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AVOIDING PATENT, TRADEMARK AND 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.