LAFI 2015 Legal Randall

8/20/2019 LAFI 2015 Legal Randall

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Basics of Protecting Your

Intellectual Property forStartups

David Randall,

PartnerSheppard, Mullin, Richter & Hampton, LLC

© Sheppard Mullin Richter & Hampton 2014, 2015



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Types of Intellectual Property

!

Intellectual Property from a legal perspective:– Patents

– Trademarks, Service Marks, Trade Dress

–

Trade Secrets– Copyrights

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Patents



Patents

!

Types of Patents– Utility Patents - protect any new and useful process,

machine, manufacture, composition of matter, orimprovement thereof

– Design Patents - protect any new, original and ornamental

design for an article of manufacture– Plant Patents - protect invented or discovered asexually

reproduced plant varieties

! Rights Conferred - Statutorily Granted Period of

Exclusivity– Right to exclude others from making, using, selling,importing

• Utility and Patent = generally 20 years from filing

• Design = 14 years from grant

– Does not provide patentee a right to practice the invention

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What Can Be Patented?

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“Whoever invents or discovers any new and useful process,machine, manufacture, or composition of matter, or anynew and useful improvement thereof, may obtain a patenttherefor, subject to the conditions and requirements ofthis title”

35 U.S.C. § 101

“Anything under the sun made by man…”

Diamond v. Chakrabarty , 447 U.S. 303, 308 - 09, 206 USPQ 193, 197 (1980) (an oil

consuming genetically modified bacteria, classified as a life form, is patentable).



Not Patentable …

! Laws of nature, physical phenomena, abstractideas

! A new mineral or new plant found in the wild!

A machine that is not useful! Printed matter

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Importance of Patents

! Enforce barrier around core technologies to derive value from

exclusivity (e.g., price premium, market share premium,

blocking value)

! Maintain Edge in Marketplace– Products Can Be Faster, Better, Cheaper

–

Products Can Have Unique Features! License for Revenue Generation, to form a Business

Partnership or Strategic Alliance! Cross License To Gain Access to Required Technology or

Markets! May Discourage Lawsuits from Competitors – “Freedom

to Operate”! Leadership Position

! Investors will Demand a Patent Position! Add Value at Exit (intangible property like patents often

represent majority of value of startup)

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Startup Considerations

! Don’t be penny wise and pound foolish.

–

Many startups skimp on patent protection and try to file their own provisional

patents

– In general, provisional applications can be fools gold

– Need to keep up innovations as they are generated to make sure patent strategy is

aligned with business strategy

!

On other hand, you want to be careful about spending too muchmoney too soon. – Have a clear direction

– No matter how good your idea, it won’t translate into money without a good

business plan

! Loose lips sink ships – Be careful about what you disclose and to

whom.

!

U.S. is now a first-to-file rather than first to invent, so want to win therace.

! Most investors won’t sign an NDA. –

Be safe and get patent applications on file before your meetings.

–

Have multiple pitch books – may want to tell them what, just not the details of how

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Trademarks and Branding

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Marks

!

Protect words, names, symbols, sounds, fragrances(smells), tastes (flavors), shapes, or colors thatdistinguish goods or services.

! Examples: the roar of the MGM lion, the pink of theinsulation made by Owens-Corning, the shape of aCoke® bottle, the shape of a Mini Maglite®flashlight.

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Why Use Trademarks?

!

Protect Your Brand!

! Preserve and promote goodwill

!

Protect owner’s reputation and advertising

investment! Protect from counterfeiters

!

Don’t allow copycats to mislead consumers

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Rights Conferred by Trademark Law

!

Right to require others to avoid imitation of your

mark that would create a likelihood of confusion

as to the source, origin, affiliation or sponsorship

of the goods or services being sold under the

mark.

!

Scope of protection depends somewhat on the

strength and fame of the mark.

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Rights and Protection

! Common law rights can arise from use withoutregistration – but ordinarily the mark enjoyslegal protection only within the geographicarea in which it is actually used

!

Registration provides enhanced protection– Put others on constructive nationwide notice– Evidence of ownership of mark

– Become incontestable after 5 yrs continued use– Enhanced damages

–

Registration may be filed with U.S. Customs Serviceto prevent importation of infringing foreign goods

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Examples

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Words

Just do It.®

Intel Inside®

Got Milk?®

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Label Placement and Shape

!

Registered in 1931

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Packagingand containers

!

bottle shape – fluted sides andbulging middle

!

Registered in1960

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Sounds as Trademarks

!

NBC® Chimes,

! Harley Davidson® exhaust roar,

!

MGM® Lion Roar;

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Color

!

Color Depletion theory! Only for non-functional colors!

Examples– Pink for insulation – Owens Corning–

Lionel – Orange and Blue

! Functional colors– John Deere green for parts

– Blue dot on flash bulbs

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Strength of Trademarks - Distinctiveness

!

The distinctiveness of a mark affects not only anapplicant’s ability to register the mark but also the Mark’s

strength after registration.

! Distinctiveness is often thought of on a continuum scale

with "inherently distinctive" marks at one end, "generic"and "descriptive" marks with no distinctive character at the

other end, and "suggestive" and "arbitrary" marks lying

between these two points.

Mark StrengthMark StrengthMark Strength Mark Strength

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Trademark Distinctiveness - Fanciful

!

A fanciful / inherently distinctive trademark is

prima facie registrable, and comprises an entirely

invented or "fanciful" sign.

!

Examples: KODAK, STARBUCKS, VERIZON,EXXON all had no meaning before they were

adopted and used as a trademark in relation to

their goods.

!

Invented marks are neologisms which will notpreviously have been found in any dictionary.

They are by definition fanciful.

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Trademark Distinctiveness - Suggestive

!

A suggestive trademark tends to indirectly

indicate the nature, quality, or a characteristic of

the products or services in relation to which it is

used, but does not describe this characteristic,

and requires imagination on the part of the

consumer to identify the characteristic.

!

Suggestive marks invoke the consumer’s

perceptive imagination. Examples include

PLAYBOY for a men’s magazine, 7-11 for a store

that was open 7 am to 11 pm, JAGUAR and

MUSTANG for fast cars.

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Trademark Distinctiveness - Descriptive

!

A descriptive mark is a term with a dictionary meaningwhich is used in connection with products or services

directly related to that meaning.

! Examples: Salty used in connection with saltine crackers

or anchovies. COMPUTERLAND for a computer store,VISION CENTER for an optics store

! Such terms are not registrable unless it can be shown that

distinctive character has been established in the termthrough extensive use in the marketplace.

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Trademark Distinctiveness - Generic

!

A generic term is the common name for the products orservices in connection with which it is used, such as "salt"

when used in connection with sodium chloride.

! A generic term is not capable of serving the essential

trademark function of distinguishing the products orservices of a business from the products or services of

other businesses, and therefore cannot be afforded any

legal protection.

! Marks which become generic after losing distinctive

character are known as genericized trademarks (e.g.,THERMOUS and KLENEX)

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!

When you begin the process of selecting a newproduct name, it is important to remember the

spectrum of distinctiveness and recognize that not

all marks may be registered.

Trademark Distinctiveness - Summary

Spectrum of Registrability

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Maintain Marks

!

Maintain Sustained Use

! Maintain watch

!

Control through licensing

–

Jeep®

!

Retain distinctiveness– Is Pepsi® OK?

– Trademarks are never nouns

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Marks may become generic

– Allen wrench

– Aspirin

– Cellophane

–

Cola– dry ice

– Escalator

– Gramophone

–

Granola– jungle gym

– LP

– linoleum

– merry widow

–

Mimeograph– photostat

– spandex

– tarmac

–

zeppelin – zipper

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Startup Considerations

!

Trademarks frequently make up the majority of astartups IP.

! Don’t discount value of branding

! Think of non-traditional TMs like sound marks or

product shape marks.! Go for arbitrary or fanciful marks rather than

descriptive marks. It will generally save you lots ofmoney and provide you with greater brandprotection.

! Higher a lawyer to perform a proper trademarkclearance search. Apple had to pay $60M to Proviewin China to continue to use “iPad”.

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Trade Secrets and Confidential

Information



Trade Secrets

A trade secret is typically some sort of information:

1. not generally known or reasonably ascertainable;

2. conferring some sort of economic benefit on itsholder because it is not being generally known;

3.

with reasonable efforts made to maintain secrecy.

Examples:

– Coca-Cola® formula, confidential customer lists.

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Rights Conferred by Trade Secret Law

!

right to prevent others from knowingly acquiring

the secret through improper means or disclosing

the secret without consent.

!

protection originates and is primarily maintained

through state law.

!

most states have enacted legislation, namely, the

Uniform Trade Secrets Act.

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Patents vs. Trade Secrets

!

Term– Patent: 20 years from filing– Trade Secret: As long as it remains a secret

!

Protection

–

Patent: Complete exclusivity and protectionagainst another’s independent development

– Trade Secret: Will not protect from independentdevelopment by proper means or reverseengineering

!

Cost– Patent: Can be somewhat expensive to obtain, but

relatively cheap to implement– Trade Secret: Cheap to obtain, but can be

expensive and/or time consuming to maintain34



Copyright

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Copyrights

! Protect original works of authorship, such as writings,music, dramatic works, and works of art that have been

tangibly expressed.

! Copyright vests as soon as created and fixed in a tangibleform that it is perceptible either directly or with the aid of a

machine or device.

! Protect the expression of the idea, not the idea. E.g.,

description of a nanotube could be copyrighted to prevent

copying the description, not to prevent others from writing adescription of their own or from making the nanotube.

! Lasts for life of author + 70 years. If work for hire, the lesser

of 95 years from publication or 120 years from creation.

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Rights Secured by Copyright Law

!

The 1976 Copyright Act generally gives the owner

of copyright the exclusive right to:

– reproduce the copyrighted work

– prepare derivative works

–

distribute copies or phonorecords of the copyrightedwork by sale, rental, lease, lending or otherwise

– perform or display the copyrighted work publicly.

!

If hire someone to generate software, artwork or

other copyrighted material, make sure you own it.

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Rights Secured by Copyright Law

!

The owner also has the exclusive right to

“authorize” others, as by license.

!

The rights owned can be, and often are, divided

and separately sold or licensed. E.g., author of a

novel may sell paperback rights to Party #1,

movie rights to Party #2, right to make a stage

adaptation to Party #3, etc.

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Limitations on Exclusive Rights

!

Fair use:

purposes such as criticism, comment, news reporting,

teaching, scholarship, or research may not be aninfringement.

!

Independent creation:

complete defense to copyright infringement, even if after

the creation of the copyrighted work.

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Registration

!

The Copyright Office of the Library of Congress

registers copyrights.

!

As copyright rights exist from the moment the

work is created, there is no need to register.

!

But registration is necessary before bringing a

lawsuit for infringement of a U.S. work.

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Notice of Copyright

!

“©” year of first publication, owner

!

No longer required but helpful to defeat a defense

of innocent, non-willful infringement.

!

Use of the notice does not require advancepermission from, or registration with, the

Copyright Office.

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Copyright Ownership

!

Transfers of copyright must be in writing.

!

Ownership of a physical object embodying

copyrighted matter does not necessarily mean

you own the copyrighted matter too. E.g., a sale

of a painting does not mean you have the right to

make reproductions.

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LAFI 2015 Legal Randall

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