Patent Search

If your invention is too similar to one that has already been disclosed, your patent application will be denied. You’d hate to discover this after having spent thousands of dollars in preparing and filing your application. You can avoid flushing a lot of money down the drain by doing a patent search first.

You can try searching the U.S. Patent and Trademark Office (USPTO) database yourself, or even Google Patents. If you find an existing patent for an invention essentially the same as yours, you will have saved yourself the cost of a professional patent search, as well as an expensive but fruitless patent application.

Not finding any obvious patent conflicts on your own does not put you in the clear, however. Elements of your invention may be included in more than one other patent using language slightly different from what you used in your search. This is where you’ll need a professional search to uncover these issues and a patent agent or attorney to analyze how they affect your invention’s patentability.

The cost of a patent search varies depending on whether your invention is a simple mechanical device or involves more complicated technologies, but may range from $600 to $2000 or so. A patent agent may charge a little less than an attorney, but an attorney can offer a legal opinion if needed.

Drawings

The Patent Office requires appropriate drawings to illustrate the invention. Because the drawings need to conform to a particular style, an experienced patent draftsman is often used, and the charge is around $100 to $150 per drawing. A typical uncomplicated application requires about three drawings.

Preparing the Application

You have two choices when filing an application. You can file a provisional application, and then follow that within one year by the regular application. Or you can just file the regular application to begin with.

The provisional application is simpler to complete and can be filed more quickly than the regular application. This allows you to establish the all-important filing date, which puts you ahead of anyone else who may be claiming to have invented something similar. It also gives you a lower cost way to potentially lock up the rights to your invention while you decide whether it will be worth the sizable additional expense to file a regular application.

Preparing a regular application is normally the most expensive part of the process. For the simplest inventions, a patent agent or patent attorney may charge from $3,500 to $6,000 to prepare all the documents required to submit to the USPTO. A moderately complex innovation could range from $6,000 to $12,000, while a very complex one could cost $12,000 to $20,000

If a provisional application is filed first, preparation cost could range from $1,500 for the simplest to $5,000 for the very complex. But the majority of this cost is typically deducted from the later fees for the regular application because much of the information on the provisional is used for the regular.

Filing Fees

The USPTO requires a filing fee with each application submitted. Applicants who qualify as a “small entity” enjoy a reduced fee schedule about 50% lower than the fees paid by large companies. Currently, the small entity fees are under $600, but fees are raised annually.

If you file a provisional application, you’ll pay a slightly lower filing fee for that application, then pay the full filing fee when you submit the regular application.

There are a variety of other possible fees that may be levied if the application includes an unusual number of claims or drawings, or if certain deadlines are missed for responding to the patent office’s requests for additional information or documents. (For a complete fee schedule, see http://www.uspto.gov/go/fees/.)

Patent Prosecution

After the application is filed, a government patent examiner begins the rigorous process of determining whether or not your invention qualifies for patent protection. Patent applications are routinely rejected initially because of some objection the examiner has. The patent attorneys or patent agents charge extra each time they are required to respond to the patent office’s action letters to clarify the examiner’s concerns or file an amendment to the application. Their fees could range from $1,000 to $5,000 for each response, depending on the time each requires.

Patent Appeal

If your patent application is ultimately denied, there is a process for filing an appeal. This process could cost from $2,000 to $10,000 additional in filing fees and attorney or patent agent costs.

Patent Issuance

When your patent application is approved, final drawings and documents are prepared and submitted to the USPTO with the issuance fee. Altogether, the drawings, government fees and attorney/agent expense can be $1,500 to $2,500.

Patent Maintenance

To keep a patent valid and in force requires periodic payment of patent maintenance fees. The rationale for these fees is that if it is not worth it to the patent owner to pay the maintenance fee, then the invention should be released into the public domain to spur further innovation.

Maintenance fees are due 3 ½ years, 7 ½ years, and 11 ½ years after patent issuance. The first fee is currently about $1000, the second is about $2500, and the third is about $4100.

Summary

Given all the variables of invention complexity, optional choice of a provisional application, and responding to an unpredictable number of patent examiner concerns, it’s easy to see now why the cost of a patent can vary so widely.

Perhaps more helpful in predicting the patent costs for your invention, however, is the observation of one prominent patent attorney that for two-thirds of his clients, the entire patent application and issuance experience costs between $7,000 and $15,000 – maintenance fees extra.

Related Articles

• How to Patent Your Invention
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I make digital collages using other images I find on the internet. I only use images that are not copyrighted. A friend told me it’s still illegal. Is that true?

My friend makes mixes using parts of other songs. We want to sell them. Is it against copyright to do that? He’s only using pieces of the songs.

The answer in a nutshell is yes, it is illegal and it is against copyright law to do that, unless you qualify for an exemption under fair use.

Everything is Automatically Copyrighted (for 70+ Years)

In the case of the images that are not copyrighted, the more factual statement is probably that the images do not have a copyright claim (the ©symbol or the word “Copyright”) on them. They are almost without doubt copyrighted nonetheless.  Here’s why.

After the copyright laws changed in 1976, anything artistic you create (story, music, film, art, photo, dance, etc.) is automatically copyrighted as soon as you put it into tangible form. That copyright lasts for the rest of your life plus 70 years. You are not required to put “Copyright” or the © symbol on it any more.

Prior to 1976, the copyright claim WAS required and if you published something without claiming the copyright, it was considered in the public domain - that is, free for anyone to copy or use.  A work also enters the public domain after the copyright on it expires.

Given these facts, anything in the public domain today had to have been created a long time ago. Everything else is still copyrighted.

Derivative Works Are Not Permitted

When you incorporate all or part of a copyrighted work into a new work, you create what is called a derivative work.  These are some examples:

• Making a statuette of a copyrighted cartoon character
• Using the words of a copyrighted poem in a song
• Making a film based on a copyrighted story or book
• Making a drawing out of a copyrighted photo (Think of the recent Barack Obama poster)
• Creating a game based on a character from a book (Harry Potter, for instance)
• Making an artwork that incorporates recognizable elements of other artworks (Sounds like our collage or music mix scenario.

All of these examples are derivative works, and you can understand why the copyright owners would be unhappy to see you profiting off of their work without compensating them.

When Is It OK?

As noted before, if a work is in the public domain, then it can be used freely.  The painting of the Mona Lisa is a good example. Copyright laws didn’t even exist when it was painted. If you wanted, you could paint a faithful copy of it and sell it on E-bay as long as you didn’t claim it was the da VInci original.

You can also use the work if the copyright owner gives permission.  Sometimes you have to ask for permission.  Other times, copyright owners publish their works with the grant of a Creative Commons license. This type of license allows anyone to use the work under specific conditions without asking permission.

And finally, fair use allows you to reproduce a work under specific circumstances.  Some of those circumstances include:

• criticism
• comment
• news reporting
• teaching (including multiple copies for classroom use)
• scholarship
• research

Related Articles

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The case involves one Jameel Ahed, a young engineer once employed by iRobot Corporation – widely known for its Roomba robotic vacuum, and to a lesser extent for its PackBot military tactical robot.  After abruptly quitting his job at iRobot where he worked as an electrical engineer, Jameel started a competing company and built a machine eerily similar to the Packbot – dubbed the Negotiator.  By employing a few cost cutting design features in building the Negotiator, the 28-year-old Jameel was able to undercut the PackBot’s costs and win a $279.9 million contract to supply his version of the remote-controlled drones to the U.S. Army.

But this potential David-beats-Goliath success story was not to be. Before Jameel was able to deliver his first bot, iRobot sued his company, Robotic FX, for trade secret theft and patent infringement and won, receiving as damages the rights to Jameel’s lower cost Negotiator design. The Army was forced to cancel its contract with Robotic FX and iRobot won a renegotiated $286 million agreement to deliver 3,000 robots over five years.

What could have been yet another oft-repeated and boring tale of an employee taking too much of his former employer’s information with him to a new job actually turned into a mini-drama that eventually formed the crux of the case.

The Story Unfolds

The drama begins after the Army hosts performance tests for the competing Negotiator and PackBot droids at a specially constructed obstacle course at Redstone Arsenal in Alabama. The 1-foot x 2-foot drones feature tank-like treads and two telescoping arms - one with a camera on the end and the other with a grasping claw. A signature feature of both robots is a set of front treads shaped like a pinball flipper that can rotate, allowing the robot to climb stairs or to right itself if flipped over – a feature patented by iRobot. The military is especially interested in the machines’ abilities to handle reconnaissance and bomb disposal tasks.

Following their separate runs, the two companies are scheduled to bid for the contract in a reverse auction. But already having served Jameel with a cease and desist letter month’s earlier, iRobot’s attorneys informed him the day after the performance tests that he was being sued for trade secret theft and patent infringement. And this is where the drama begins.

Hiding the Evidence

iRobot had the foresight to hire private investigators to monitor Jameel’s activities from the moment he was notified of the suit. Later testimony revealed that after he received the email from iRobot’s legal team on a Friday, he left his office with a number of CDROMs and electrical components in a box labeled “iRobot” and put them in his car. The next morning, he bought a shredder, and a hard-disk erasing program, and then, on the way to his girlfriend’s apartment, he stopped at a dumpster and emptied the box of electrical components. The private investigators that were tailing him retrieved the items he discarded.

Jameel and his girlfriend, who was also Robotic FX’s Chief Operating Officer, spent the weekend feeding CDROMs into the shredder and erasing hard drives on computers at the office and at home. The first shredder couldn’t stand up to the load and broke, so Jameel had to go buy another one.

Finding the Evidence

Aware that Jameel was destroying evidence, iRobot was unable to do anything until Monday morning when its attorneys obtained a preliminary injunction ordering Robotic FX to preserve all records and evidence. The next day, the attorneys showed up at Robotic FX offices with U.S. Marshals and began searching the premises.

The search continued at Jameel’s girlfriend’s apartment where Jameel managed to enter through a rear door minutes ahead of the authorities and stash a laptop computer under the bed. They found it anyway and discovered a message still on the screen that the hard drive had been scrubbed. They photographed it for evidence.

The Case Unravels

In a panic, Jameel phoned an executive at the company slated to manufacture his robots for the Army contract and pleaded, “What do I do?”  The executive already knew there was going to be a legal challenge from iRobot. His company’s strategy was to drag the case out for years, if possible, while they delivered robots to the army and cashed million dollar checks. His advice to Jameel? “Cooperate.”

Unfortunately he was unaware that Jameel had already compromised their case badly. So badly that Judge Nancy Gerstner granted an injunction preventing the Army contract from going forward based almost exclusively on Jameel’s highly suspect behavior, and ordered the case to trial.

Having lost the Army contract, Jameel settled the suit before trial, agreeing to close his company and stay out of the robotics business for five years, and to transfer to iRobot his Negotiator designs.

Lessons Learned

The two things that stand out most in this case are:

• The young Jameel’s naiveté believing he could illegally appropriate trade secrets and violate patents with impunity is stunning.
• The value iRobot received in acquiring Jameel’s lower-cost redesign of its product is probably worth many millions of dollars and was ultimately a just resolution of the case.

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Resources

Bray, Hiawatha (2007). Robotics firm says rival stole designs. Retrieved Jan 24, 2009 from the Boston Globe web site: http://www.boston.com/business/technology/articles/2007/09/21/robotics_firm_says_rival_stole_designs/

GoRobotics (n.d.) iRobot to Robotic FX, “You stole our design.” Retrieved Jan 24, 2009 from the GoRobotics web site: http://www.gorobotics.net/the-news/latest-news/irobot-to-robotic-fx-you-stole-our-design

Roush, Wade (2007). Saying Ahed’s Destruction of Evidence “Profoundly Undermines” His Credibility, Judge Issues Partial Injunction Against Robotic FX—Much of Record Sealed. Retrieved Jan 24, 2009 from the Xconomy web site: http://www.xconomy.com/2007/11/02/saying-aheds-destruction-of-evidence-profoundly-undermines-his-credibility-judge-issues-narrow-injunction-against-robotic-fx-much-of-record-sealed/ 

Roush, Wade (2008). In Coda to Robotic FX Lawsuit, iRobot Introduces Its Own Version of Negotiator Robot. Retrieved Jan 24, 2009 from the Xconomy web site: http://www.xconomy.com/boston/2008/08/06/in-coda-to-robotic-fx-lawsuit-irobot-introduces-its-own-version-of-negotiator-robot/

Schachtman, Noah (2008). Who Stole the Plans for iRobot’s Battle Bots? Retrieved Jan 24, 2009, from the Wired Magazine web site: http://www.wired.com/techbiz/it/magazine/16-05/mf_robotthief?currentPage=all#

• Copyright
• Patents
• Trademarks
• Trade secrets

Whether tangible or intangible, intellectual property (”IP”) is something individuals and companies can legally own, buy, and sell. As with many other types of property, IP can be misappropriated or stolen, and its value can be damaged or destroyed.

Just as you would protect other types of property by locking your car or buying insurance for your house, you have various ways to protect your intellectual property, too. But because IP sometimes has an intangible quality, locks and keys are not always the most effective means of securing this property and protecting its value.

What follows is a short course and introduction to protecting intellectual property, with links to more detailed information.

Copyright

As provided by the laws of the United States and other countries, anyone who creates an original work of authorship is entitled to certain rights to control the reproduction and use of that work. Works of authorship include:

• Books, stories, literary articles, news articles
• Sound recordings, music, song lyrics, poems
• Paintings, drawings, photographs, computer graphics
• Scripts, plays, videos, films
• Dance, pantomime, performing arts
• Sculpture, three-dimensional art, assemblages

In the United States and some other countries, recent changes in laws provide that the creator’s copyright exists from the moment the work is first put into tangible form. You have no need to register the work and you’re not required to affix the © symbol to it for the copyright to be valid.

A subtle quirk of the law, however, is that while the copyright owner has the right to restrict reproduction, performance, use or adaptation of the work by unauthorized persons, the owner cannot enforce those rights in a court of law unless the work has been registered with the U.S. Copyright Office.

If you suspect your copyrighted work has commercial value and you want to preserve your rights to prevent infringement, register it. Registration is not complicated or expensive.

Patents

Not every idea can be legally patented. In fact, an idea itself can’t be patented at all unless it’s in the form of an actual invention or discovery. The law provides patent rights can be issued for new, non-obvious and useful processes, machines, articles of manufacture and compositions of matter. Subsequent court interpretations have expanded patentable items to include business processes and computer controlled processes, and narrowed them to exclude laws of nature and physical phenomena.

A patent gives the patent owner a monopoly on the use or sale of the invention or discovery for 20 years. The price of this monopoly (in addition to the application fees) is disclosing the invention to the world in sufficient detail so that anyone skilled in the field can apply it once the monopoly period ends.

Obtaining a patent can be a long, arduous, expensive process, and there is no guarantee that a patent will be granted. Even if a patent is obtained, in a highly competitive field the patent’s validity can be challenged on a number of fronts.

When the potential rewards are worth the effort and expense, obtaining a patent to protect your invention or discovery may be the obvious choice. In some cases, however, protecting it under trade secret laws may be more efficient.  (See “Choosing Between Patent and Trade Secret Protection.”)

Trademarks

Trademarks are the words and symbols companies attach to their products or services to distinguish them from their competitors’ (Trademark law applies to both trademarks and service marks). It is precisely because of trademarks that you will never confuse a Coke with a Pepsi, or a Holiday Inn with a Marriott.

A company’s right to exclusive use of its established trademark is grounded in centuries of common law and protected in the courts. You can freely use the TM or SM symbols to announce your claim to a combination of words and images representing your trademark or service mark, and obtain this common law protection.

A higher level of trademark protection is available, however, by using the trademark registration system. Registration makes enforcement of trademark rights and resolution of disputes less chaotic, and therefore less expensive.

Registering your trademark with the U.S. Patent and Trademark Office is appropriate if your product or service is available in more than one state or country. If your mark is only used within your state, you can register it with the appropriate state agency.

Trade Secrets

Trade secrets occupy a unique space in the intellectual property sphere. Whereas registration of patents, trademarks and copyrights must be applied for with the appropriate government agency, there is absolutely no registration process for trade secrets. That only makes sense. The value of a trade secret derives principally from it not being generally known, and registration would completely defeat that goal.

Where an intellectual property attorney can assist you in registering and defending your copyright, patent or trademark claims, the attorney’s value in trade secret matters is slightly different. The attorney’s initial focus is helping you determine if trade secret laws are appropriate for the intellectual property you want to protect. (See “Choosing Between Patent and Trade Secret Protection.”)

When trade secret protection is the chosen avenue, you will need to take the appropriate measures for protecting those secrets. If you don’t take suitable precautions against disclosure, the courts will not be sympathetic to your claims of misappropriation.  Your attorney can help you in determining the proper precautions necessary to preserve and enforce your trade secret claims.

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• Key Provisions of the Uniform Trade Secrets Act

Before the UTSA was widely adopted, state courts judged legal cases involving trade secrets under common law and tort rules. Relying mainly on case law established in prior disputes, the rules and expectations for trade secret protection varied considerably between the states. 

The implementation of uniform laws across most states has been a significant benefit to businesses operating in multiple jurisdictions. Business policies no longer have to vary to conform to the unique legal requirements in different locations, allowing businesses to operate more efficiently.

The UTSA spells out the remedies available to an injured party for misappropriation of its trade secrets and includes the following key provisions.

Definitions

The UTSA specifically defines a trade secret as:

information, including a formula, pattern, compilation, program device, method, technique, or process, that:
(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Misappropriation is defined as:

(i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
(ii) disclosure or use of a trade secret of another without express or implied consent by a person who
    (A) used improper means to acquire knowledge of the trade secret; or
    (B) at the time of disclosure or use knew or had reason to know that his knowledge of the trade secret was
         (I) derived from or through a person who has utilized improper means to acquire it;
         (II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
         (III)  derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
    (C) before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

Proper Means

Though not spelled out in the UTSA, common law and tort rules have established the following ways in which trade secrets can be legally discovered:

• Independent discovery or invention
• Disassembling a product to discover how it works or was made (reverse engineering). To be lawful, the product must be obtained by fair and honest means, such as purchasing it on the open market.
• Discovery under a license from or the authority of the owner of the trade secret
• Observation of the item in public use or on public display
• Obtaining the trade secret from published literature

How Secret is Secret?

Given that one party can legally “independently discover” what is another party’s trade secret, it becomes possible for both parties to “own” the secret and enjoy the benefits of trade secret protection. It is not necessary for a trade secret owner to be the exclusive owner. But knowledge of the secret must be restricted enough that the owners each enjoy a potential or actual economic advantage by continuing to keep the secret safe from further discovery.

On the other hand, a secret does not have to be “publicly known” to lose its trade secret protection. For example if the process for making a highly specialized computer chip is known only by three companies in the world, but they also happen to be the only three companies manufacturing those chips, then the process is hardly a secret in their trade.

Injunctive Relief

If your trade secret is misappropriated, a court can issue an injunction restraining the offending party from future use and disclosure. Whether for months or years, such an injunction will usually be only for a specific time period and not indefinite.

The theory in determining the length of an injunction is that the advantage a misappropriator gains from illegally using your trade secret will eventually be minimized by the effects of competition reducing the value of your secret, and/or possibly the ultimate discovery of the secret by others in due time. If the court determines the villain’s illegal advantage would likely be erased in two years, then that would be the proper duration of the injunction.

Following that theory, if a different competitor discovers or reverse engineers your secret while an injunction against a misappropriator is in effect, then the injunction can be terminated early if the secret loses its protected status.

Also, if by the time a case is decided, further use and disclosure is unlikely to cause future damage to the trade secret owner, then an injunction becomes pointless.

Damages

If more than one party has the same trade secret information and the information is misappropriated from just one of the parties, only the party from whom the secret was obtained is entitled to damages.

When calculating damage awards, the law allows recovery of the trade secret owner’s actual losses plus any unjust gains received by the misappropriator that are not already counted in the actual losses. When misappropriation is willful and malicious, the court may award exemplary damages up to twice the amount otherwise calculated.

In lieu of damages, the court may award royalty payments to the trade secret owner for the misappropriator’s unauthorized use or disclosure when reasonable documentation can be provided to support a royalty value.

In some cases, a party may be sued for receiving benefits from a trade secret they acquired in good faith and without any reason to suspect it was misappropriated. When the party discovers the misappropriation and discontinues relying on privileged information it’s not entitled to use, it may suffer a monetary loss. In such a case, the court is permitted to excuse the defendant from paying monetary damages since its actions were not willful and it, too, has suffered.

In the event of willful and malicious misappropriation, or in the event of any act of bad faith by either the plaintiff or defendant, the law additionally allows awarding attorney fees to the prevailing party.

Note: Each state enacting the UTSA may have adopted its own variations of the specific clauses proposed in the model statute. If you have questions about trade secret law in your state, consult a local intellectual property attorney.

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A non-disclosure agreement (”NDA”) is one party’s legal promise not to disclose another party’s confidential information to an outside third party. It is a written agreement, often also called a “confidentiality agreement.”

The NDA is a legally binding document, usually including remedies for breach of agreement. It is predominantly used between businesses and signed by representatives of each business having the power to legally bind their respective companies. But it may also be used between employers and their employees, between individuals, and between individuals and companies.

When the agreement is “two-way,” meaning both parties may be sharing confidential information and each agrees not to disclose the other’s, it’s called a “mutual non-disclosure agreement.”

When is it used?

Two companies working together for a joint business purpose will sometimes need to share sensitive information that is not publicly known in order to further their business arrangement. The information could be client lists, business processes, trade secrets, financial data, or any other information a company is not required to disclose to the general public, and which has been previously kept confidential.

The business arrangement could be between a client and a supplier, vendor or consultant. It could be between two non-competing companies seeking to enter some type of joint venture or joint marketing arrangement, or two competing companies considering a coalition, merger, or acquisition.

Why is it used?

The most important purpose of an NDA is to give the respective parties notice that some of the information being shared is confidential and is expected to be kept confidential. In any legal case regarding unauthorized use or disclosure of trade secrets or other confidential information, the existence of an NDA greatly strengthens the case.

Though most ethical businesses would never knowingly share confidential information it acquired about another company, they could do so unintentionally if not advised what information the other company considers “private”.

The NDA prompts the discussion of what each company considers confidential and memorializes the discussion in writing. By virtue of a written agreement with potential legal implications, each party is more likely to be discerning about how it uses the other company’s confidential data.

How is it enforced?

Most standard-form NDAs state that the party whose confidentiality is violated can obtain a court-ordered injunction to prevent the other party from continuing to use or reveal the information.

While it is possible to sue the violating party for damages if actual damages are incurred and can be quantified, that is usually not specified in the agreement, nor does it have to be.

Generally, the parties signing an NDA are motivated by maintaining a good reputation within their industry for ethical behavior, knowing that they can be ostracized if they become known for cavalier treatment of NDAs. The fear of litigation costs may be only a subtle additional deterrent.

How do you create one?

Type “nondisclosure agreements” into an Internet search window. You will encounter a large number of free and purchasable forms that are exceedingly similar.

Remember, it is not so much the terms of the agreement as the fact that you and the other party have discussed the issue, and have agreed to each keep one another informed of what information is confidential and to keep it confidential.

How do you use it effectively?

Rule #1: Don’t use the Agreement for petty reasons or to cover information that is not really confidential. A good NDA identifies what can be considered confidential and what cannot. You will identify yourself as a business novice if you pull out an NDA for inconsequential matters.

Rule #2: Don’t be cavalier when signing an NDA. If it covers YOUR confidential information, let the other party know that you will always try to specifically identify the information you consider precious. You want to help them keep your secrets by letting them know what you deem secret. And if you really consider it secret, don’t tell the other party unless it is necessary for your business purpose.

Rule #3: If the agreement covers the other party’s information, let them know how serious you are about protecting that information as assiduously as you would protect your own. Ask them to be sure to identify confidential data when it is divulged, but assure them that you would not share insider information of any kind indiscriminately. You will raise the value of your personal stock in the other person’s eyes immensely.

Rule #4: If a signer represents a company, be sure he or she has the power to bind the company. If not, then (s)he has an obligation to obtain a signed NDA from anyone else in his company that (s)he may pass your confidential information to before sharing it. Be sure that expectation is discussed if leaking the information could be devastating to your business.

(This article was first published by the Steve Holder at Helium.com)

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Trade secrets are also referred to as confidential information. In the event your confidential information is obtained illegally and you sue for damages, part of your case will hinge on how much effort you expended in protecting the confidential information. The greater that effort, the more likely the court is to agree that the purloined info was indeed confidential. And because of your great effort to keep it secret, the court is also likely to agree that the information was valuable and you are owed damages for it being illegally acquired.

If you’re intent on preserving the value of your confidential information and keeping it out of the hands of company outsiders, following are some of the steps you can take. The effort you expend in guarding confidential information needs to be only in proportion to its value, so not every safeguard is required in all cases.

Internal Controls

Employment Policies

Customer lists and records are one of the most common types of company confidential information. Misappropriation of that data by an employee going to work for a competitor is a frequent subject of trade secret lawsuits. Therefore an employee non-disclosure agreement (”NDA”) is an essential minimum safeguard and it must be signed as a condition of hire without exception.

A signed NDA confers two benefits. First, it alerts the employee to the existence of information you consider confidential and spells out how that information is to be treated. Second, when a signed NDA exists, a court is more likely to agree with your claim of trade secret infringement. If the court finds in your favor, it can prohibit the employee and new employer from contacting your customers and award you damages if warranted.

Additional safeguards include creating a written policy on handling and protecting confidential information. Distribute this to all employees and obtain a written acknowledgment they received it, and understand they must read and follow it. Also include the name and phone number of the person they should speak to if they have any questions concerning the policy, and to whom they should report any mishandling or unauthorized disclosure of confidential information.

To make your safeguards even stronger, hold meetings at least once per year to review and discuss the policy. Document any cases of mishandling and the corrective action taken to prevent recurrence.

Information Handling

At a minimum, any information you want to be treated as confidential must be labeled as such. For electronic documents, insert “Confidential” in the header or footer so it prints on every page. For drawings or other information not in electronic format, obtain a stamp to mark the materials “Confidential.”

Your policies should specify that employees never leave confidential information lying in plain sight if they are not physically present to control access to it. Also specify that any confidential materials being discarded must be shredded.

If appropriate, you may want to establish additional classes of confidentiality, such as “Extremely Confidential” and/or “Company Secret.” Your policies may establish that ordinary confidential information must be kept in a drawer or filing cabinet when not in actual use, whereas materials bearing a higher classification must be kept under lock and key when not in actual use. 

Access to sensitive documents on computer networks should also be limited to authorized users with authentication appropriate to the level of security desired.

External Controls

In business it is often necessary to share with another company information you consider confidential. This is always done after having the other company sign an NDA. Most ethical companies respect NDAs, but there are a few things you can do to help ensure your confidential information is not disclosed unintentionally.

• Be sure the right person signs the right NDA. An individual NDA obligates the signer not to reveal your confidential information to anyone not authorized to receive it. A company NDA obligates all of the employees of the signer’s company not to inappropriately disclose your confidential information. A company NDA signed by someone not having the authority to bind the company may not have legal validity.
• Always explicitly identify confidential information before sharing it. They can’t keep it confidential if they don’t know it’s confidential.
• Minimize your risks and never share more than is absolutely needed. 
• Don’t allow the other party to keep copies of your confidential information unless it’s necessary. When the other party no longer needs the copies, request those and any subsequent copies be returned to you, or at a minimum obtain written verification all copies have been securely destroyed.

The Best Kept Secret in the World

As an example of extreme measures, consider the best kept trade secret in the world, the Coca Cola formula. Invented in 1886, it has been a trade secret for over 120 years. When the government of India required them to disclose the formula as a condition of doing business there, Coca Cola decided not to enter that market. And when a judge ordered the formula be turned over to a plaintiff during the discovery phase of a lawsuit, Coca Cola was penalized for refusing to obey the judge’s order.

Only one written copy of the formula exists and it is stored in a bank vault in Atlanta, Georgia. The vault can only be opened by a written resolution of the board of directors. Two employees who oversee preparation of the formula are the only people in the company who know it. They are never identified and are not allowed to travel on the same airplane.

Related Articles

• Key Provisions of the Uniform Trade Secrets Act
• Guide to Non-Disclosure Agreements
• Trade Secrets - Fast FAQs
• Choosing Between Patent and Trade Secret Protection

Differences Between Patents and Trade Secrets

What Can Be Protected

The first issue to consider is whether the intellectual property (”IP”) you want to protect qualifies for either patent or trade secret protection, or both or neither.

To qualify for utility patent protection, your IP must be legally patentable. The law allows patents for machines, methods, processes and compositions of matter, among other things. Specifically ruled out are ideas, concepts and scientific truths. Your IP must also be new, useful and non-obvious. Failing any of those requirements, you can’t obtain a utility patent. It may be possible to qualify for a design patent, though, if your IP is a new and non-obvious ornamental design applied to an article of manufacture.

For trade secret protection, your IP must be information that is valuable because it is not generally known, and you must take reasonable actions to prevent it from being revealed.

In general, if your IP is patentable it is also likely eligible for trade secret protection as an alternative. But if you choose to patent your discovery, you give up the ability to maintain it as a trade secret. When the patent is issued it becomes public information and the invention is no longer secret.

On the other hand, anything that cannot be legally patented may be protectable under trade secret laws if keeping it secret creates an economic advantage for its owner.

Term of Protection

A utility patent gives its owner the exclusive right to benefit from the invention for 20 years. Thereafter, anyone can make, sell or use it. Protection for a design patent issues for 14 years. During the protected period, the patent owner can legally enjoin anyone from using the invention without permission. Even someone who invents or discovers it completely on their own cannot legally use it once it’s been patented.

A trade secret, though, has no expiration date. The most famous trade secret example is Coca Cola, which has managed to keep its soft drink formula a trade secret for more than 120 years. Had they patented the formula, it would have entered the public domain 100 years ago, and perhaps ended their business.

A trade secret does lose its protected status, however, when it becomes generally or publicly known. A company whose trade secret is illegally disclosed may be able to claim damages from the offending party, but once out of the bag, the cat can never be put back in. 

Trade secret protection also does not prevent anyone from developing the identical information completely on their own, and using it to their benefit or making it public.

Example

Einstein Corp. developed a mathematical formula for converting matter to energy, but it was not patentable because it is a scientific truth. Instead Einstein Corp. kept the formula as a trade secret and used it in the manufacture of nuclear power plants. No other company was able to manufacture such plants because they did not have the secret formula. Einstein Corp. enjoyed a decided economic advantage because of it, and took extraordinary efforts to keep the formula secret. 

One day, Fermi Inc.’s engineers discovered Einstein’s secret formula working strictly in their own laboratories and without any contact with Einstein or its staff. Therefore, Fermi Inc. had every right to use the information for its own benefit. They elected to publish the formula. Once the formula became public, Einstein lost its rights to protect the formula as a trade secret, and consequently lost its economic advantage in the nuclear power plant industry.  

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Using Trademarks as Search Terms

Playboy Enterprises sued Netscape Communications in 1999 for infringement because Netscape users were shown banner ads for adult websites other than Playboy’s when its trademark terms “Playboy” and “Playmate” were used as search terms.

In 2000, a lower court ruled in favor of Netscape causing quite a bit of consternation for trademark owners. Playboy appealed, however, and the case was sent back to the lower court in 2003. The appeals court ruled that Netscape was obligated to alleviate confusion over the sites actually associated with the trademark. Netscape and Playboy settled the suit out of court two weeks later with the terms undisclosed.

In a similar suit filed in 2004, insurance giant Geico sued Google for infringement because the search engine company regularly sold advertising rights to the search terms “Geico” and “Geico direct” to competing insurance companies. 

In an odd twist illustrating the subtleties still being defined in trademark law and the Internet, a judge denied Geico’s request to block Google from selling the rights to display ads when Geico’s trademarks are used as search terms. On the other hand, the judge ruled Geico could sue Google for damages when the ads from competing companies included Geico’s trademarks in the ad heading or text. On that issue, Google and Geico settled before the case went to trial. The terms were not disclosed

Subsequent and ongoing cases seem to maintain the right of Internet users and search engines to use trademarked terms in web searches, and the right to offer advertising placement based on users’ search expressions, so long as the trademarked term does not appear in the ads of competitors.

Cybersquatting

The Anticybersquatting Consumer Protection Act of 1999 (”ACPA”) acknowledges the potential for trademark infringement inherent in domain names that are misspellings or variations of well-known trademarks. When the offending domains are obtained and operated in bad faith, the ACPA gives the trademark owner rights to claim ownership of the domain names and recover damages from the operator. The bad faith requirement creates a small window for the legitimate use of a trademark variant when the offender innocently acquires the domain name and operates it for a legitimate, noncompeting purpose.

The textbook application of the ACPA is the near-legendary case of John Zuccarini who operated over 3,000 advertising websites that were all misspellings of well-known domains. In one example of the several cases filed against Zuccarini, he was ordered to pay nearly $90,000 to the owner of joecartoon.com for operating five websites named joescartoon.com, joecarton.com, joescartons.com, joescartoons.com and cartoonjoe.com.

A counter-example illustrating legitimate use of a trademarked domain name is Hatfield, Inc. vs. William Hatfield. Mr. Hatfield registered hatfield.com for email purposes, and Hatfield, Inc. sued to acquire the domain for itself arguing that “Hatfield” was its registered trademark for meat products. The court ruled against Hatfield, Inc. noting that Mr. Hatfield had a legitimate claim to the domain name and was not using it as a trademark.

The court’s comments in a related case summed it up nicely:

“Holders of a famous mark are not automatically entitled to use that mark as their domain name; trademark law does not support such a monopoly. If another Internet user has an innocent and legitimate reason for using the famous mark as a domain name and is the first to register it, that user should be able to use the domain name, provided that it has not otherwise infringed upon or diluted the trademark.”

Related Articles

• The Web 2.0 Service Mark Controversy
• Service Marks vs. Trademarks
• The Flap Over Software Patents

According to lore, the phrase “Web 2.0″ was coined in 2003 by Tim O’Reilly and the staff of CMP Media as a title for a conference they were planning to hold in 2004. As is standard business practice, CMP Media in 2003 filed for registration of the conference name as a service mark. No one predicted that the term Web 2.0 would ultimately become everyone’s popular catchphrase for the next incarnation of the Internet.

To put that popularity in perspective, the following are the number of Google search results for several well-known trademarks:

• Microsoft: 909 million hits
• Web 2.0: 411 million hits
• Intel: 361 million hits
• Coca Cola: 32.3 million hits
• Apple Computer: 15.5 million hits
• Budweiser: 9.3 million hits

Though the term is hugely popular, it wasn’t until a nonprofit industry group in Ireland – IT@cork – announced in 2006 it was holding a Web 2.0 conference of its own that the brouhaha erupted.

CMP Media was legally required to object because if it didn’t, it would lose its rights to the Web 2.0 service mark. Although a cease and desist letter is the standard format for notifying others of your objection to their using your registered mark, it was in hindsight not the best notification format in this circumstance. Tom Raftery, a conference organizer at IT@cork, posted the letter on his blog declaring it to be “anathema to the whole philosophy of 2.0, which is about sharing,” and bloggers around the globe reacted.

Responding instinctively, the blogosphere quickly unleashed a wave of hostility toward CMP and, ironically, toward Tim O’Reilly who is arguably the world’s leading proponent of openness on the Internet. In fact, O’Reilly had been invited to speak at the conference, but CMP’s legal department was not aware of this because O’Reilly was vacationing where he couldn’t be reached when the incident erupted.

In retrospect, O’Reilly Media vice president Sara Winge wished they had phoned the Irish group instead of sending the legal letter. In the end, CMP Media calmed the furor by granting IT@cork permission to use the registered mark “this time,” with future use to be negotiated.

The Heart of the Issue

Though the incident stirred a lot of passion for industry insiders - and amusement for industry outsiders - the real issue involved was not, “Can you register Web 2.0 as a service mark?” because the answer to that is settled and it is “Yes.” 

The real issue is that trademark owners cannot allow their trademarks to become popular terms for anything other than their branded product or service. This is the battle that Coke and Kleenex fight every day. If a mark becomes a generic term, a court can rule that it is no longer eligible for trademark registration and the original owner loses the rights to the mark.  That is what CMP was attempting to prevent.

Related Articles

• The Flap Over Software Patents
• Internet Trademark Infringement Cases
• Service Marks vs. Trademarks