top 5 ip mistakes startups make - and how to avoid them
DESCRIPTION
When it comes to startups and intellectual property, it’s definitely a case of “what you don’t know can hurt you” — think loss of your “special sauce,” expensive litigation, and worse. Proper IP management protects your company, creates an asset (that potential investors want to see), gives you legitimacy, and provides you with leverage in case of a “fight.” In this presentation, from Allonn Levy, Shareholder for Hopkins & Carley, and Glenn McCrae, Chief Strategy Officer for Early Growth Financial Services, you'll learn tips for registering your IP; pre-litigation and litigation remedies for IP issues; the best tools for researching trademarks, etc.; understanding license agreements; and more.TRANSCRIPT
The Top 5 IP Mistakes
Early Growth Companies Make
#IPMistakes
Allonn E. Levy, Esq.Hopkins & Carley
Glenn McCraeEGFS
San Jose
Palo Alto
Burbank
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Mistake #1: I Don’t Need To Register My IP
I’m not looking for a fight I don’t have the money I’ll do it when I need to I have more important things to do I wouldn’t have the money to enforce my
rights anyway It’s OK, I’ve got an NDA
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Consider…
Copyright
Trademarks Trade Secrets
Patents
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What Is a Copyright? A limited monopoly granted to a author/creator by
the U.S. Constitution & Fed. Govt. (Art. I §8 U.S. Const.)
The author is granted an exclusive right in the expression – but not the ideas
The term of the exclusionary right is generally 70 years after the death of the last surviving author. (17 USC §302)
Practitioner Beware: duration differs for anonymous works, pre-1978 works and others
Work For Hire - A SV Favorite Generally: A copyrightable work prepared by an employee within the
course and scope of her employment is a work for hire and the work is deemed authored by the employing company. (17 USC §101, 201)
Employee v. Independent Contractor Generally an independent contractor does not fall within the work for
hire rule… unless she does. (Community for Creative Non-Violence v. Reid, 490 U.s. 730 (1989) [setting forth non-exhaustive analysis for employee / independent contractor analysis]).
Specially Ordered or Commissioned works are presumed not to be works for hire unless specifically Agreed-upon by both creator and employer.
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What Rights Do Copyrights Protect? Right to:
Reproduce works; Prepare derivative works;
Distribute works to the public through sale, license, transfer, rental etc;
Publically Perform the work (for literary, sound and other creative works etc.);
Publically display the work (for graphic, sculpture, motion picture, dramatic works etc.)
(17 USC §103)
17 U.S.C. §204 – requires “an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights comprised in a copyright” to be in writing signed by the author.
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Copyrightable Subject Matter
Original works
Fixed in a tangible medium from which they can be perceived, reproduced or otherwise communicated (written, pictured, sculpted, danced) (17 USC §102(a))
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• Books• Movies• Pantomimes• Some Databases• Computer Programs
• Photos• Websites• Pamphlets• Ads• Music & Lyrics
What Cannot Be Copyrighted? Idea, Process, System, Method of Operation, Concept,
Principle, or Discovery (17 USC §102(b))
Idea/Expression Dichotomy – Plot, Idea, Data within Database, Etc.
Gardens – Kelley v. Chi. Park Dist. 635 F.3d 290 (7th Cir. 2011) (living garden not “fixed” and not “authored”)
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Litigation Benefits of Registration Copyright exists absent registration but….
An author must register in order to file a lawsuit (17 USC §411)
An author may only collect attorneys fees and statutory damages if the work was registered within 3 months of publication or prior to infringement (Oddo v. Reis, 743 F.2d 630 (9th Cir. 1984))
Registration within 5 years of publication creates a presumption of validity for the copyright. (17 USC §410).
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Pre-Litigation Remedies
DMCA Notice & Takedown Provisions
Creates a “Safe Harbor” for On-Line Service Providers (OSPs)
To remain in the “Safe Harbor” the OSPs must comply with proper notices under 17 USC 512c(3)a.
Draft notices carefully: Section 512f – creates liability for any “person” who misrepresents
Yes, lawyers are people too…
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Litigation Remedies Injunctions – pre and post-trial
Actual damages/profits or Statutory Damages Actual losses of owner or actual profits of infringer; $750 - $30,000 per infringement; $150,000 per willful infringement;
Discretionary award of fees and costs
Court impound and destruction of infringing works (17 USC §§503, 504, 505)
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Patents
Article 1, Section 8, of the U.S. Constitution states that Congress is empowered to "...promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries“
In exchange for promptly disclosing to the public, the government to provides individuals with legal protection for their inventions
Covered by federal law (Title 35 of U.S. Code)
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What Is a Patent
A limited monopoly granted to a patentee by the U.S. federal government.
The term of the exclusionary right is generally 20 years from the earliest effective filing date.
Patents filed since December 12, 1980 require the payment of maintenance fees to remain effective for their full terms.
What Is an Invention?
The discovery or creation of something new, useful and non-obvious that is recognized as being patentable.
Conception & Reduction to Practice America Invents Act (“AIA”)
First to File Conception & Reduction to Practice No Longer
Relevant as of March 2013
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Types of Patents Utility
“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 therefor, subject to the conditions and requirements of this title.”35 U.S.C. §101.
Design Whoever invents any new, original and ornamental design for an article of
manufacture may obtain a patent therefor, subject to the conditions and requirements of this title.”35 U.S.C. §171.
Plant “Whoever invents or discovers and asexually reproduces any distinct and
new variety of plant, including cultivated sports, mutants, hybrids, and newly found seedlings, other than a tuber propagated plant or a plant found in an uncultivated state, may obtain a patent therefor, subject to the conditions and requirements of this title.”35 U.S.C. §161.
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Patentable Subject Matter “Anything under the sun that is made by man. ”Diamond v.
Chakrabarty, 447 U.S. 303, 308-09 (1980) Any new, useful, non-obvious:
Process Machine Manufacture Composition of matter Improvement thereof
35 U.S.C. §101 (Utility Patent) Business Method Limitation – In re Bilski
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What Cannot Be Patented
Laws of Nature law of gravity
Physical Phenomenon a new plant found in the wild
Abstract Ideas E = mc2
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That Doesn’t Stop . . .
Goofy Patents
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Pat on the Back ApparatusU.S. Patent No. 4,608,967
A self-congratulatory apparatus having a simulated
human hand carried on a pivoting arm suspended form shoulder supported member.
The hand is manually swingable into and out of
contact with the user's back to give an amusing or an
important pat-on-the-back.
What Is a “Mark?”
TM – A word, phrase, symbol, or design (Trade Dress) or a combination of such elements that distinguishes the source of the good of one party from those of others
SM – A “service mark” is the same as a trademark but it relates to services rather than a product
® – Refers to a mark that has been registered with the U.S. Patent & Trademark Office’
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Establishing a “Mark”
Protectable marks are “inherently distinctive” (arbitrary or fanciful) or “descriptive” + have “acquired a secondary (source-identifying) meaning.” Presumptive protection can be established through:
Registration with the USPTO
Creation of a CA Corporation (Limited Protection)
Sufficient Use to Create Consumer Identification
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Likelihood of Confusion The 8 relevant factors (not exclusive):
(1) strength of the plaintiff's mark; (2) similarity between the two marks; (3) proximity of the goods; (4) evidence of actual confusion; (5) marketing channels used; (6) type of goods and the degree of care likely to be exercised by the purchasers; (7) defendant's intent in selecting his mark; and (8) likelihood of expansion of product lines.
Mallard Creek, 56 Cal.App.4th at 435 (citing Sleekcraft, 599 F.2d at 348-349).
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TM in SV – Domain Name Conflicts Cybersquatting: Intentionally registering another’s
mark;
Diversion Cybersquatting: Intentionally registering a similar or misspelled mark;
Innocent / Fair Comment: “yourTMsucks.com”
Conflicts between competing TM Owners
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Trade Secrets – What Are They Generally
“Information” that derives independent economic value, actual or potential, from not being generally well known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use and which is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
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California’s Got to Be Different
California Civ. Code Sec. 3426.1(d). A trade secret consists of information, including a
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.
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Trade Secret – Other Attributes Automatic provided that “reasonable efforts” are taken to
keep it secret.
Use agreements (i.e., Confidentiality, Security) and other means (e.g., limited access, need-to-know, exit interview) to maintain the trade secret status.
Lasts indefinitely, as long as it remains secret.
Formula for Coca Cola – kept as a secret
State Law not pre-empted.
Improper Use or Misappropriation – can be criminal
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Misappropriation – What Is It? Misappropriation has a specific legal definition which
includes two distinct types of misuse: 1) the acquisition by improper means, and 2) the use or disclosure of trade secrets. Civil Code section 3426.1.
"Improper means" includes "theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy, or espionage through electronic or other means." Civil Code section 3426.1(a).
The second definition of "misappropriation" under the Code refers to the prohibition of the use or disclosure of trade secret information. Civil Code section 3426.1(b)(2).
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Liability for Misappropriation
Injunction Damages
Money damages for the economic harm suffered as a result of a trade secret violation. This may include the plaintiff's losses resulting from the misappropriation and the defendant's profits derived from it. If the court determines that the defendant acted willfully or maliciously, it may award punitive damages in an amount up to twice its actual damages. Cal. Civ. Code § 3246.
Fees & Costs Attorneys' fees if the defendant acted willfully or maliciously. Cal
Civ. Code § 3246.4 (scroll down).
Statute of Limitations – 3-years in California
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WHAT DO YOU DO?
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Create An IP Strategy
Don’t “back-into” your decisions
Talk to someone smart
Register where possible
Protect where you can’t register
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What About Copyrights, Patents, and Marks? Registration is a good investment –
about $400-5K for copyright $3K-$10K for patents + $1.5K-$2.5K per office
action. $400-$3K for trademarks
Registration gives you leverage in a fight Registration gives you legitimacy Registration creates an asset
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No registration available
Creation is free – just need an NDA
Enforcement is expensive
No legitimacy
Difficult to claim as an asset
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What About Trade Secrets?
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Mistake #2 – Not Doing Your Homework
There Are Tools Other Than Google!
WHAT DO YOU DO?
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Search, Search, Search & Verify
Trade Names/Marks Mark Clearance Cross-Licensing Diligent
Upkeep/Enforcement
Copyrights & Patents PTO Searches Technology Searches Tracing / Documenting
Rights To Use
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Mistake #3 – The Right-Click Conundrum
How could something so easy
be bad?
Just because It’s easy…
Copying a copyrighted work (registered or not) is a copyright violation
The bots are out there…
Its not just YOU we need to worry about…
Your marketing department (which is probably your cousin Hank…) is a liability minefield.
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WHAT DO YOU DO?
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Plan Ahead
Policies Contracts –
indemnification Asking questions Policing your
marketing materials Policing your website
Documentation, documentation, documentation…
Take your OWN pictures
When in doubt DON’T USE IT
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Mistake #4 – Not Reading
The Fine Print
C’mon I Make Deals, I Don’t Have Time To
Read License Agreements!
Talk Is Cheap – The Fine Print IS Your Deal
License Agreements That Don’t Track Your Needs
Indemnification Agreements That Cover any IP Claim That Is Made – whether you are at fault or not.
Stringent Notice Requirements For Termination, Complaints, Non-Payment, Etc.
Agreements That Don’t Protect YOUR IP; Or Don’t Do So Under Different Circumstances (Bankruptcy, Sale, Transfer To Competitor etc.)
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WHAT DO YOU DO?
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Just Read the Damn Agreements! !!
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Mistake #5 – Ignoring the Digital Millennium Copyright Act (DMCA)
Ignoring The wwahhhuh?
DMCA
Safe Harbor - Immunity Grants You Complete
Immunity Even If A Copyrighted Work Is Actually Infringed.
Notice & Takedown The Single Most Powerful
Tool To Immediately Stop Infringement On The World Wide Web
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WHAT DO YOU DO?
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DMCA – What You Need
Safe Harbor - Immunity Do A Safe Harbor Review
17 USC §512(a) Web Sites Networking Services Server Farms / Co-los Content Delivery
Technologies Register & Designate an
Agent
Notice & Takedown Have Your Registrations
Organized and Available. If You Haven’t Registered
Have Clear Documentation Of Creation, Ownership/license status Organized and Available.
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Thanks and Q&A
•
Hopkins & Carley, A Law Corporation70 South First StreetSan Jose, CA 95113T: (408) 286-9800
@HOPKINSCARLEY
Allonn Levy, Esq., [email protected]
Glenn [email protected]
2033 Gateway Place, 5th Fl.San Jose, CA 95110T: (415) 320-5753
@EARLYGROWTHFS