WHY YOUR COMPANY MAY NEED AN INTELLECTUAL PROPERTY AUDIT
By: Mark 1. Ingber, Esq.
In today's age of rapidly emerging technologies I have consistently counseled clients that the entire commercial value of their company may depend upon the extent of their intellectual property rights (i.e. a company's patents, trademarks, copyright and trade secrets) in such technology, and their relationship with employees or independent contractors who develop or use such technology
Given the huge investment in research and development by most companies, the identification, protection and preservation of intellectual property assets, merits recognition as a top management priority. Twenty plus years of first hand experience leads me to conclude that an Intellectual Property audit is a recommended and reliable mechanism to determine the ownership, scope and status of a company's intellectual property rights which will enable the detection of defects in intellectual property rights that may affect the value of the company's assets so that corrective measures may be taken.
1. General reasons why your client may need an Intellectual Property Audit:
- To determine the origin of intangible assets and the extent of interest in technology and related intellectual property rights;
- To determine the scope of rights that third parties, including independent contractors, may have, by license, ownership, or otherwise, in company assets;
- To detect defects in existing intellectual property assets and the mechanisms and procedures for protecting and perfecting the same;
- To determine, in contemplation of intellectual property litigation, whether all filings necessary for jurisdictional requirements have been satisfied, what clouds on company title may exist, and what defenses may be asserted against the company; and
- To avoid liability for third party claims of infringement resulting in the development of new products.
II
When Should an Intellectual Property Audit Be Undertaken?
a. In the beginning stages of a company - to ensure that proper procedures are established to protect and perfect intellectual property rights on a continuing basis - and periodically thereafter.
b. Whenever there is a major transfer of intellectual property rights - for example, a merger, sale or acquisition of a company possessing intellectual property; licensing or acquiring the rights to a given product or process; taking a security interest in intellectual property rights.
c. Whenever there is a significant change in applicable intellectual property law. Example: broadening availability of patent protection for software-related inventions; changes in trademark law which allow the filing of applications based merely on Intent-to-Use; and changes in copyright law affecting computer programs.
III.
Scope of Trademark Protection Generally, trademark rights are secured upon proper use of the mark in commerce. I highly recommend, however, that a company register its marks with the United States Patent and Trademark Office. Such federal registration will provide the company with a bundle of rights that are not available for unregistered marks, including national protection against confusingly similar marks. Further, a company would be permitted to use the ® symbol, which provides notice to its competitors that its marks are registered. In addition to words and symbols, the law of trademarks can protect a product's nonfunctional appearance, known as its trade dress. Accordingly, if a product's design is distinctive or has acquired recognition in the marketplace based on that design, we have been successful in obtaining court action to halt the theft or infringement of that design can be halted by court action. For example, Ferrari was able to prevent competitors from stealing the design of its Ferrari Daytona Spyder classic sports car based on its distinctive trade dress. Actions against I1copycatsll for :infringement of a product's trade dress can be highly effective protection.
Policing - a trademark must be protected from counterfeiters and infringers. Anyone who uses your client's mark or a derivation of it without a license will have to be stopped from doing so. If they are not, the mark's legal status may be in jeopardy. Neglect in policing a mark is a form of" abandonment," and is a basis for basis for losing a federal registration of a mark.
A trademark owner's effort at policing its trademarks is evidence of the strength of those marks. Third party uses, by contrast, can lead to third party trademark registrations, and in general, third-party registrations are
highly probative evidence that the public considers such marks to be weak and descriptive. Thus, if a court finds that a company has failed to adequately police its trademark, a severe consequence is that the company's trademark is greatly reduced in value or even becomes generic and unprotectable. Examples of terms which were which were once trademarks owned by companies, but which later were held by Courts to be unprotectable include
Aspirin, Brassiere, Cellophane, Escalator and Yellow pages.
Steps your client should take to protect its trademarks:
a)
Trademark Watching Service - This service can be used to monitor 3rd party usage on a worldwide basis. This can enable a company to timely file an opposition to similar marks.
b)
Trademark Searches - As a company comes up with new ideas for products and their respective trademarks, counsel should review them as to availability of a particular mark for a particular product. Intellectual property attorneys can provide a complete analysis of Trademark Office as well as state and common law records, if necessary. Tile best time to search is before actual usage, artwork or label printing is effected.
c)
Infringements - Counsel should work with their clients to curb infringements both domestically and on an international basis.
IV
Scope of Copyright Protection Copyright protection applies to a work's ornamental and artistic features. Copyright can be obtained for such works as literary, musical, dramatic, graphic, sculptural, audiovisual, sound recordings, computer software. Protection is automatic upon creating the work. However, the work should be federally registered to provide additional rights not offered by an unregistered work. Obtaining a federal registration enables the copyright owner to sue for damages for infringement - an extremely valuable right. Ownership of copyright rests with the natural author unless the work is a "work made for hire," in which case ownership rests with the employer. Recent case law has made it easier for a consultant to claim the copyright in lris commissioned creation over the party who hired him to produce it.
Steps your company should take to protect its copyrights:
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a)
Marking and Labeling-counsel should review client advertising and packaging materials prior to their being printed in final form to ensure that proper trademark, copyright and patent markings are included, as there are legal implications to improper as well as no markings at all.
V.
Scope of Patent Protection In order for the invention to be entitled to protection by a patent, it must be both novel and non-obvious. All that is required for an invention to be novel is that there must be a difference between the invention and what is already known. For an invention to be non-obvious, however, more is required. In particular. the differences between the invention and what is known must not be obvious to a person having ordinary skill in the field to which the invention relates.
Steps your company should take to protect its inventions::
a)
Evaluations - Counsel should work with their clients to preliminarily evaluate new developments to determine their patentability.
b)
Patentability Searches - The search is to determine patentability and sets forth an analysis, which will provide a good basis of whether to proceed with a patent application.
c)
Issue cease and desist letters to third party infringers.
VI
Employer/Employee Agreements Counsel should review client employee agreements to ensure that all intellectual property created remains its property, as well as ensure that trade secrets cannot be disclosed to third parties.
VII
Trade Secrets Trade secrets include any information that is not generally known which provides a competitive advantage to a business such as software, a customer list, production process or formulas. In order to successfully assert a trade secret, one must establish that adequate steps were taken to preserve secrecy. Counsel should work with their client to ensure that it is taking the proper steps to protect their trade secrets.