Developing CountriesDeveloping CountriesDeveloping country governments often do

not enforce intellectual property laws vigorously because companies in those countries generate little value from intellectual property and because weak intellectual property laws reduce the cost of many products

Weak intellectual property laws in developing countries lead to widespread piracy, and require companies to formulate strategies that are effective under such conditions

International Agreements on International Agreements on Intellectual Property Intellectual Property Several international agreements make

it easier to obtain intellectual property protection in multiple 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

Property Rights Agreement