INTELLECTUAL PROPERTY

Will penalties from user data lawsuits destroy your online business?

If you own a website that collects user data or simply operates online, take caution!

By Peter Lemire

In June of this year, California enacted the California Consumer Privacy Act (CCPA), becoming the first state in the U.S. to pass its own data privacy law. The CCPA act was enacted just one month after the European’s General Data Protection Regulation (GDPR) officially became enforceable. Any relief felt by U.S. companies for completing the arduous task of bringing their business practices into compliance with the GDPR was short-lived—California has plunged headfirst into the privacy arena, and they’re playing by their own rules.

On the surface, it may seem that companies not doing business with California residents or EU citizens remain unaffected and are free to carry on business as usual. However, the enactment of the CCPA could have broad implications for businesses across the country. The public is demanding corporate accountability for cybersecurity and privacy—just ask Mark Zuckerberg, the creator of Facebook. Companies should start contemplating and formulating compliance strategies sooner rather than later. In the realm of privacy and data security, a proactive approach to the management of cybersecurity and privacy risks is best, and may avoid a costly game of “catch-up.”

In order to understand what privacy and personal data management policies should be in place, it is first important to look at what the CCPA requires for compliance. The CCPA has been largely referred to as California’s version of the GDPR, however, the comparison is slightly misleading as there are quite a few differences between the CCPA and the GDPR.  This means that existing privacy policies tailored for the GDPR will not automatically be fit for purposes of complying the with CCPA, and will likely need to be updated to reflect the disclosures and transparency obligations required by the CCPA.

Of course, the first step is determining whether your business is even affected by the CCPA. The CCPA applies to for-profit businesses that collect and control California residents’ personal information, do business in the State of California, and either (a) have annual gross revenues in excess of $25 million, (b) receive or disclose the personal information of 50,000 or more California residents, households, or devices on an annual basis, or (c) derive 50 percent or more of their annual revenues from selling California residents’ personal information.

Although the CCPA’s directives become operative January 1, 2020, in order to comply with the 12-month look-back period for consumer requests, businesses subject to the CCPA will need to begin mapping data and keeping records of personal information beginning January 1, 2019.

Even if the CCPA does not apply to your business, it is still worth having a basic understanding of the CCPA, as other states are following the EU and California’s lead, which could lead to federal involvement. Essentially, the CCPA gives California residents four basic rights in relation to personal information. First, “the right to know” grants the right to know what personal information is being collected, and the right to know whether personal information is being sold or disclosed and if so, to whom. “The right to opt-out” provides for the right to opt-out of the sale of the collected personal information to third parties. Further, minors under the age of 16 must actually opt-in (meaning the sale of personal information is not permitted until consent is expressly provided), and for minors under the age of 13, the consent must come from a parent or guardian. “The right of access” gives consumers the right to have businesses disclose the information collected, the categories of information collected, the categories of third parties with whom the information is shared, the categories of sources of the information, and the business purpose for collecting or selling personal information. Finally, the CCPA provides for “the right of equal service,” which forbids businesses from discriminating against consumers for exercising their right to privacy afforded under the Act.

California’s law is just the tip of the iceberg of what is happening throughout the United States. The GDPR and CCPA have brought concerns of inconsistent and sometimes conflicting privacy laws to life, and present businesses with unnecessarily burdensome compliance challenges. As a result, attempts to lobby Congress to pass federal omnibus privacy and data protection law that would pre-empt the CCPA and other existing and future state data protection laws are currently underway. The U.S. Chamber of Commerce, the Internet Association, a trade group representing leading Internet companies, and the Interactive Advertising Bureau have already all spoken on the matter.

Businesses that are compliant with the GDPR do have a fairly significant head start on complying with the CCPA. However, because there are material differences between the two regulations, even businesses that are “GDPR-compliant” (if there is such a thing) will have additional work to do to prepare for the CCPA. Absent an act of Congress pre-empting the CCPA, businesses who may have dodged the GDPR bullet must now develop robust data management. However, even businesses who have not been affected by the GDPR or CCPA may want to consider taking a second glance at their privacy practices and policies—one way or another, privacy regulation seems inevitable.

If you have questions about how to update your privacy agreements to avoid costly trouble, we are here to help. Please feel free to contact us at (303) 768-0123 or send us an inquiry here.

By | December 19th, 2018|BLOGGING, BUSINESS LAW, CYBER LAW, INTELLECTUAL PROPERTY, OTHER|Comments Off on Will penalties from user data lawsuits destroy your online business?

SupCo trademark game-changer

Take care around trials and appeals

By Peter Lemire

A recent decision by the Supreme Court will have attorneys and business paying more attention to what are known as “adversary proceedings” before the United States Patent and Trademark Trial and Appeals Board (TTAB).

Adversary proceedings are basically mini administrative trials that are conducted when one party believes that it will be harmed by the USPTO allowing the registration of a trademark to a third party. There are two forms of adversary proceedings: oppositions and cancellations. An opposition is when a third party objects to the registration of a mark prior to the granting of the registration.

A cancellation action is identical to an opposition, but it occurs after a registration has already been issued and the third party is seeking to cancel the registration. While these proceedings have for the most part been taken seriously, the Supreme Court decision in B&B Hardware, Inc. v. Hargis Industries, Inc. has exponentially raised the stakes due to the fact that the court ruled that a TTAB decision regarding whether there exists a likelihood of confusion between two trademarks can in some cases have a preclusive effect (meaning that the TTAB decision would be binding in the later infringement action) in a subsequent trademark infringement litigation.

This is a big deal.

To illustrate what a potential game-changer this decision is, some background is probably in order. Historically, there has been somewhat of a divide between the world of registration at the USPTO and the world of infringement that is battled over in the federal courts.

This is due to the fact that the trademark system is somewhat of a dual system of common law (unregistered marks) and federally registered trademarks. Contrary to what many people believe, the federal registration does not create trademark rights. Trademark rights are actually created by an individual’s or company’s use of the mark to identify its goods or services. It’s the use that actually creates the rights, known as common law rights.

By federally registering these rights through the USPTO, an individual or business gains certain extra advantages. In today’s world, most businesses – especially small- and medium-sized businesses and startups – greatly benefit from federal registration; however, it is not a necessity.

The Lanham Act (the federal trademark statute) sets out the rules and process for federal trademark registration. One of these rules is that a registration can’t issue if it causes a likelihood of confusion with another registration.

Additionally, owners of federal registrations and common law users who believe that they will be harmed by a registration can contest the registration through an opposition or cancellation proceeding. These proceedings are quasi judicial proceedings wherein limited discovery is generally conducted and the “trial” generally amounts to written testimony and arguments submitted to the TTAB.

Historically, these proceedings had fairly low consequences, due to the fact that an adversary proceeding only deals with the issue of whether a mark is registerable with the USPTO, and not whether it infringes on another mark. The only downside to a party defending an adversary proceeding was that the mark may be prohibited from registration or an existing registration was cancelled.

No damages, attorney’s fees or injunctions can be awarded in an adversary proceeding. If a mark holder lost an adversary proceeding, they could always just rely on their previously established common law rights. Furthermore, if an infringement action was subsequently filed, the mark holder would essentially have a second bite at the apple if they wished to defend the litigation, since the likelihood of confusion standard, with some differences, is also the test for infringement.

With the Supreme Court’s decision, how the adversary proceeding is prosecuted and argued can now have a profound effect on a subsequent infringement action. A mark holder whose mark is found to cause a likelihood of confusion at the TTAB leve, can also now have that determination applied against them in an infringement case, where they would be liable for damages and attorney’s fees, and could face an injunction preventing them from using their mark. Therefore, these actions should now be fought just as aggressively as one would in an infringement case.

The takeaway from all of this is that for businesses facing adversary proceedings at the TTAB, the stakes now just got higher. Businesses will need to be more strategic with their arguments in front of the TTAB, and probably conduct significantly more discovery than was done in the past. Interestingly, this may also encourage more settlement at the adversary proceeding stage.

If both parties are wary of potential preclusive effect of a TTAB decision, this may lead them to engage in more serious settlement talks in order to avoid the risky proposition of having an adverse TTAB decision bind them in future proceedings. Time will tell.

By | April 7th, 2015|INTELLECTUAL PROPERTY, PATENTS, TRADEMARKS|Comments Off on SupCo trademark game-changer

Kick-starting the new year

Crowdfunding might be just what your business needs

By Peter Lemire

When meeting with clients, we often explain to them that securing intellectual property rights of inventions or products is an important step of the process, but it is just the start and sometimes is the easiest part of bringing a product to market or starting a new business venture. Millions of great ideas are conceived every day; however, just because something is a great idea does not guarantee success.

Business owners face major obstacles, including the practical realities of bringing the product to market and generating sufficient consumer awareness to sustain the business. Previously, this could be a monumental task that dooms many business ventures. However, the advent of crowdfunding sources may make the process of exposing a product to the market and making that initial purchase of inventory easier.

Crowdfunding websites such as www.kickstarter.com have existed for a few years, but I never seriously considered participating in a Kickstarter project. In the early days many of the projects revolved around funding the arts – projects included independent films, musicians seeking to fund albums, and projects to launch or revive TV shows. In exchange, benefactors generally would receive tickets to the premier, copies of the film or CD or other associated swag.

At the time I saw Kickstarter as an interesting and effective way for the artist community to fund projects. As time has gone on, Kickstarter has shown to be wildly successful for these sorts of projects. Most notably for Colorado is the successful funding of the documentary Touch The Wall, which documents Missy Franklin and Kara Lynn Joyce in the years leading up to and during the 2012 London games. When looking at the number of projects successfully funded through Kickstarter in 2014, these sorts of projects still dominate.

It wasn’t until last fall that I was able to see the potential benefit of a website like Kickstarter for entrepreneurs and small businesses. When browsing Facebook, I saw an ad for a pole to be used with a GoPro that contained a battery inside the handle that could power a camera for eight-plus hours.

As an avid skier and GoPro enthusiast, the ability to have enough battery power to last a whole day of skiing was interesting. I clicked the link and, to my surprise, was taken to a Kickstarter page. I watched the video and checked out the company’s website. What struck me was that this was not a call to fund a concept or some “pie in the sky” idea. It was an actual product that the company had spent time developing – they had already acquired production-ready molding, tooling and packaging. They just lacked the operating capital to purchase the first large order of product.

I felt I would actually get the product, so backed the product. The pole arrived, it works great, and the overall experience was great. I even bought a few PolarPro filters.
It then occurred to me that Kickstarter could be a way for clients to obtain the capital needed for a product launch, as well as gain exposure and marketing for their product.

A look at Kickstarter’s 2014 data indicates that artistic endeavors dominate the number of 2014 funded projects, but technology and designs dominate the amount of money raised. Funding, however, is not automatic. Here are tips to enhance crowdfunding success:

1) Project professionalism. Kickstarter’s terms and conditions state that accountability lies solely with the creator of the project. Backers are encouraged to do their own research. The more established and reliable of a company you are, the better chance to get funded.
2) Crowdfunding can catapult you over the last hill. Funders want product, not concept. Products put through the R&D process and tooling are ready to manufacture. Funders are not eager to fund design and development. With Touch the Wall, all of the footage had already been shot. The money raised by the Kickstarter campaign went to editing, post production, distribution, etc.
3) Be able to show a production-ready prototype. This ties in to No. 2, but consumers want to see the product and to see people using it. They want to see that it is real and that it works. SolidWorks drawings and computer animated images do not instill confidence that the project is at a point that invites participation.
4) Lower price points make it easier for backers to take that leap of faith. More people will take a calculated risk to back campaigns at amounts of $100 or less versus something that costs several hundred dollars or more. I was willing to risk $100 on the power pole and if nothing ever materialized, I may have been annoyed but it wouldn’t have been catastrophic. If it had cost much more than that, I don’t know that I would have participated. The takeaway here is that your ultra-cool GPS-enabled widget may be a really neat product, but you may not find many backers if your starting price is $1,500.00.
5) A history is a plus. If you have a worth highlighting. And say upfront why you need the money. If it is because your first production run will cost $50,000 and you simply don’t have that sort of cash lying around, say so.

If you are a business owner and you haven’t thought about using crowdfunding as an arrow in your to get the capital and marketing exposure your company needs when launching a new product.

Who knows – it might just be the kick start your business needs in 2015.

By | January 16th, 2015|BLOGGING, INTELLECTUAL PROPERTY|Comments Off on Kick-starting the new year

A forgotten right the government can’t take away

If you have followed the news lately, you’ve probably have heard about the United States Patent and Trademark Office’s (USPTO) board decision to cancel the Washington Redskin’s federal trademark registrations covering their name and graphical logo. The USPTO had determined that the term, “Redskin” and the graphical logo associated with the NFL team, violated trademark laws’ prohibition against scandalous or immoral subject matter at the time the mark was registered.

It should be noted that this isn’t the first time the USPTO has come to such a conclusion with respect to the football team. The courts reversed the previous determination on a procedural issue regarding whether or not the individual that brought the cancellation action had standing to sue. It was interesting to see some of the initial commentary regarding the decision and the lack of knowledge about trademark law and the nature of trademark rights.

No matter your particular view of the underlying case, the situation with the Redskins is a good example of the public’s misperception of trademarks, how trademark rights are accrued, and why trademark registrations can carry more benefits in the eyes of the public than those actually conveyed under the law.

The most interesting aspect of the discussion is the mistaken belief that trademark rights are granted by the government. In fact, at the most basic base level, trademark rights are created by an individual or company’s use of a trademark to identify their goods or services in commerce. By naming your product “XYZ” and selling it in the marketplace you accrue what are called, “common law rights.” The longer you use it and more geographic areas your goods and services are sold, the strong your rights become.  These rights are not contingent on any government approval or certificate.

However, while the federal registration does not create trademark rights per se, it does grant you certain extra add advantages. First and foremost, for smaller businesses the benefits of the federal registration definitely make sense as they will protect your mark nationwide, even if you haven’t sold product or provided your services in all 50 dates. This can be important if a company has plans to start regionally and slowly expand operations or a larger geographic region or even nationwide.

Without a federal registration, a business could find itself in the position of looking to enter into a new market where another common law user has already established rights in that geographic area. Therefore you will either be barred from entering that area or, if you do work in that area, you will have to do so under a different name. This can severely hamper and make more costly marketing and brand awareness campaigns. Larger companies (e.g. Microsoft) don’t necessarily have this problem due to the fact that they can launch products and services nationwide. Therefore, they create common law rights in all geographic areas from the get-go. While federal registration is still important to larger companies, they will still have powerful rights even if they just rely on common law trademark rights.

As the 2014-2015 football season starts up, think twice about producing Redskins merchandise to line your pockets. Though the USPTO did cancel the Redskins federal trademark registrations, you are out of luck for cashing in on the brand.

The law still recognizes strong common law rights in the Redskins name and logo, and you will more likely find yourself on the other side of a lawsuit for trademark infringement and counterfeiting if you endeavor on that path. Furthermore, the team has vowed to appeal the USPTO’s ruling to the federal courts. Given the history of the case and the seemingly thin factual support for the USPTO’s decision, there stands a high likelihood that the Redskins would prevail on an appeal.

Hazy times for Colorado’s marijuana businesses

Many businesses are dealing with the impacts of Colorado’s foray into recreational marijuana. Often, this uncertainty is focused on how the new laws and regulations will be implemented. While compliance with the Colorado regulatory framework is often the first priority of companies associated with the marijuana industry, another important legal issue is lurking below the surface, and unfortunately how it is resolved remains to be seen. The issue concerns an area of intellectual property law that all businesses have – trademarks.

Trademarks protect identifiers of the source of goods in commerce – essentially they protect brands. Trademarks can be any non-functional aspect of a product or service that identify its source. They can be business or product names, logos, or even things such as product packaging or design (e.g., the shape of an I-Phone or a Coke bottle).
The law protecting trademarks has two main purposes. The first is to protect the goodwill built up by business owners with the consuming public.

Basically, we don’t want a company to spend 20-plus years building a good reputation only to have another company come in and adopt a mark that is intended to ride on the coattails of the first company. The second purpose is to protect the consuming public. Essentially, when you go and buy a Coke, you do so because you have certain expectations about the product including quality, price etc. Therefore, the law recognizes that it is in the public’s best interest to not allow dish water to be bottled and sold to the unsuspecting consumer as a Coke or for a fly-by-night company to sell shoddy knock off shoes as a pair of Nikes.

There are basically two types of trademarks – registered and unregistered. Unregistered trademarks (also called common law trademarks) arise from the business’ use of the terms to identify its goods. The scope of protection for common law trademarks is generally narrow. Fights about the geographic scope of common law trademark rights often get down to the zip code level. Because of these limitations it is not preferable to just rely on common law rights.

Registered marks are those in which the trademark owner has sought registration of the trademark with a state or with the federal government. Each state’s laws are different and can range from highly complex systems to Colorado’s system, which basically just defaults back to common law protection. Most trademarks are protected under the federal Lanham Act. Trademarks registered under the Lanham Act are enforceable in all 50 states even if the business hasn’t had sales nationwide.

The problem facing Colorado companies that are involved in or sell goods or services related to the marijuana industry is that, generally speaking, the law doesn’t allow for trademarks rights in goods or services that are illegal. On a broad level this makes sense; if you are conducting an illicit activity, you shouldn’t be able to sue someone else for doing the same illicit activity under a similar name. Doing so would tend to legitimize the illegal activity. But what happens when something is legal under state law but illegal under federal law?

Usually the answer would be that the state law is invalid due to the Supremacy Clause of the United States Constitution. However, this inconvenient fact is essentially the third rail in the marijuana debate. Even though the last two administrations have looked the other way, marijuana is still illegal federally. The federal controlled substances act prohibits among other things the manufacturing, distributing, dispensing or possession of certain controlled substances including marijuana and marijuana-based substances.

Additionally the CSA makes it illegal to sell, or offer for sale any drug paraphernalia (“any product, equipment or material which is primarily intended or designed for use in manufacturing, compounding, producing, preparing, injecting, ingesting, inhaling or otherwise introducing into the human body a controlled substance”) 21 U.S.C. §863. Because of this a company will not be granted federal trademark registration for marijuana or marijuana paraphernalia. Therefore a business owner cannot get a federal trademark for the name of their dispensary or their own brand they might assign to a particular strain of marijuana. Additionally a business owner would also be denied federal common law protection for any such mark under the Lanham Act.

Things most likely don’t fare much better under a state common law analysis. While there isn’t any case law out on this yet, but strictly going by the law, a court would have to deny state common law protection as well, due to the Supremacy Clause. This causes a huge conundrum – how are marijuana business owners supposed to protect their goodwill?  How do we protect consumers that rely on brand names to make purchasing decisions regarding, quality, strength and safety?

Most ironically, a grower could produce a new strain, protect it with a plant patent, and give it a new name. If someone infringed the patent the grower could sue and obtain an award for damages. However, if the same individual sold an existing (non-patented) stain under the same brand name as the patented strain, the grower might not have any recourse.

So does this mean that marijuana-related businesses should just ignore trademarks? I would say that is not a wise choice. There are still many strategies that a business can use to get the most protection possible under both state and federal law, which while might not be ideal, it is definitely better than nothing. Additionally, sophisticated legal counsel can also employ other areas of intellectual property may also prove helpful in protecting brand identity.

Lastly, we really are in a situation of wait and see. Until either the federal law is changed, or some cases concerning these companies move their way through the courts, it’s all a bit hazy.

The perils of third-party IP policy shifts

Gammers Teach us a lesson on the perils of shifting 3rd Party IP Policies.

 

Before Christmas a client gave me a heads up about some new developments in Youtube’s Content ID System that was causing an uproar in the gamming community and others who monetize their YouTube videos.  The conflict stems from what appears to be overally aggressive actions on YouTube’s part to attempt to deal with copyright infringement on its service.  While YouTube’s actions may not directly affect a lot of mainstream businesses, it can serve as a good lesson for those that use 3rd party providers to host and disseminate content for their business and how a change in policies by these third parties can radically affect one’s business.

 

It all started in early to mid-December when content owners started receiving notices that their vlogs (video blogs) were flagged for violating copyright law.  As a result the content was either removed or all revenue created by the post through the hosting of ads was funneled to the copyright owner (often without the copyright owners request).  The main problem with the system is that it is automated and apparently isn’t triggered by a request from the copyright owner.  Therefore, there have been a lot of questionable flagging, some of which most likely constitute fair use.  One of the more humorous responses (at least in my opinion) was posted by a YouTube user here: http://www.youtube.com/watch?v=JQfHdasuWtI  (Caution NSFW).  Personally, I like the example of a video interviewing representatives from the game Tomb Raider that gets flagged because there are images of the game and sound from the game in the background.  Others that have been flagged are reviews of products that might include a brief clip or a screenshot of a user interface.

 

The YouTube policy once again puts the concept of fair use in the spotlight.  The fair use doctrine, allows for use of copyrighted works without the copyright owners permission in certain circumstances.  In general use for purposes such as criticism, comment, news reporting, teaching, scholarship or research are generally not considered an infringement of a third parties copyright.  The rationale is that the 3rd parties use is not merely to copy but to use limited pieces of the work in a transformative way by incorporating it into a new work.  The trick is, in an age where so much content is being generated how do you separate the truly infringing works from those that would fall under fair use.  With millions and millions of videos on YouTube, it is certainly a daunting task. Often time companies cast a very broad net with the knowledge that some legitimate use will be included.

 

The YouTube situation is another manifestation of the clash between content owners and those who wish to use small amounts of the pre-existing content in an on line context.  For example, an online retailer may want to show screen images of a certain video game to potential customers, or may want to create on-line reviews of the games or computer programs in order to help their customers make purchasing decisions. In the context of a product review, the use of those images or video most likely would fall under the preview of fair use.   If you are a big enough retailer, you may simply host those review on your own website and you most likely would not be affected.  However, smaller enterprises often times rely on YouTube to actually host the content, even if the company includes an embed link to the video on its home page.  Therefore these companies and individuals are at the mercy of YouTube’s intellectual property policies and user agreements, which have and continue to evolve over time.  Essentially, a business that relies on you tube i) exclusively to provide its content based product or ii) uses YouTube essentially as a hosting platform for its content based marketing materials is always subject at some level to YouTube and Google’s (YouTube’s parent company) prevailing views of intellectual property rights.  This can subject businesses to great harm, if the business has not made other preparations.  For companies that provide video product reviews for their customers, they may want to consider hosting the content on their own website as opposed to exclusively on YouTube or Facebook.  Failure to do so can put businesses behind the eight ball in the event the tech company they are relying on has a sudden change in policy.

By | January 29th, 2014|COPYRIGHTS, CYBER LAW, Fair Use, INTELLECTUAL PROPERTY|0 Comments

The murky law of fair use

Weird Al doing a Michael Jackson song parody?

In our practice, we deal not only with the enforcement of intellectual property rights, but we also do a fair amount of defense of accused infringers. One of the surest ways of getting into an intellectual property dispute (aside from illegally downloading movies using BitTorrent) is to make reference to, mention or otherwise utilize someone else’s intellectual property.

While this may seem obvious, it can creep up in the business context in unexpected ways. Generally speaking, business will cite that they are allowed to do their activities under the doctrine of “Fair Use.” Additionally, it is important to note that there is a difference in running afoul of the law and being embroiled in a conflict with another business. While a company’s actions may be justified legally, it may still find itself in a dispute which can cost a lot of money, time and resources.

These issues come up in two different areas of intellectual property – copyright and trademark. While each area of law adopts a concept that allows certain usage by parties other than the owner, the concepts are quite different in what they allow third parties to do.

In general, trademark law can be seen as more lenient when it comes to the commercial use than copyright law, which is somewhat understandable given the objectives of each type of protection. The goals of trademark law are to: 1) prevent consumer confusion in the marketplace between the source, sponsorship or affiliation of different goods, and 2) to protect the goodwill built with respect to trademarks by their owners.

Copyright has a slightly different focus of protecting the benefits to society derived from the labors of those who create creative works. The underscoring notion is that unimpeded copying of creative works will lessen the incentive for authors to create such works, which will yield an overall undesirable outcome. To that end, copyrights have a definite term (in theory) and then become part of the public domain, free for all to use. Trademarks, on the other hand, can be indefinite as long as the owner continues to use the mark to identify its goods or services.

Fair Use in copyright law generally favors noncommercial use whose benefits are mainly felt by society as a whole. It covers limited usage for things such as criticism, comment, new reporting, teaching, scholarship or research. The use will be treated more favorably if the use is “transformative” as opposed to mere copying, meaning that the user has added something of their own to the work. In determining whether a use constitutes a fair use under copyright law, a four-factor test is applied:

1) Whether the use is commercial in nature or is for nonprofit educational purposes;
2) The nature of the copyrighted work;
3) The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4) The effect of the use upon the potential market for or value of the copyrighted work.

As a rule of thumb, the more artistic the use, the more likely it could qualify as a fair use. On the other hand, the more commercial the use, the less likely it will be considered fair use. Simply put: Weird Al doing a parody of a Michael Jackson song – okay. But using a photo or music in an advertisement without the copyright holder’s permission – not okay.

While these broad generalizations might be pretty easy to determine what is OK and what is not, in reality these determinations are often highly complex and are always very fact determinative.

Because of the explicitly commercial nature of trademarks, the law is more allowing of use of someone else’s mark in a commercial environment. However, there are still restrictions and business owners still need to be extremely careful to not run afoul of the law.

Classical Fair Use is when a business uses a term not as a mark but in a descriptive sense. Therefore, the owners of the Aspen trademark for ski resorts cannot preclude someone from using the term Aspen to refer to the Colorado town or the tree.  Additionally, you can generally use a third party’s trademarks to refer to their own goods. This usually comes up when your product or service is complementary to another, or you are engaged in comparative advertising. Some jurisdictions call this use Nominative Fair Use.

In Colorado, the  U.S. 10th Circuit Court of Appeals has not officially adopted the defense of Nominative Fair Use, but various district court decisions have stated that such a use does not cause a likelihood of confusion. Therefore, in general companies can state that their accessory is designed to be used with an iPhone or an Xbox, or that more people prefer Coke over Pepsi (or vice versa). However, there are important restrictions placed on the use. For example, you only should use the trademark as much as necessary to identify the other person’s mark. Excessive use of their third party mark could be interpreted as an attempt to leverage the other party’s mark for your own benefit. As with copyrights, what constitutes proper use of a third party mark is a complex analysis and utilization of qualified intellectual property counsel is essential.

The last consideration when using third party copyrights or trademarks in your business is more of a practical consideration rather than a legal one. A lot of business owners (and business lawyers) do not understand the laws regarding use of others’ intellectual property. Often clients will get threats of lawsuits even though we believe that their use is permitted by the law. People often get emotionally attached to these sorts of things and do not appreciate someone else using them.

While your position may be vindicated, in the end these disputes, do take time and money to sort out. Therefore, if a company is highly risk adverse and would rather stay away from any potential problems (regardless whether they are in the right), then the best course of action would be not to engage in any use of another company or individual’s intellectual property.

Can you keep a secret? Resist the urge to blab about that new gadget

Sometimes keeping quiet about a new product, service or venture can be difficult. While it may be difficult to fight the urge to tell everyone on the street all about your new innovative process, formulation or gadget, it is wise for a business to take a bit of time and see whether the new innovation is protectable under one of the theories of intellectual property law.

Some of the available protections such as trade secret require the business to take certain actions, or act in a certain way, and if not properly done, the protection under the law may be lost forever. In these cases we often discuss some of the more well-known intellectual property protections such as patents, copyrights and trademarks.

However, sometimes an item, process or other valuable information or asset is not patentable for one reason or another, or the inherent limitations of a patent (e.g., its limited term of protection) do not make it an ideal choice for a company. In these situations, protecting the innovation as a trade secret may be a possibility and could add great value to a company.

In Colorado the definition of a trade secret is pretty broad.  t covers “the whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value.”

Basically, think of the “secret formula” to Coke as an example.  There are a few things to note about this definition. The first thing is that it doesn’t have to be your product or a tangible item, it could be data, technical information, or the process you use to create your product or deliver your service.

Many times, companies will look at what they do and figure they don’t have anything protectable because the end product or service is not necessarily unique.  However, they never give thought to how they create the product or deliver the service. If their process is innovative and not known to the public, then it can qualify as a trade secret. However, it is important to identify potential trade secrets early on because their validity heavily depends on how the business treats the trade secrets.

To be a trade secret “the owner thereof must have taken measures to prevent the secret from becoming available to persons other than those selected by the owner to have access thereto for limited purposes.” While it may seem obvious in order for something to be a trade secret, it must be in fact secret. In practice this is actually more of a sticking point than one would imagine. The rule concerning secrecy includes people within the company itself.

For example, if the receptionist knows the detailed ins and outs of the process you use to create your whiz-bang product – it’s probably not a secret. Likewise, if your marketing department puts out a marketing pamphlet bragging about the specific algorithms that your software has that your competitor doesn’t, its probably not a secret.

Within the company trade secrets must be kept on a need to know basis. Those knowing of or possessing the trade secrets must also take reasonable precautions to keep the trade secret secret.  This includes password protecting computers that have the trade secret on them, implementing restricted access for any part of the building in which the trade secrets are being practiced, having restricted access for network resources utilizing the trade secrets.

Failure to observe such practices can result in the loss of a trade secret and loss of the ability to go after a competitor or other third party for misappropriation of that information latter on down the line. Therefore, it is important at the outset to identify potential trade secrets and take the appropriate steps to protect them. Additionally, once you have your systems to protect the trade secret, you need to stay on top of them because after all it only has protection from misappropriation if it is secret. If at any time the cat gets out of the bag – game over.

Just as any other type of intellectual property protection, trade secrets are another tool in a company’s toolbag and should be considered when rolling out a new product or service, or even to protect existing internal operations. These determinations need to be made early on to ensure that what you view to be your trade secrets are really trade secrets under the law.

By | May 27th, 2013|INTELLECTUAL PROPERTY, TRADE SECRET|0 Comments