Intellectual Property Law Disasters

Perhaps nowhere is Benjamin Franklin’s old adage that “an ounce of prevention is worth a pound of cure” truer than in the field of intellectual property law. All too often, prospective clients come to our firm with intellectual property law issues after it is “too late.” For example, when they have already lost rights because they have waited too long to take the necessary steps to protect those rights.

While there are ways we can try to help such clients “backfill” to protect whatever remaining rights they may have, it is always hard for us to explain to them how far more effective and economical it would have been for them had they proactively sought protection. We are often compelled to tell clients that when it comes to intellectual property protection, the old FRAM® oil filter advertising campaign slogan applies: “you can pay me now or you can pay me later,.” In intellectual property, we generally find that clients either “pay us now” by properly securing rights or “pay us [more] later” after disaster strikes.

To help businesses and individuals avoid such pitfalls, here are some of the most common intellectual property law disasters – and how to avoid them.

Importantly, this information is provided for information purposes only – businesses and individuals should always consult with a licensed attorney to evaluate their particular circumstances. (Patent attorneys are unique in that they have to undergo an additional bar exam, administered by the U.S. Patent and Trademark Office, to represent clients).

Common Disaster 1 – Not Securing a Trademark Registration

One common intellectual property disaster is failing to file Federal trademark applications “early and often.” A trademark is a word(s) and/or a design or a combination of the two, e.g., a logo, which identifies the source of goods or services for consumers. A trademark is sometimes referred to as a “brand.” Trademark rights accrue through use of trademarks in commerce. Many businesses never think to protect their trademark rights until it is “too late,” i.e., until a competitor adopts confusingly similar branding.

Trademark rights are best protected through registration with the Federal government. Federal trademark registration owners enjoy a number of benefits such as nationwide trademark protection, critical evidentiary presumptions and increased opportunities to recover damages from infringers / counterfeiters.

Failing to file a trademark application does more than simply forgo these benefits – it exposes a business to potential geographic constriction of trademark rights. By way of example:

if Company A uses the trademark “X” in Florida; and

Company B (located in another state) files a federal trademark application for the “X” trademark first;

then this could result in :

Company A owning the rights in the “X” trademark but only in Florida; while

Company B owns the rights in the “X” trademark for the rest of the United States.

Naturally, this can create a brand “stranglehold” for businesses keen on expanding beyond their current geographical territory.

Bottom line: companies should carefully protect their important trademarks / brands by filing for Federal trademark registration protection as soon as the decision to adopt the trademark/brand is made (even before actual use commences!).

Common Disaster 2 – Waiting to Register a Copyright

A second common pitfall is waiting to file a Federal Copyright application until after an infringer is discovered. Copyright rights protect the creative expression of an idea – and can be used to protect everything from a book, screenplay, sculpture or song to a movie, painting, computer program source code or a photograph. The list frankly goes “on and on.” Generally, copyright protection is most important to artists and businesses which commercialize creativity, such as software developers, photography studios, art galleries and entertainment and sports / media companies.

While copyright rights vest when a work is fixed in a tangible medium (e.g., when the words of a book are written down for the first time), without regard to whether or not a Federal copyright application has been filed, filing a Federal copyright application conveys many important benefits. Such benefits include the right to file suit, to elect recovery of statutory damages, the right to recover reasonable attorney’s fees and presumptions about ownership and validity. By failing to file a copyright application until after infringement begins, such benefits – particularly the right to elect recovery of statutory damages – can be lost.

Earlier this year, the Supreme Court decided a case entitled Fourth Estate Public Benefit Corp. v. Wall-Street.com. In that case, the Supreme Court clarified that “registration occurs, and a copyright claimant may commence an infringement suit, when the Copyright Office registers a copyright.” Currently, the wait time for an electronically filed copyright application is approximately 6 months – with paper-filed applications taking even longer to process. That means that artists and business owners who wait to file a copyright application not only face possible loss of benefits such as statutory damages, they face unnecessary delays in defending their rights. While expedited options (analogous to a theme park’s fast pass) are available (for an extra fee), the best practice is to simply file copyright applications before problems arise.

Bottom line: companies which commercialize artistic creativity should routinely file copyright applications to protect such creativity.

Common Disaster 3 – Not Patenting an Invention

A third common intellectual property disaster is failing to timely file a utility patent application. Patents give inventors a right to exclude others from practicing an invention. A business which owns a patent covering an invention can monopolize the market for such invention during the life of the patent – creating an invaluable “head start” in the marketplace. Patent rights can be critical to protecting and monetizing a business. This is especially true in the startup phase where a business’ only source of value often lies in its ideas.

However, utility patent rights are easily the most time-intensive and expensive form of intellectual property protection. As such, many inventors and business owners struggle to justify the expense of filing a patent application before a product has demonstrated its commercial potential. Unfortunately, this leads many inventors and business owners to try “testing the waters” by selling products which embody an invention before filing a patent application.

Most countries have an absolute bar to patentability when an invention is offered for sale or publicly used prior to filing a patent application. This means that, if foreign markets are important to a business, a patent application needs to be filed before an invention is offered for sale or publicly used. In the United States, inventors are generally given a one year grace period in which to file an application after offering an invention for sale or publicly using an invention. Naturally, relying on this grace period comes with risks – most notably, since 2013, the United States has been a “first-to-file” country, meaning that whomever filed for patent protection first “wins” the patent, even if someone else conceived of the invention first!

All that being said, there is a simple, cost-effective solution for companies unwilling to invest in a full utility patent application until testing the invention’s commercial viability, namely, filing a provisional patent application.

A provisional patent application can be thought of as a “placeholder” which gives an applicant up to twelve months to file a full utility patent application. During these twelve months, an applicant can commercially exploit the invention without fear of losing rights. Because a provisional application is much less formal than a full utility patent application, it is also much less expensive to prepare and file (although the overall cost sometimes increases if an applicant later chooses to file a non-provisional application).

Bottom line: provisional patent applications provide a useful compromise for inventors and business owners who are willing to invest a smaller amount of money for a one year “trial run” in commercializing an invention.

Common Disaster 4 – Improper / Inadequate Personnel Agreements

A fourth and final common intellectual property disaster is failing to have employees and independent contractors sign personnel agreements which include proper intellectual property provisions. While the exact needs of each business must be addressed on a case-by-case basis, common oversights include failing to:

use appropriate work for hire / assignment contract language (to secure and/or confirm the ownership of all copyright rights);

use non-disclosure contract language (to ensure that employees and independent contractors do not share trade secrets);

use non-competition contract language (to ensure that employees and independent contractors do not launch competing businesses);

use non-solicitation contract language (to ensure that employees and independent contractors do not solicit customers, e.g., for a side-business); and

provide proper notice of whistleblower immunity under the 2016 Defend Trade Secrets Act (to avail the business of the protections afforded by this Federal trade secret statute).

Bottom line: businesses should take intellectual property protection / ownership into account in both future and current personnel agreements (which might need to be updated / amended).

By taking the simple precautions outlined above, businesses can avoid some of the biggest, most common and most costly intellectual property disasters.

This article originally appeared in the July/August issues of Southwest Florida Business Today.