Trade Secrets, Trademarks and Copyrights

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 the new 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 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 Secrets Trade 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 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 keep the information secret

Secrecy as a Strategy Offers a longer time horizon of protection and it does not disclose information 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 to fit them into their own plans Risks the independent discovery and exploitation of the inventions

Trade Secrets Versus Patents

Non-Disclosure Agreements Trade 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 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 through legal 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 the rights to them

Copyrights ◦ 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.

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 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 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 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

Fair Use

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 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 the 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 Marks ◦ 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)

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 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 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

Enforcing a Trademark Trademarks 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 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 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 on the 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 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 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 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 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