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Small
Business Home >> Useful
Standard Legal Documents >>
Avoiding Patent, Trademark, & Copyright
Problems
INTRODUCTION
Patents, copyrights and trademarks, as well as know-how or
trade secrets, are often collectively referred to as intellectual
property. Many firms have such property without even being
aware of it or of the need to take measures to protect it.
Many people's notions of intellectual property are unrealistic.
Some believe, for example, that having a patent on a product
will enable one to succeed in the marketplace. Consequently,
they may spend thousands of dollars to obtain the exclusive
rights to market something that no one wants or can afford
to buy. Others may conclude that intellectual property protection
is not worth the expense and bother.
People who may not be interested in protecting their own
rights still must take precautions to avoid infringing on
the rights of others. This calls for more than the avoidance
of copying. Copying is unavoidable; it is a way of life and
one way in which we learn. But, one can easily infringe on
the rights of others without deliberately imitating specific
features of goods or services.
This publication addresses the steps newcomers to a market
should take to avoid infringement and when they should take
them.
PATENTS Most people have heard variations on a remark attributed
to Ralph Waldo Emerson: If a man can make a better mousetrap
than his neighbor, though he builds his house in the woods
the world will beat a path to his door. To keep the discussion
concrete, let's imagine a present day inventor of a new mousetrap
who not only invents a better mousetrap but is also successful
in marketing it. The higher the inventor's profit margin,
the more others will want to copy his invention. Let's assume
that the inventor selects Figaro as the brand name and actively
promotes the product. However, he does not legally protect
his invention, but relies on the consumers' loyalty, goodwill
and brand identification to ensure future sales.
Taking measures to develop loyalty and goodwill may be sufficient
until a larger and better known competitor turns up. For example,
what if economies of scale and lack of development costs mean
that the competitor can sell the same mousetrap for 20 percent
less? Goodwill may not be enough to ensure customer loyalty
at a higher price. A patent would be much more helpful, because
it would prevent the competitor from selling the new trap
until well after the original firm had a chance to get on
its feet. This situation illustrates that it is the smaller
firm that often has the most to gain from protecting intellectual
property.
As bad as the situation is without patent protection, it
could be worse. Let's assume that customers are so taken by
the Figaro promotion that they are willing to pay the 25 percent
premium the firm charges in order to stay in business. Imagine
what would happen if the company had to stop using that name
or had to face an expensive lawsuit. Imagine what would happen
if it turns out that someone else actually has a current patent
on one or more features of the better mousetrap. By failing
to consider the intellectual property of others, the new firm
would not only be forced to stop selling under the name Figaro,
but might be forced to stop selling the mousetrap altogether.
AVOIDING PATENT INFRINGEMENT Utility patents - what people
usually mean when they use the term patents - provide 17 years
of exclusive rights for inventions that deal with the way
things work. Design patents afford 14 years of protection
for significant improvement in the appearance of useful items,
such as car bodies or furniture. Both of these patents do
more than prevent copying; they forbid the making, using or
selling of an invention similar to or the same as the protected
invention, even though the second invention was independently
created. (Plant patents, which will not be covered in this
discussion, may not give the same protection.)
Copying may actually be a way to avoid infringement. The
inventor of the mousetrap might have avoided potential problems
by using technology that was described in a printed publication,
publicly used or on sale. Products that are on sale and give
no notice of patent coverage are relatively free from the
risk of infringement.
Any person trying to market fairly new technology that doesn't
appear to be patented should keep in mind that an inventor
has one year from public sale or disclosure within which to
file a patent application. In addition, because patents often
take two or more years to obtain, there is still a chance
that a patent could be issued at a later time. Although there
is no liability for infringement prior to issuance of a patent,
a competitor would have to cease making, using or selling
the technology once the patent was issued, thus risking the
loss of both start-up costs and inventory.
Of course, if our inventor was determined to make a better
mousetrap, there would be no interest in copying something
else in the market. Still, before spending too much time and
money on research, the inventor should ensure that others
do not have exclusive rights in the area being explored. The
inventor certainly should not assume that, because a product
is not on the market, it is unpatented. As many independent
inventors have learned to their chagrin, it is usually easier
to patent something than to market it profitably.
A PATENT SEARCH The inventor should hire a patent attorney
or agent to conduct an infringement search. A patent agent
is a technically trained person who has passed a special examination
given by the U.S. Patent and Trademark Office; a patent lawyer
is one permitted to draft contracts and provide other general
legal services. Patent searches can be expensive if one must
consult foreign records; it is much less costly to determine
whether technology is currently patented in the United States.
Yet, as we will see, there is value in going somewhat beyond
that point.
A search might reveal that (1) someone else had a patent
that has since expired, i.e., the information patented is
now in the public domain; (2) no current or expired patents
cover the area of proposed research or (3) someone else has
a current patent covering all or part of the proposed design.
Let's consider these potential results in order.
THE INVENTION IS IN THE PUBLIC DOMAIN If the mousetrap (or
an obvious variation) was disclosed in an expired patent,
the inventor is free to manufacture and market it without
concern for the patent laws. Also, even if the inventor didn't
find exactly what he or she originally had in mind, a host
of good and freely used ideas that are even better might have
been discovered. These alone could be worth several times
the price of the search in saving research and development
time.
ONE OR MORE ELEMENTS OF THE PROPOSED MOUSETRAP APPEAR TO
BE NEW If, after a thorough search, our inventor's proposed
improvements to the mousetrap seem not only to be novel but
also to offer significant advantages over the prior design,
the inventor may seek a patent and/or begin selling the mousetrap
without further ado. If, however, the inventor begins selling
without first filing a patent application, he immediately
forfeits possible protection in many other countries and also
forfeits any possibility of patent rights in the United States
after one year.
ASPECTS OF THE PROPOSED DESIGN ARE COVERED BY A CURRENT PATENT
If an unexpired patent is found to cover any part of the proposed
mousetrap design, the inventor knows that he is not free to
use it without a license. Infringing on a current patent exposes
one to a suit for damages as well as an injunction against
future use. Even an injunction might mean substantial costs,
including the loss of current inventory, and a patent covering
even a small feature of the new mousetrap might give rise
to the need to retool. Although deliberate infringement is
more serious, ignorance of others' patents is no defense.
TRADEMARKS Trademarks (or brand names) indicate commercial
source. Trademarks may be words, logos or other symbols indicating
that goods come from a particular company. They may even be
sounds, three-dimensional symbols (such as the well-known
McDonald's golden arches) or colors. There are also service
marks, which indicate the source of services, and other kinds
of marks that will not be considered here.
As with patents, one can infringe on another's marks without
copying them or even being in direct competition with their
owner. All that is necessary is to use the same or a similar
mark under circumstances in which consumers may be confused
as to the source or sponsorship of the goods or services.
A TRADEMARK SEARCH A trademark search is the only way to
find out whether Figaro or something confusingly similar is
being used by others as a mark for a mousetrap (or perhaps
such things as rodenticides) in the proposed market area.
It is also necessary to determine whether the mark has been
registered in the U.S. Patent and Trademark Office, which
could give the registrant rights well beyond the market areas
currently occupied.
There are two reasons why a search may not be sufficient.
First, in the United States, it is unnecessary for a firm
to do more than use a good mark to have trademark rights in
its market area. Consequently, a search may not locate all
such prior users. Second, people may be able to prevent the
use of a potential mark without having used it as a mark themselves;
for example, when a trademark can be associated with others
in such a way that consumers might presume that some kind
of relationship might exist. This is where the mark Figaro
would run into trouble.
As you may recall, Figaro is the name of the cat in the Disney
film Pinocchio. Although the Walt Disney Company does not
have a monopoly on the use of the name, it might nevertheless
be able to prevent it from being used on a mousetrap. If that
seems too farfetched, consider the company's concern if "Mickey"
had somehow been part of the mousetrap name!
COPYRIGHTS A copyright provides an owner with the exclusive
rights to reproduce a certain work for a specified period,
subject to some basic limits. The term of a copyright is the
lifetime of the author plus 50 years in the case of identifiable,
living authors. Copyrights arise automatically and are inexpensive
to register.
Searching for a prior copyright is probably unnecessary.
Copyright infringement can be avoided by establishing that
a work was independently created. Therefore, records showing
independent creation are helpful to avoid liability. Even
with such records, establishing independent creation may be
difficult if the original work was widely disseminated or
otherwise available to the alleged infringer. In one such
case, the court held that, although copying may have been
unconscious, the original was nevertheless infringed.
One of the limits to copyright protection is that ideas (compared
to expressions) and technology (computer software aside) are
generally not protected. This means that our inventor is free,
at least as far as copyright laws are concerned, to use any
information that can be found in books on mousetrap designs
and to make and sell working copies of anything shown or described.
Copyright gives the owner only the right to prevent reproduction
of the text or drawings themselves.
What if the inventor wants to use some of that text, for
example, in an advertisement? There is a remote possibility
that such use might be protected under the "fair use"
defense, but it would be very unwise to proceed without getting
permission from the copyright holder or seeking expert advice.
TRADE SECRETS Trade secrets overlap the subject matter of
copyrights and patents. As long as efforts have been made
to preserve secrecy, a suit may be brought to redress the
misappropriation (or wrongful taking) of almost any kind of
information of competitive value. Misappropriation includes
industrial espionage and breaches of confidential relationships
(for example, by former employees), but it does not include
reverse engineering. Thus, a trade secret suit will not succeed
if an aspect of a product's design or construction was obtained
by examining an item purchased in the marketplace. Nor will
a suit be useful against those who independently discover
a secret process or recompile commercially valuable information.
The risk of being accused of misappropriating a trade secret
is never very high, particularly if one seeks competent legal
advice before using unlicensed information that has not been
obtained through reverse engineering.
THE NEED FOR EXPERIENCED COUNSEL Any attorney admitted to
practice in any state in the country is technically qualified
to register trademarks with the U.S. Patent and Trademark
Office or copyrights with the U.S. Copyright Office in Washington
D.C. Unlike the situation with patents, no special examination
is given to determine whether the attorney is familiar with
the copyright or trademark law or registration procedures,
for example. Clients are advised to seek an attorney who specializes
in such matters.
SUMMARY Whether or not our mousetrap inventor takes measures
to preserve the intellectual property, he or she certainly
should avoid infringing on the rights of others. Although
this is not difficult in the case of copyrights and trade
secrets, patents and trademarks are another matter altogether.
Unquestionably, it costs precious start-up capital to have
patent and trademark searches performed; however, proceeding
in a new venture without doing so is equivalent to erecting
a building or signing a long-term lease without checking the
real estate title. Searches will not make the product appeal
to the public, but they will ensure enjoyment of any hard-won
market success. A patent search is comparatively cheap insurance
against the possible need to retool or to absorb inventory
losses. Moreover, a close look before adopting a trademark
is cheaper in the long run than the cost of advertising and
new promotions designed to advise customers to seek the mousetrap
under a new name.
APPENDIX A: FURTHER INFORMATION ON INTELLECTUAL PROPERTY
Patent and Trademark Office, Washington, DC 20231, or the
United States Trademark Association, 6 E. 45th Street, New
York, NY 10017. Both publish free or inexpensive booklets.
A booklet for independent inventors, "So You Have An
Idea", is available from the Innovation Clinic, 2 White
Street, Concord, NH 03301. To order it send $2.00 and a self-addressed
mailing label. The Innovation Clinic also has a set of HyperCard
stacks (for Macintosh computers) covering several topics of
interest to inventors and small business owners. These are
available for $5.00 and a self-addressed mailing label.
Write to the Copyright Office, Washington, DC 20559, indicating
the subject matter in which you are particularly interested,
for example, music or arts.
"Patents Trademarks and Copyrights", Lawrence E.
Evans, Jr., 1986, Gunn, Lee and Jackson, Eleven Greenway Plaza,
Suite 1616, Houston, TX 77046.
You may want to consult one or more of the many inventors'
handbooks available at public libraries. One example is "How
to Profit From Your Ideas", Flemming Bank, 1985 ($12.95).
Bank and Associates, P.O. Box 20365, Portland, OR 97220. This
is a step-by-step guide that shows how you can make money
by turning your creative ideas into marketable products.
APPENDIX B: INFORMATION RESOURCES U.S. Small Business Administration
(SBA)
The SBA offers an extensive selection of information on most
business management topics, from how to start a business to
exporting your products.
This information is listed in "The Small Business Directory".
For a free copy contact your nearest SBA office.
SBA has offices throughout the country. Consult the U.S.
Government section in your telephone directory for the office
nearest you. SBA offers a number of programs and services,
including training and educational programs, counseling services,
financial programs and contract assistance. Ask about
- Service Corps of Retired Executives (SCORE), a national
organization sponsored by SBA of over 13,000 volunteer business
executives who provide free counseling, workshops and seminars
to prospective and existing small business people.
- Small Business Development Centers (SBDCs), sponsored by
the SBA in partnership with state and local governments, the
educational community and the private sector. They provide
assistance, counseling and training to prospective and existing
business people.
- Small Business Institutes (SBIs), organized through SBA
on more than 500 college campuses nationwide. The institutes
provide counseling by students and faculty to small business
clients.
For more information about SBA business development programs
and services call the SBA Small Business Answer Desk at 1-800-8-ASK-SBA
(827-5722).
Other U.S. Government Resources Many publications on business
management and other related topics are available from the
Government Printing Office (GPO). GPO bookstores are located
in 24 major cities and are listed in the Yellow Pages under
the "bookstore" heading. You can request a "Subject
Bibliography" by writing to Government Printing Office,
Superintendent of Documents, Washington, DC 20402-9328.
Many federal agencies offer publications of interest to small
businesses. There is a nominal fee for some, but most are
free. Below is a selected list of government agencies that
provide publications and other services targeted to small
businesses. To get their publications, contact the regional
offices listed in the telephone directory or write to the
addresses below:
- Consumer Information Center (CIC), P.O. Box 100 Pueblo,
CO 81002 The CIC offers a consumer information catalog of
federal publications.
- Library of Congress Copyright Office, Register of Copyrights,
Washington, DC 20559
- Patent and Trademark Office (PTO), Washington, DC 20231
Public Service Center: (703) 557-INFO
- U.S. Department of Commerce (DOC), Office of Business Liaison,
14th Street and Constitution Avenue, NW, Room 5898C, Washington,
DC 20230 DOC's Business Assistance Center provides listings
of business opportunities available in the federal government.
This service also will refer businesses to different programs
and services in the DOC and other federal agencies.
Nongovernment Organizations - Software Publishers Association,
1101 Connecticut Avenue, NW Suite 901, Washington, DC 20036
- United States Trademark Association, 6 E. 45th Street,
New York, NY 10017
For More Information A librarian can help you locate the
specific information you need in reference books. Most libraries
have a variety of directories, indexes and encyclopedias that
cover many business topics. They also have other resources,
such as
- Trade association information - Ask the librarian to show
you a directory of trade associations. Associations provide
a valuable network of resources to their members through publications
and services such as newsletters, conferences and seminars.
- Books - Many guidebooks, textbooks and manuals on small
business are published annually. To find the names of books
not in your local library check "Books In Print",
a directory of books currently available from publishers.
- Magazine and newspaper articles - Business and professional
magazines provide information that is more current than that
found in books and textbooks. There are a number of indexes
to help you find specific articles in periodicals.
In addition to books and magazines, many libraries offer
free workshops, lend skill-building tapes and have catalogues
and brochures describing continuing education opportunities.
If this document is of use
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