intellectual property 101 for entrepreneurs hmc entrepreneurial conference claremont, california...

Intellectual Property 101 For Entrepreneurs

HMC Entrepreneurial ConferenceClaremont, California

March 6, 2004

Stephen H. LaCount

Core Intellectual Property Rights

• Patents

• Trade Secrets

• Copyrights

• Trademarks

Patent Protection For Inventions

• Patent holder is granted the exclusive right to exclude others from making, using, selling and offering for sale

• Types of patents: utility, design and plant


• Utility patents: any new or useful process, machine, manufacture or composition of matter, or new and useful improvement

• Term: 17 years from date of issue, or 20 years from date of first filing (earlier of)


• One year grace period to file application in US; not applicable in many foreign countries

• “Prosecution” – negotiation with patent examiner

• PTO issuance times


• Patentability standard: novelty and nonobviousness

• Significance of prior art

• Anatomy of a patent application


• Patent rights begin when patent issues

• Joint ownership problems – assignment to the entity

• Scope of license rights


• Enforcement defenses – invalidity and non-infringement

• Patentability of software

• Patent litigation and indemnification

Trade Secret Protection

Definition (Model Trade Secrets Act)“Trade Secret’ means information, including a formula, pattern, compilation, program, device, method, technique or process that: (1) derives independent economic value…from not being generally known to, and not being readily ascertainable by proper means by, other persons…, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

Trade Secret Protection – Policies and Procedures

• Restrict visitors – control or deny access to sensitive areas

• Limit disclosure – implement strict “need to know” standard

• Internal procedures and safeguards

Trade Secret Protection – Policies and Procedures

• Explicit written agreements: employer-employee; buyer-seller; licensor-licensee; beta site evaluations; distributors; resellers

• Stamp and legend documents: “Confidential” “Proprietary Information of...” “Do Not Duplicate or Distribute”


• No filing fees or government registration

• Perpetual duration (Coca Cola formula)

• Duty of confidentiality extends to former employees; due diligence on new hires


• Reverse engineering activities

• Espionage and trade secret misappropriation

• Trade secret protectioncan be waived or lost

– forever in thepublic domain!

Copyright Protection

• Original works of authorship fixed in any tangible medium of expression

• Ideas not copyrightable; only expression

• Automatically begins when work is “fixed”


• Bundle of exclusive rights: – reproduce and copy

– distribute copies of the work

– prepare derivative works

– publicly perform and display


• Copyright registration – “license to sue”

• “Works for hire” – authorship and copyright ownership attributed to employer

• Assignment agreement from independent contractors


• Software – works of authorship – object and source code versions

• Software licenses: a broad spectrum

• Copyright infringement: access and substantial similarity


• Databases

• “Fair Use” Defense – Amount of work used

– Purpose of use (commercial?)

– Parody

Trademark Protection

• Lanham Act: “Any word, name, symbol, or device, or combination thereof, used by a party to identify its goods and distinguish them from those manufactured or sold by others.”

• Trademarks identify the source or origin or a particular product or service


• Selection criteria: “fanciful” or “arbitrary”

• Avoid descriptive marks

• Trademark searches: “common law users”


• Registration benefits

• Use and intent to use registrations

• Domain names as trademarks

Five Common IP Mistakes

• Vague and untailored non-disclosure agreements (“NDAs”)– One-way versus two-way: rules of the game

– Definition of “confidential information”

– Include standard exceptions

– Duration issues (protection beyond 3-5 years?)

– “Residuals”


• Poorly conceived license agreements:– “Company hereby grants to MS a worldwide, fully paid,

perpetual, non-exclusive, irrevocable license (a) to use, modify, create derivative works based upon, reproduce, distribute or license or sell, rent or lease copies of, the Licensed Software, in source or object code forms, and derivative works thereof, and (b) to license third parties to exercise the foregoing rights, including the right to license such rights to further third parties.”


• Poorly designed agreements with independent programmers and technology developers: – IP ownership in “deliverables” not defined

– Entitlement to use preexisting works

– “Best efforts” - no payment milestones

– No “acceptance criteria”


• Open-ended IP indemnification provisions:– Allocation of risk between the parties

– Scope of IP rights and covered parties

– Triggering events

– Exclusions

– Specific remedies


• Poor selection and use of trademarks:– Weak descriptive marks

– Reliance on cursory search results

– Sloppy use in product literature and promotional materials (e.g., adjective use)

– Failure to police proprietary marks

intellectual property 101 for entrepreneurs hmc entrepreneurial conference claremont, california...

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