Our legal system provides certain rights and protections for owners of property. The kind of property that is created from the fruits of mental labor is called intellectual property. Rights and protections for owners of intellectual property are based on federal patent, trademark and copyright laws as well as state trade secret laws. In general, patents protect inventions of tangible things; copyrights protect various forms of creative, written and/or artistic expression; trademarks protect a name or symbol that identifies the source of the goods or services; and trade secrets protect proprietary, confidential information that meets certain requirements as described below.
Trade Secrets include information, such as a formula, pattern, compilation, program, device, method, technique, or process that must derive independent economic value (actual or potential) from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use, and the trade secret owner must take reasonable steps to maintain the secrecy of the information. The most classic and well-known example of a “trade secret” is the formula/recipe for Coca-Cola Classic.
The public policy behind protecting trade secrets is to ensure fair competition among businesses and to promote innovation. As a society, we have determined that it would be unfair to allow a business to use another business’ proprietary business information to compete against them. We wish to motivate entrepreneurs to have new ideas, create new products and offer new services or do any of these things in an innovative way. This is how we move forward as a society not just economically but also culturally.
In today’s business, a common trade secrets issue arises when an employee is terminated or quits and then uses certain information that he or she gains while employed in his or her new job. A common example is when a sales employee takes the “customer list” with him or her. While you might think that a “customer list” is always going to be considered a trade secret, the statutory analysis must be applied nonetheless. What if the customer list is published on the company’s website? Or, what if every single employee had unrestricted access to the customer list on the server no matter whether that employee was the receptionist, the graphic designer or the sales person? When we refer to the customer list and our desire to protect it, we are not talking about the identity of the customer usually. Instead, what we are really talking about is something else like the specific needs of the customer, the right contact person at the customer, and the pricing and terms offered to that customer.
When we talk about “protecting trade secrets,” we are talking about preventing the misappropriation of trade secrets and the enforcement of your rights once misappropriation has occurred. This may involve petitioning for injunctive relief like a temporary restraining order, or a lawsuit for monetary damages.
Despite all the stories of hacking and corporate espionage in the news, the greatest risk and threat to your trade secrets lies with your own employees and your competitors that lure them away. The best way to protect a trade secret is to share it with the fewest number of people possible. Since that is not always feasible, the best practices for preventing employee theft of trade secrets include:
- Routinely marking written and electronic materials as “Confidential Information” and then treating them as such;
- Requiring third parties to execute a “Non-Disclosure Agreement” or “Confidentiality Agreement” prior to sharing confidential or proprietary information with them;
- Requiring all employees to sign written employment agreements that contain covenants not to disclose confidential information or solicit customers and employees following departure from the company;
- Providing every employee a written employee handbook or employee policy manual which contains policies with respect to the protection of company trade secrets among other provisions;
- Requiring attendance at regular employee training sessions concerning the identification of trade secrets and the proper handling and protection of trade secrets;
- Limiting the use and presence of personal computing devices like smart phones, tablets and laptops at the workplace; and
- Regular workplace monitoring including personal computer searches and email searches
Having the right attorney on your side to help you identify items that qualify as trade secrets and to advise you on the best way to protect those trade secrets is invaluable as the loss of the protection that California law provides your trade secrets can be devastating to your business.
If you suspect that a third party has stolen your trade secrets, you may have recourse against them. However, the stakes are very high in trade secrets litigation which requires a tempered approach that actually analyzes whether you had a trade secret in the first place, evaluates the evidence you have of the misappropriation of your trade secrets, determines the likelihood of a successful outcome of litigation and counsels you with respect to alternatives. Trade secret litigation is hotly contested, high-stakes litigation where the loser can ultimately be out of business.
Trademarks and service marks are words or logos that identify the source of those goods or services. A classic example is the Nike Swoosh logo. When we see a pair of shoes with a Nike Swoosh on them, we know to some extent that we are getting high-quality athletic shoes designed and built for a particular athletic sport. Nike has invested a great deal in the promotion of that logo and the quality of the goods that the logo represents. As a society, we want to promote that type of investment and innovation so we give Nike the exclusive right to use the Swoosh logo and prohibit others from using anything that is confusingly similar.
Trademark rights attach at the moment you first begin using the mark in commerce. You can use a mark internally within your company for weeks or months; however, your exclusive rights to the mark do not begin until you actually use the mark in public in commerce such as when your website goes live to the public or your goods are first put into distribution.
Even though trademark protection is granted by law at first use, registering your trademark or service mark with the United States Patent and Trademark Office (USPTO) provides other benefits which make registration worthwhile. The benefits of registration include:
- Public notice of your claim of ownership of the mark in the USPTO’s public online databases;
- A legal presumption of your ownership of the mark and your exclusive right to use the mark nationwide on or in connection with the goods/services listed in the registration;
- The ability to bring an action concerning the mark in federal court;
- The use of the U.S. registration as a basis to obtain registration in foreign countries;
- The ability to record the U.S. registration with the U.S. Customs and Border Protection (CBP) Service to prevent importation of infringing foreign goods; and
- The right to use the federal registration symbol ®.
Trademark availability searches are valuable tools for avoiding trademark infringement claims and wasting resources spent on marketing and product packaging. Before you begin to market new goods or services, you should first search the marketplace to confirm whether or not anyone else is already using that mark in connection with goods or services. Reliable third party service providers are recommended over trying to conduct the search yourself. Simply checking the USPTO’s database is not sufficient. A complex analysis of a number of factors should be completed by an experience attorney before you invest in further development and marketing.
A “copyright” in a thing is the exclusive right to make copies of it, perform or display it publicly, distribute it, and make derivatives based off of it. While these rights are not always absolute (i.e., there are exception such as “fair use”), these are the basic rights you have when you have a copyright in a work of authorship.
Similar to trademarks, your right to copyright protection of your work of authorship derives from the first publication of the work. Immediate registration of your copyright with the United States Copyright Office is strongly recommended due to the special benefits granted by federal law for registration within the first 90 days after publication. “Publication” means when the work is fixed in any tangible medium of expression. The special benefit of timely registering is your right to statutory damages (which will often exceed your actual damages) and the right to be reimbursed for your attorneys’ fees incurred in bringing the infringement action.
Copyrightable works including the following categories:
- literary works;
- musical works, including any accompanying words/lyrics;
- dramatic works, including any accompanying music;
- pantomimes and choreographic works;
- pictorial, graphic, and sculptural works;
- motion pictures and other audiovisual works;
- sound recordings; and
- architectural works
It is important to note that copyright is granted to the person who creates the work of authorship. Therefore, it is critical that you use properly drafted agreements with vendors and other contractors to ensure that all of their rights are assigned to you upon your payment of their fees. If you do not use well-drafted written agreements, these vendors or contractors could claim that they simply sold you a license to use the work and could then use their rights to compete against you or license/sell the rights to a competitor. While it is natural to trust vendors and other contractors when you first begin to do business with each other and it is difficult to imagine that they could ever claim that they own the intellectual property, it is always best to document your agreement about such matters at the outset of the relationship.
Patent lawyers possess a highly specialized and unique niche in the practice of law. They typically have a science background and are required to take a separate bar exam. While we are not a patent lawyer, Black and Deen can help identify patentable designs and processes in your business and then connect you with a patent lawyer who has the proper background for your situation since patent lawyers are not interchangeable.