Valuable intellectual property generally does not suddenly or magically appear. The best business ideas are often the product of careful research and development. Artistic and literary creations frequently result from months and years of creative effort. The adoption of a trademark may be preceded by expensive consumer surveys and a diligent search to identify previous uses of similar marks.
To ensure that those who expend these efforts reap the benefits, the law recognizes four main types of intellectual property: patents, copyrights, trademarks, and trade secrets. Intellectual property law also provides specific forms of protection for semiconductor layouts-designs, symbols indicating geographic origin, industrial designs, and plant varieties.
Sovereign entities grant patents to inventors as incentives to encourage progress in applied science. The need for these incentives is almost universally recognized in the fact that patent systems now exist in most of the industrialized, and even some developing, nations of the world.
Patents are granted by the U.S. Patent and Trademark Office (USPTO), a branch of the Department of Commerce, for inventions of new and useful compositions, machines, articles of manufacture or processes. (There are also special types of patents available for new plant varieties and new ornamental designs for manufactured articles.) The USPTO carefully examines each application for a patent, and grants protection for those inventions that meet stringent legal standards. The invention must be useful and novel (i.e., not previously known or used), and must not be obvious over what is already known.
Corporations invest millions (some even billions) of dollars in developing new products and production techniques. Every such investment is a gamble. Such investments would not be made if competitors could copy successful innovations and creative works of others at will. The limited duration of a patent gives successful inventors a necessary head start in recouping the fruits of their investment, thereby enabling them to invest in further research.
Patents are property. Patent rights may be sold and licensed. Many corporations, research organizations, and individuals, as well as the Federal Government, own patents. Sometimes they own substantial banks of them. The power of important patents is illustrated by the following examples:
- For many years the oil and gas drilling industry searched for a rotary rock drilling bit that could withstand the high temperatures and pressures encountered by bits at depths of several miles. Periodically, spent bits had to be brought to the surface at great cost. Hughes Tool Company owned patents on inventions that solved the problem. Competitors began to copy the patented Hughes Tool bits. In a series of lawsuits, Hughes proved that the patents were valid and infringed. In one lawsuit alone, Hughes was awarded a judgment of almost $205 million against a competitor who had profited extensively from the infringing use of Hughes' patented inventions.
- In the years following Polaroid's development of an instant photography system, Polaroid secured a series of important patents. In 1976, another company began competing in Polaroid's market and succeeded in capturing a substantial share of the market. Polaroid sued for patent infringement. After 14 years of litigation and 18,000 pages of testimony, documents and exhibits, Polaroid was awarded profits, royalties and interest totaling over $909 million. Patent protection again preserved the substantial investment of time and resources of a successful inventor.
- Laser pioneer Gordon Gould first applied for a patent in 1959. Over the next 30 years, the USPTO issued a series of patents to Gould for new inventions in the laser field. One such patent, for optically pumped laser amplifiers, was issued in 1977. Thereafter Gould began to sue the competitors who had copied his invention. One competitor was permitted to remain in business by paying royalties pursuant to a license agreement, with payments for past infringement spread over a long term. Once again, the patent system made it possible for an inventor to secure a proper reward for his pioneering efforts.
Like patent protection, copyright protection in the U.S. is conferred by federal law, based on a specific provision of the Constitution. Federal copyright protection applies to literary, musical and dramatic works, pictorial, sculptural and audiovisual works, and other kinds of works of authorship, including computer program expression. Copyright protection for works created today begins when the work is first "fixed in a tangible medium of expression," i.e., written down or otherwise recorded. It lasts for the life of the author plus fifty years.
The owner of a copyright has the exclusive right to reproduce and distribute copies of the copyrighted work, and to prepare derivative works (adaptations, translations, etc.) based on the copyrighted work. If the work can be performed, such as a musical or dramatic work, the copyright owner has the exclusive right to perform it publicly. In the case of a work that can be displayed, such as a picture, sculpture or motion picture, the copyright owner may prevent others from displaying the work without the owner's permission. All of these rights are subject to the doctrine of "fair use," which permits limited use of copyrighted works for certain beneficial purposes (for example, teaching and research) without the permission of the copyright owner.
Like a patent, a copyright is considered to be property, and may therefore be sold and licensed. Claims to copyright may be registered in the Copyright Office, a branch of the Library of Congress, located in Washington, D.C. When a copyrighted work is published, well-advised copyright owners place a notice of copyright on the copies of the work as a warning to would-be copiers. Such notice may consist of a "c" enclosed by a circle, the date (at least the year) and the name of the copyright owner.
From 19th-century photographs to 20th-century computer programs, U.S. copyright law has protected artists and authors in numerous ways. For example:
In 1882 an enterprising New York photographer carefully posed the famous Irish dramatist and poet, Oscar Wilde, and took a remarkable photograph showing him in a deeply pensive mood. Soon afterwards, without the photographer's permission, a lithographer produced 85,000 copies of the photo and began selling them. The photographer sued for copyright infringement and was awarded damages. Copyright law protected the fruits of the photographer's creative efforts.
The popular Lotus 1-2-3 computer spreadsheet employs a visible menu command system that has a unique structure, sequence and organization. When a rival company copied this element of the program, a court held that the element was protected by the Lotus copyright, and the would-be copier was forced to devise its own menu.
A trademark is a word, a group of words or a logo that is used in connection with the sale of goods to distinguish them from those made or sold by someone else. Words and logos are also used in the sale of services, such as those offered by insurance companies, hockey teams and rock groups; such marks are called service marks.
By using a trademark or service mark in the sale of goods or services, the owner of a mark acquires the right to exclude others from using a similar mark on other products in a way that is likely to confuse the purchasing public. This is a valuable right to a business entity, because of the time and effort invested in building public goodwill in a product and the mark. Trademark protection also protects the public against the consequences of confusion, buying something which they believe to be one thing when in fact it is something else.
An example of a trademark infringement case in the past is:
Geoffrey Inc. v. Stratton, 16 U.S.P.Q. 2d 1691 (D.C.Cal.1990) Plaintiff Geoffrey, the owner of TOYS-R-US® and KIDS-R-US® stores, sued Stratton for trademark infringement as a result of the operation of its PHONES-R-US store. Since 1960, Geoffrey had used marks containing the "R-US" suffix for children's toys, furniture and other goods. Stratton, the "junior" user of the "R-US" suffix, sold retail telephone sales and services. Finding infringement, the court explained that even without registration of the "R-US" suffix per se , that suffix was exclusively associated with Geoffrey by virtue of its family of "R-US" marks. Because the court found that the PHONES-R-US mark was designed to confuse the public and trade upon Geoffrey's goodwill, Stratton was found liable.
Trademark protection is recognized under the laws of individual states and is enforceable in state courts. Marks may be registered with state administrative agencies, usually the Secretary of State.
There is also a federal Trademark Act that provides for registration of marks used or intended for use in interstate commerce. Important advantages flow from federal registration. For example, registration is constructive notice throughout the U.S. that the registrant claims ownership. And, after five years of continuous use, no one may contest the registrant's right to continue to use the mark. Also, federal registration allows the registrant access to the federal court system in infringement suits.
Such well-known trademarks and service marks as Coca-Cola®, Kodak®, Buick®, Kellogg's®, Burger King®, Reynolds Wrap®, Jell-O®, Xerox®, Motorola®, AT&T®, Michelob®, Exxon®, Polaroid®, Visa® and Sanka® are widely recognized by consumers as reliable signals that a product or service offered for sale originates from the same source year after year, and that the quality of the product or service will not vary. Business competitors invest millions of dollars in advertising to publicize the goodwill that marks represent. Consumers identify such marked goods as having particular characteristics and merit. In our market economy, trademarks play a critical role in the language of advertising. Competition would indeed be cumbersome and impractical without them.
Business competitors are sometimes victims of industrial espionage that takes the form of theft of business ideas and methods. Trade secret protection is a sturdy shield against such tactics.
A trade secret is an idea or information that has commercial value because it is not widely known. "Trade secret" is a broad concept that includes a wide variety of business methods, processes, machines, formulas, patterns and techniques that are kept secret from one's business competitors.
Trade secret protection is acquired as soon as the idea or information is created, and lasts for as long as the information is protected as, and remains, a secret, under applicable statutory provisions. Trade secrets are protected primarily by the laws of the several states. Protection is available against anyone who steals the secret or uses it without permission. Many states have criminal statutes outlawing theft of trade secrets.
Although trade secret protection is potentially perpetual, it does not prevent someone else from discovering the information independently by proper means, such as "reverse engineering" of a product that has been sold on the open market. However, applicable copyright or patent laws may preempt use of a reverse engineering discovery.
- An example of trade secrecy law at work involves the ever-growing market for computer software. A number of software characteristics may be protected as trade secrets. One company, Integrated Cash Management Services, Inc. (ICM), developed computer programs for banks that were readily customized to suit a client's specifications. Although the individual programs were not secret, the "architecture" that defined how the programs interacted with each other was secret and could be kept secret because it could not be discovered by reverse engineering. A federal court held that the "architecture" trade secrets were of considerable value to ICM and were not known outside of ICM, and protected them from attempted misappropriation by former employees of ICM who had taken their secret knowledge to a competitor.
- In another well-known trade secret case, the DuPont Company had begun to construct a chemical plant in Beaumont, Texas. Equipment used in DuPont's secret process for making methanol was placed in the buildings under construction. Before roofs could be placed over the buildings, the defendants took aerial photographs of the exposed plant from which valuable information about the secret process could be ascertained. The court upheld DuPont's suit for misappropriation of a trade secret, holding that DuPont had taken reasonable precautions to protect its trade secret, and should not be expected to take the expensive and unusual steps required to shield the construction from aerial surveillance.
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- See Top 10 Reasons Most Law Firms Have No Idea How to Hire and Evaluate Patent Attorneys for more information.
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