1. INTELLECTUAL PROPERTY 101 & Software Audits Institute of Management Accountants January 20, 2010 Presented By: Jay Richardson & Allison Brennan Attorneys at Law Buckley LeChevallier P.C.

2. Intellectual Property Types & Characteristics of Each: 1. Patent: grant of a property right in an invention 2. Copyright: literary, dramatic, musical, artistic, and certain other intellectual works fixed in a medium of expression to protect against third parties copying such material without permission 3. Trademark: logo, tagline, product name, business name, domain name to identify and distinguish goods and services 4. Trade Secrets: information not generally known in trade

3. PATENT  The most technical and difficult protection to obtain; highly specialized area of law;  Definition of the scope of patents is “whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new or useful improvement thereof, may obtain a patent”

4. PATENTS  Types of Patents: Utility patents Design patents Business method patents Plant patents

5. PATENTS  US patents are governed by the Patent Act (35 U.S. Code) US patent law grants to patentees the exclusive right to make, use, and sell the invention during patent period and to exclude others from producing, using, importing or selling or offering to sell the inventor’s discovery or invention for a limited period of time (20 years from the date of application)

6. PATENTS  To obtain protection under US law, a patent application must be submitted to the USPTO for examination to determine if the invention is patentable. Criteria for an invention to be patentable must be: Patentable subject matter Non-obvious (in relation to prior art) Novel (in relation to prior art) Useful

7. COPYRIGHT  What is a copyright?  Definition (17 USC § 102(a)): ♦ Original work of authorship ♦ Fixed in ♦ Tangible medium of expression (now known or later developed) ►Original work of “authorship” ♦ Requires expenditure of a modicum of intellectual effort ♦ Originality ♦ Ingenuity, uniqueness, and esthetic merits are not required ►Fixation: A work is “fixed” when its embodiment is sufficiently permanent to allow it to be perceived for more than a period of transitory duration

8. Types of “works of authorship” protected  Literary  Artistic – dramatic and choreographed works  Musical – including words  Pictorial, graphic, and sculptural works  Motion pictures  Computer programs  Architectural works

9. “Economic Rights” – exclusive rights to control  Copying  Distribution  Publication  Performance  Creation of derivative works

10. Ownership  Author: person(s) who actually created the work  Work made for hire ▪An employer is considered to be the author, if A work is prepared by the employee within the scope of employment No signed agreement is required (but employers will anyway) ▪Specially commissioned work

11. What is a trademark?  A word, name, symbol, design, logo or combination of these  used to identify and distinguish the source of the subject goods or services

12. Types of Marks  Trademark (goods): identify the source of the goods and expectation of level of quality (Nike ®, Coca Cola ®, Kodak ® )  Service Mark (services): identify the source of the services and expectation of level of quality (McDonalds ®, Fed Ex ®, NBC’s peacock of colors, Bruce Seiler’s “Manage the Capital, Grow the Business”)  Certification Marks: certify characteristics of goods or services (Underwriters Laboratories ® certification of electrical standards, Good Housekeeping ® Seal of Approval)  Collective Marks: indicate membership in a group (Girl Scouts ® )

13. Symbols  ® - designates federally registered mark (USPTO)  TM - designates goods, owner claims common law trademark rights, mark not registered  SM - designates service (rather than product) not registered, e.g., “Manage the Capital, Grow the Business SM ”

14. The goal of trademark law is to promote commerce by informing consumers who is behind the product or service being purchased and by enabling owners to build a following in their goods or services.

15. How do you get trademark rights?  By being the first to use the mark for your particular product / service if the trademark you’ve selected is “strong.”  You may also gain trademark rights by applying to register to use the mark, if you later use it and are granted the registration.

16. What makes a “STRONG” trademark?  Its distinctiveness – how well the trademark distinguishes itself and its product from others in its industry, which is measured: Conceptually – how much does the trademark describe the product? Commercially – how many other similar marks are already in use in that field?

17. Question:  Does a trademark’s strength increase the more accurately it describes the product?

18. Answer:  NO! The more the trademark describes the product, the less protectable it is. Think “Shoes”. That’s a generic word that all shoe sellers are entitled to use to describe their product. “Flat Shoes” isn’t much better, that’s descriptive. UNLESS the descriptive name has secondary meaning, which means the public strongly associates the trademark with the seller’s product, like “Toys R Us”.

19.  The less directly the trademark describes the product, the stronger the trademark will be conceptually.  A suggestive trademark, which suggests a product’s qualities, is often protectable (depending on how crowded the field is), for example: Mustang for cars  An arbitrary term that doesn’t describe the product is even stronger: Apple computer  The strongest trademarks are coined terms: Kodak and Prozac  The problem with the coined/arbitrary trademarks is that it takes more effort/resources/$$ for company to educate the public about what the product associated with the trademark is.

20. Think of it as a continuum: Generic  Unprotectable Descriptive  weak, unless it has a secondary meaning Suggestive  stronger Arbitrary/Coined  strongest

21. Website Domain Names  A domain name is a company’s Internet address, whereas  A trademark designates the origin of goods and/or services  A domain name is not a trademark Unless you use your domain name as a trademark like “monster.com ® ” or “overstock.com ® ”

22. What is a trademark infringement?  Another’s use of a similar trademark in a manner likely to cause confusion.

23. Likelihood of confusion is measured by:  The similarity of the trademarks, products and marketing methods and customer sophistication  The strength of the senior user’s mark  The junior user’s intent in selecting its mark  Whether actual confusion has occurred

24. TRADE SECRETS  A trade secret is information generally not known in trade; must take reasonable steps to maintain secret; protects against acquisition by improper means Generally, driven by state law, Uniform Trade Secrets Act is the “standard”

25. In Oregon  ORS 646.461(4) defines a “trade secret” as “information, including a drawing, cost data, customer list, 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.”

26.  Nondisclosure / Confidentiality Agreements  Scope of definition of “confidential information”  Tangible (labeled) information  Intangible information

27. Software Licensing Audits: Would Your Company Pass?  What is a licensing audit? Software vendors use audits to protect their intellectual property and identify misuse or overuse of software licenses. By installing the software, you agree to the terms of use, including the right to audit  Why Should You Care? Vendor audits are increasing as a method of replacing revenue lost due to slow sales and deter the alleged increase in pirating Penalties for licensing violations can be severe: copyright penalties of up to $150,000 per infringed title

28.  When Was Your Last Internal Audit? Is every single operating system and application used in your business licensed? Are you certain? Reduce the financial risks of an audit by knowing know what software is installed and where it came from. Perform an internal audit annually: Identify all software, compare with the company's software licenses and obtain proper licenses for any unlicensed software.

29. Questions? Comments? Please visit our website at www.buckley-law.com