PATENTS

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

Maximize your business’ value

The law once said that to file an application for a United States federal trademark registration, an individual or a business had to actually be using the mark in interstate commerce. That individual or business must have actually sold the goods or services to someone in another state, or their sale of the goods or services had to have had an effect on interstate commerce. There was no way to “reserve” a name prior to actual usage.

In 1989, however, the Trademark Act was amended to allow for an “intent to use” application (ITU) to be filed with the United States Patent and Trademark Office (USPTO). While actual use in interstate commerce is required to issue a registration, the ITU application allows an individual or business with the bona fide, good faith intent to use a certain mark to file an application in advance with the USPTO.

The ITU carries some substantial benefits, including what we trademark attorneys call a constructive use date as of the date of the application. Put simply, under the law you will now be treated as though you had actually started using the mark in interstate commerce as of the date the application was filed, even if the actual use comes much later down the line. Therefore, once your registration issues, you will be considered the senior user and can prevent others from adopting the same or similar mark for the same or similar goods if that user adopted the mark after the date of the ITU filing, even if their date was before you had actual use.

The constructive use date of the ITU application can be a big advantage for businesses. It allows a company to pick a name (or several possible names) for a new product or service offering, conduct clearance searches to make sure no one else has a better right to the name, and then immediately file an ITU. This can be of special importance in cases wherein a name has been identified but there will be a delay in the rollout of the goods or services. By filing the ITU, the company is assured that it is protected against someone else beating them to the punch and launching first.

While such benefits can be great for a business, an ITU application does come with a few down sides. First, they require more filings with the USPTO so are more expensive. Secondly, ITU applications can only be assigned in very specific circumstances and these restrictions can impact certain business sale transactions depending on how they are structured.

Additionally, certain types of rejections by the USPTO are harder to overcome with ITU applications, as these applications do not have the opportunity to move onto what is called the Supplemental Registry. The Supplemental Registry is a holding place for in-use applications whose marks have been deemed descriptive; with time and continued use they may be moved over to the Principal Registry.

Supplemental Registry registrations receive a registration number, they have access to federal courts, and they can be cited by trademark examiners against subsequently filed applications. They are not afforded certain legal presumptions (such as ownership and validity) and they do not confer nationwide rights. However, if it comes down to having a registration on the Supplemental Registry or no registration at all, the Supplemental Registry is definitely preferred. If an application receives a final rejection, the applicant must then make the decision whether to appeal (which is a time consuming and expensive process) or abandon the application altogether.

The biggest piece of advice I have for clients filing ITU applications is to always keep their eye on the ultimate goal, which is to achieve sales as soon as possible. Keep in mind that a registration will not issue until you have had sales. Additionally, having sales and filing a notice of use will switch an ITU application to an in-use application. This may come in handy in the event that the application receives a merely descriptive or geographically descriptive rejection, which then opens up the possibility of the Supplemental Registry.

One thing you want to avoid is waiting to launch your product or service until you receive your notice of allowance from the USPTO. While it may be tempting to do so, it really isn’t the best strategy and it only serves to delay the ultimate issuance of any registration. In the worst case scenario, it could lead to a circumstance in which the application has to be abandoned because use cannot be achieved before a rejection is deemed and the USPTO declares the application abandoned.   As long as the clearance search has not identified any previous users that might cause a likelihood of confusion rejection, an applicant’s best bet is to always be diligently working toward use.

Bear in mind, however: Trademark rights are created by your use of those terms to identify your goods or services and are not created by the piece of paper issued by the government.

By | October 31st, 2014|PATENTS|0 Comments

My take on Tesla

What’s really behind Musk’s blog post?

Kurt Leyendecker

Tesla Motors and its CEO Elon Musk made news in the patent and intellectual property world a few months ago with a company blog post entitled “All Our Patent Are Belong To You” (the error in the title is Musk’s, not mine). The post was most simply an indictment of the patent system.

The blog post waxes poetic about how the global threat from the internal combustion engine was far greater than any exclusionary benefit the electricity-powered Tesla might derive from its patents. Of patents he wrote, “Too often these days, they serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors.” Boldly, he declared, “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

But wait! Let’s dissect this a bit. Musk is one of the shrewdest businessmen alive today.  He doesn’t do anything without considering how the move benefits his companies. Just recently, Musk convinced Nevada lawmakers to pony up about $1.3 billion in tax breaks to help build his battery plant. Is Nevada getting a significant equity position in Tesla for their investment? The answer is no!

Have we all forgotten the battery swap promise? About a year and a half ago at a stockholder presentation with Musk presiding, a Model S was driven onto the stage and magically, its depleted battery was replaced with a fresh one in about a minute. The actual swap, however, occurred underneath the stage away from the prying eyes of the press and audience. Where are the promised battery swap stations? Well, California changed its laws concerning electric vehicles and the battery swap capability was no longer necessary for Tesla to receive desired tax credits, so it quietly disappeared.

Ultimately, the great Tesla patent giveaway is for Tesla’s benefit. It boosts the company’s image among core supporters, and it might even give other auto manufacturers and suppliers pause before suing Tesla for infringement of their patents. Think of the PR nightmare, especially among the electric car faithful, of suing the company that magnanimously made all its patents available to everyone.

Of course, the patents themselves aren’t important to Tesla as they once were or might have been if someone else entered their space earlier and as aggressively. Tesla is now the 900-pound gorilla with knowhow, economies of scale, easy access to dollars, and market clout. Musk indicates in his blog the original reason Tesla pursued patents was to dissuade large entrenched competitors from entering Tesla’s space, but that this belief “couldn’t have been more wrong” because the competitors didn’t. Perhaps the converse is true: The patents helped dissuade competitors from entering the electric car market in the first place.

What is good for Tesla isn’t necessarily good for everyone else. Do patents really stifle innovation and award attorneys to the detriment of inventors as Musk contends? There are no doubt dozens if not hundreds of small – even tiny – companies across the country trying to develop new motor and battery technologies often funded by angels and venture capital. Do you think the founders and employees of these companies would toil to create the proverbial better mouse trap or that the angels would invest millions if the companies couldn’t prevent the resulting inventions from being used by the major industry players, including Tesla, without reasonable compensation? The ability for small players to protect their innovation spurs development, not the opposite.

Then there is the real question: Did Tesla actually free its patents to be used by all?  Musk’s statement was carefully worded. He didn’t say that Tesla would not sue someone who uses its technology, but that it would not sue someone who wants to use it in good faith. What does “good faith” mean? Does the fact that Musk wrote “wants to use” instead of just “uses” mean a company must get Tesla’s blessing before using Tesla’s patents? What isn’t said is whether Tesla will require a license before they let someone use their patents or whether it will require the user to pay Tesla a royalty. Making Tesla’s patents available for licensing isn’t all that unique: Many companies make their patents available for licensing.

Would you be surprised to learn that since Musk declared patents a hindrance to innovation on June 12, the company has had at least 13 patents issued, and that the issue fees were paid to the U.S. Patent office AFTER the blog post and Tesla’s monumental policy change?

I think the one thing we can reasonably conclude from Musk’s post is that the patent plaques that adorned the lobby at the company’s headquarters have been taken down.  Perhaps the blog post should be rewritten with a new title, “We Remodelled Our Lobby.” For some reason, I think such a post would not have received much attention.

By | September 22nd, 2014|PATENTS|0 Comments

The K-cup story

Many years ago, John Sylvan had an idea: provide a hermetically-sealed, compact cartridge containing a filter and enough ground coffee to brew a single serving in a specially designed brewer. After the freshly brewed coffee was delivered, the remaining carcass would simply be discarded without fuss or muss. Sylvan’s brilliant idea came to him in the mid-80s. He did not begin working on the idea in earnest until the 90s. John and the company he formed had the forethought to apply for patents on his innovation.

Keurig, named after the Danish word for excellence, toiled through the 90s funded almost exclusively by investors perfecting the cartridge, which came to be known as the K-cup, and its associated brewer. John and his fellow founders were able to convince the investors that the benefits of the K-cup system far outweighed the simple fact that a cup brewed with it cost five-to-10 times as much as a traditionally brewed cup. Truth be told, the otherwise visionary investors really only saw a play for the corporate/office market where convenience outweighed cost: a niche market in the multibillion dollar coffee industry but one with potential sales at least in the tens of millions annually.

Around 1998, when Keurig finally started selling brewers and K-cups in earnest, it registered trademarks for the brand names. When the system took off, the competition was left scratching their heads. A new product segment had been created, one with terrific margins and one in which purchasers of Keurig coffee makers were forced to buy consumables from Keurig itself. The strong patents coupled with Keurig’s aggressive enforcement stance contrasted with the time, cost and uncertainty in developing a suitable non-infringing alternative, left potential competitors with no other alternative than to figuratively beg Keurig for a license to make their own versions of the K-cup.

Keurig and its successor in interest Green Mountain Roasters, who bought the company out in 2002, were under no compulsion to grant patent licenses, but wisely realized it was better to derive revenue from its competitors than to back them into a corner and force them to try and develop a K-cup alternative. If successful, the competitors would have jeopardized the company’s future. Keep your friends close and your enemies closer: The maxim rings true in business as well.

The Keurig system found a place not only in the office and commercial markets but in homes as well. The K-cup system has proven to be the biggest thing to hit the industry since Mr. Coffee killed percolators in the 70s.

One might figure Sylvan became a wealthy man. Sadly, inventors and innovators often do not make great businessmen. He had trouble getting along with the investors and was forced out for a mere $50,000 shortly before the company’s first production commercial brewer was released. In hindsight, perhaps he should have demanded a percentage. Suffice it to say, the sharks freely roaming the ocean of commerce aren’t as tame as those kept in primetime tanks.

As the product grew, Keurig continued to innovate and protect the improvements to the brewers and the K-cups. Even though the seminal patents were strong, they realized it would expire someday. Hopefully, however, improvements to the K-cup would mean competitors’ post patent cartridges would remain a step behind the K-cup in terms of cost, functionality and quality. To date Keurig has been issued 44 patents in the United States and has more pending all related to their K-cup cartridges and the associated brewers.

Patents weren’t the only intellectual property trick up Keurig’s sleeve: they also had trademarks, and trademarks don’t have expiration dates as long as you keep using them. Currently Keurig has 15 registered United States trademarks and about 35 more pending.

When the company’s initial patents expired in 2012, many articles predicted Keurig’s decline. Keurig’s competitors still face major obstacles. Any systems and cartridges they may develop might not infringe the expired patents but they have to be very careful not to infringe the remaining 40-plus patents. While the remaining patents are much more narrow, they do lay a minefield that competitors must navigate in developing their non-infringing alternatives, greatly increasing the cost of development. Stepping on a mine can mean an expensive lawsuit.

Even if successful in developing a suitable K-cup alternative, competitors don’t have a word or phrase to describe their coffee cartridges. If a competitor strays and improperly insinuates some connection with K-cups or Keurig, the company, which is now the 500-pound gorilla in the coffee industry, releases its pack of lawyers to shut things down.
If a competitor stays clear of the Keurig marks, it faces the monumental and uncertain task of educating the public about a new single serving cartridge without reference to the original – all at great expense and huge risk of failure. Ultimately, most of the industry players have or will decide to go the certain and predicable route of licensing Keurig’s technology and trademarks adding even more money to its $4 billion-a-year revenues.

Would there be a Keurig or even a single-serving coffee cartridge today if they had not pursued intellectual property protection? Its seminal patents helped garner investors in the 1990’s permitting the system’s development. The patents kept competitors at bay during its growth years of the 2000s.

Today, as the industry leader, its trademarks and patent portfolio continue to thwart competitors and allow it to maintain its position as the market leader. Sometimes my start-up clients ask me whether it is worthwhile to pursue patent protection on their idea. All I need to do is look over my shoulder and point to the coffee machine on the credenza and say, “Yes, it is.”

It’s not always best to follow the leader

Case in point: Twitter’s new IPA

A few months ago, I attended an intellectual property conference where the head IP counsel for Twitter discussed its new Innovator’s Patent Agreement, or IPA.

A few of the panel members hailing from academic institutions were drooling over the IPA as a revolutionary new path for companies to take with regard to their employees and intellectual property rights. As I was not familiar with Twitter’s recent announcement, my immediate gut reaction was that the only good IPA is one in a frosty mug that is full of golden, hoppy goodness. Upon delving into the Twitter IPA, I have come to the conclusion that my initial assessment was correct — well, at least for most of us out there.

Twitter claims that the development of the IPA came about as a result of the need to recruit the best and brightest software developers. Since these individuals grew up in a time that movies and music were expected to be freely available on the Internet, the new generation of developers do not like patents and want more control over how their software innovations are used.

Enter Twitter and the IPA. The IPA is basically a different breed of the Proprietary Information and Inventions Agreement. These types of agreements are the contracts used by companies to formalize the assignment of the invention from the employee to the company (if the employee is essentially paid to invent, they have a duty to assign it to the company under the law). Once the invention is assigned, the company can do with it what it wishes, including suing for infringement under any resulting patents.

The IPA changes things up a bit. While the invention is still assigned to the company, the company makes certain agreements on how the patent is used. Most notably, the IPA states that a company will not assert any of the claims of the patent unless it is for defensive purposes.

“Defensive” is generally defined as asserting it against another company or individual that 1) filed or threatened a patent infringement lawsuit against the company; 2) threatened or filed a patent lawsuit against any company in the last 10 years; 3) or to otherwise deter a patent litigation against the company. Otherwise, the company or any successor in interest to the patent must obtain the inventor’s consent before enforcing the patent.

While Twitter’s aims of reducing contentious patent litigation (which is a bit ironic because twitter does not have any issued patents and only has three pending applications) may be laudable, adoption of the IPA by young startups could prove to be disastrous. First of all, patents are just not good defensive weapons. Patents, by their nature, are exclusionary rights, meaning that you can only use a patent to exclude someone else from doing something.

Simply put, a patent is a deal between innovators and the government. In granting the patent, the government grants the patentee an exclusionary right to some product, process or other invention for a set term of 20 years. In exchange, the patentee is forced to basically disclose an instruction manual on how to create, manufacture or practice the invention, and at the end of the term the invention is dedicated to the public for anyone to use, manufacture or practice.

This exclusionary right is enforced through the filing of a lawsuit. Apart from the right to exclude competition, patents have no other intrinsic value. While you may put differing values on what that exclusionary right is worth, there may be a time in the future in which you wish to sell the company and/or some or all of its assets. Patents may be of great interest to the potential buyer.

By restricting your rights, you have essentially gutted the economic value of the patent and your fledgling company. Additionally, putting restrictions on how you may enforce your intellectual property will most likely negatively affect your ability to attract venture capital or other investors. Investors want to make sure that the company they invest in has the best chance to return their investment with a profit.

If a company puts restrictions on how it will enforce its hard earned intellectual property, investors may be wary that the company will not be able to adequately protect its market share. If a company is already generating enough revenue that it can self-finance its capital needs, this may not be a bad deal for you. However, if you are looking at using OPM (other people’s money) to help your business grow, such restrictions could have disastrous affects.

Lastly, the law itself makes patents a bad defensive weapon. Under the law, a party who knows of an infringement, but fails to enforce its rights may lose the ability to enforce its legal rights under the doctrine of latches.

Simply put, if I have known that your company has been violating our patent for 10 years, but I do not do anything about it until you file suit against me, I am most likely out of luck due to latches. Now that defensive weapon doesn’t look so menacing, and you may be without a lot of that leverage that you were counting on.

New concepts in business practices come and go. New and small ventures really need to take a look at whether the next up and coming thing will strategically work for their business, or if it could possibly do more harm than good.

Just because Twitter’s IPA may seem to work for them does not mean that it works for every company out there. Putting these sorts of restrictions on a company’s intellectual assets may cost some companies significant value down the road in terms of the purchase price in an acquisition or the price received for assets in a spin-off transaction.

It always pays to take a look at a proposed strategy and see if it fits into your business plan prior to taking any action.

By | July 30th, 2013|PATENTS|0 Comments

Can I Patent That?

A question I frequently get from prospective clients is, “Is my invention patentable?” Variations on this inquiry include the following:

• “Can I patent an improvement to a device that is already available?”
• “Is it correct that in order for something to be patentable, it has to be at least 10 percent different than the known device from which it is derived?”
• “Can I get a patent on something that is already on the market, but I am using it in a new manner?”

The scope and breadth of what is patentable is very broad and wide. Chances are if your invention is useful, new (also referred to as “novel”) and not obvious, it is patentable.

Patents protect the rights of inventors to exclude others from making, using, offering for sale, or selling their invention throughout the United States or importing it for a specific period of time. Most people know this. But ask the same people what an invention is, and more often than not, the response will be much more narrow than is actually the case.

The prototypical invention is a completely new widget, tool or device that does something or accomplishes a task better (faster, easier or cheaper) than whatever was done before. In popular imagination, the likes of Thomas Edison remain the prototypical inventor: a person sitting in his lab, garage or workshop dreaming up ways to solve the world’s problems. Factually, however, the prototypical invention and the prototypical inventor are the exception rather than the rule.

Given the foregoing, perhaps the next question is: “What exactly is considered an ‘invention’?” You would think that this would be an easy inquiry to answer, but that would be wrong.

At its broadest according to Merriam-Webster, an invention is “something invented,” which requires us to look up the meaning of the verb “invent,” which is “to produce (as something useful) for the first time through the use of ingenious thinking and experiment.”

Putting this together, an invention is something new and useful invented by a person, and it can be anything from a new drug to a new medical device to a gardening tool to a manufacturing process to a musical composition. In other words, an invention may improve upon or create a new process, machine, device, product, result, function, discovery, art object—or even a genetically modified plant. Often times companies overlook patent protection because they do not consider the item or process an “invention.”

For example, even if the ultimate product is not patentable, the specific process, tool or machine that you use to make it is. If that process, tool or machine yields a product or result that is faster, cheaper or better than patenting the process, tool or machine may have enormous value to your company as you can prevent others from doing the same thing. This can give companies a competitive advantage in the marketplace, especially in mature industries.

If you think your invention is patentable, by all means protect it. Consult an attorney. The next step is to obtain a U.S. patent for your invention, which is the granting of a property right to the inventor(s), issued by the U.S. Patent and Trademark Office. Contrary to popular belief, new patents are issued all the time to ordinary people, just like you, with not-so-ordinary ideas.

By | March 6th, 2013|INVENTION PROMOTERS, PATENTS|0 Comments

File that Patent! Time is Running Out

Do you or your company have a product or process that you’ve been developing for some time but have yet to patent? If so, a new law could considerably affect your ability to patent.

In 2011, Congress passed the America Invents Act (AIA), with the provisions of the act to be amended over time.  The most significant provision takes effect on March 16, switching the U.S. patent system from a first to invent paradigm to a first to file paradigm. This change brings U.S. patent laws in this regard in line with those of almost every other industrialized nation.

Under the old paradigm, the pertinent consideration in awarding a patent to one person over another was when the inventor first conceived of his or her invention. Conception of an invention occurs the first time an inventor mentally envisions the invention: in other words, the “ah ha” moment. At this moment, the inventor might not know exactly how the invention will work or be implemented, but the invention is formulated in her mind to a sufficient degree. It is considered a sufficient degree if the details of the invention can be disclosed to someone of at least average skill in the particular field to which the invention pertains, and this person could, through the development process, make or implement the invention.

After conception, an inventor is required to reduce the invention to practice. This can be accomplished in one of two ways: by actually making or implementing the invention or by filing a patent application. Providing the inventor is diligent in developing the invention from conception through reduction to practice and files a patent application, she will be awarded a patent over co-pending applications by inventors who later conceived of a similar invention. The foregoing is the case even if the other inventors actually filed a patent application first.

All this changes on March 16, when only the inventor who first files a patent application on a particular invention will be eligible for a patent. If you file your application on March 17, it will not matter at all that you have been working on the invention diligently for years. Rather, someone else who first conceived of the same invention independently of you only a month ago, but files a patent application before you on March 16, will be awarded the patent.

The new first to file paradigm will change the inventing process in the United States. For instance, in my firm’s practice, we will be recommending that clients file patent applications sooner rather than later, even if there are a few bugs to be worked out in a particular invention. In the past we often recommended the inventor perfect his invention before filing, since the filing date was not wholly determinative of patent priority. If the invention changes after the application is filed, an additional sibling application can be filed to incorporate any new or different features. Inventors will also be encouraged to more quickly reduce an invention to practice, compressing development times as much as possible.

For smaller companies and independent inventors, the new paradigm may prove more costly, requiring more resources to be expended on development and requiring filing of additional patent applications as a new product morphs into a final design during development. Certainly, these changes favor larger entities with substantial product development and legal budgets.  However, large companies are also often bureaucratic in nature and take longer than they should to accomplish even the most sensible tasks, so their new-found advantage may not be fully realized.

Nevertheless, this column is a call to action for any company or individual that has a product or process that they have been developing for some time to consider filing a patent application on the invention before March 16, thereby preserving first to invent status for the invention.

As the lead times in drafting a patent application can be significant, the sooner you discuss your situation with a competent patent attorney the better. Filing before March 16 instead of after could make all the difference in whether you can ultimately receive patent protection.

By | January 21st, 2013|PATENTS|0 Comments

The perils of public-generated content

There is a well-known phrase known to businesses relying on the internet to help drive marketing and sales: “Content is king.”

That phrase has expanded, in the wake of businesses turning to Facebook and YouTube and in the development and use of better consumer digital cameras and video. That new and improved phrase is this: “User-generated content is king.” Soliciting user-generated content (UGC) is often an attractive marketing strategy: It engages customers and cultivates much-desired online content for a business all at the same time.

Some companies have come to regret that marketing move, however, as users who generate content are bringing suit when their material appears in future advertising, marketing or other company collateral, as McDonalds recently found out.

In the McDonald’s case, the wheels were set in motion in 2008 when McDonald’s hosted a “Big Mac Chant” contest on MySpace. Contestants created videos of their chants and uploaded them to the website. One participant, Daniel Calden uploaded a video of him in sunglasses with a sock puppet singing “Big Mac. Big Mac. Big Mac.  Everybody wants to eat a Big Mac.” Nothing came from the entry, although a few days after it was submitted it was removed, and Mr. Calden’s inquiries with McDonald’s and their marketing firm went unanswered.

A year later, McDonald’s launched a commercial involving a fish mounted on a wall singing to a man about wanting a Filet-o Fish sandwich. Three years later, Calden filed suit against McDonald’s and their marketing company for theft of intellectual property, breach of the contest contract, copyright infringement and a host of other theories. (Interestingly, the statute of limitations on a copyright infringement case is three years.) McDonald’s fired back with a motion to dismiss the claims, citing among other reasons, that the works are not similar in the least except that both works contained men, non-human characters, and music about McDonald’s sandwiches.

Probably the McDonald’s case is one where the plaintiff is fishing for a settlement.  However, it serves as a good example of the perils of soliciting UGC. No doubt McDonalds crafted their contest contract in a careful manner, which will definitely help them in the case, however even careful drafting might not prevent a business from being sued. While wanting to be involved with customers on a more interactive basis is an admirable objective, business owners must remember that generally people are passionate about their creations and creative works. They can and often do get very possessive and angry if they feel they have been taken advantage of – even if they assigned their rights to the company in the contest rules. Something that might make good business sense to a marketing professional may leave a customer feeling cheated, taken advantage of, or betrayed.

The worlds of contests and UGC also have a lot of legal issues associated with them.  Contests are subject to state gaming laws and can potentially lead to serious liability for illegal gambling if not structured correctly. Additionally, a business will want to make sure that it owns any UCG submitted and that the contestant is not entitled to any additional compensation other than what is provided for in the contest rules – even if they are not the contest winner.

These contracts need to be tightly drafted. Otherwise a company could wake up with a much-enlarged audience resulting from an online initiative, but simultaneously be subject to not just intellectual property violations, but illegal gaming issues as well.

“Content is King,” still applies, but care and caution could help a company’s online efforts from also becoming costly.

Avoidance: Understandable, but Often Painful

This is about pain — the avoidable kind.

Lawyers can get a bad rap for shark-ism and sometimes, that’s fair. In this case, however, the pain is shared across the board, by both the lawyers and the clients. No one, including a hard-working and ethical attorney, likes seeing people have to spend blood, time and money on heartbreak and angst that is fairly easy and cheap to avoid.

Our firm has been involved in a number of litigations that were very costly to our clients, but which could have been avoided. For the most part, those costs could have been side-stepped if the clients had engaged an IP attorney to help them set up intellectual property policies and procedures; properly protect the intellectual property (IP); and clearly define ownership.

Human nature being what it is and cash always being tight in a young growing company, non-essential tasks and expenditures are often put off as more pressing fires are fought. This short-sightedness, however, can come back to haunt. It can be painful to witness.

The math is simple: An IP attorney review of website content may cost up to $1000, depending on its size. However, if one or more third-party photos are found on the site, an expensive five- or six-figure copyright infringement settlement could be immediately eliminated.

Moreover, seeking the blessing of an IP attorney and filing for trademark registration before settling on a brand for a new product or service might set an enterprise back less than a couple thousand dollars, but could save hundreds of thousands of dollars in litigation when, for example, a well-heeled competitor decides the brand is too close to one of theirs.

Registering copyrights for important materials and images typically cost a few hundred dollars each. It’s money well spent. Doing so can deter competitors from copying all or in part of the fruits of a business’ hard work and expenditures. Infringement could cost $150,000 per instance in statutory damages.

A business that institutes and follows a trade secrets policy that includes non-compete agreements with key employees might cost a few grand, all said and done. However, instituting a trade-secrets policy could prevent employees from being able to take specific knowledge learned while employed to a competitor. Not doing so, can cause a business to lose a competitive advantage worth hundreds of thousands if not millions of dollars over time.

Having clear and concise intellectual property clauses drafted for use in contracts with third party contractors sets an organization back a few saw bucks. Alternatively, the matter often ends up in federal court as the business and the contractor both claim ownership to a valuable piece of IP. If lucky, the experience will settle before trial and a company may only be out a $100,000 or so.

Many a wise business owner understands these warnings, but immediate demands call out.  The phone rings or a colleague comes into the office, or a deliverable needs immediate attention. Several years later, a complaint and the prospect of spending hundreds of thousands of dollars defending the company in court presents itself.

Sometimes an ounce of prevention truly is world’s better than a cure. No one likes to watch money eaten up after-the-fact on avoidable circumstances. IP protective measures can and often are an easy and preventative business strategy — and the truth is that everyone, including good lawyers, feel better about that.

Kurt Leyendecker is a founding member of the intellectual property law boutique, Leyendecker & Lemire. Leyendecker & Lemire specialize in patents, trademarks and related complex civil litigation. Kurt Leyendecker can be reached directly at 303.768.0123 or kurt@coloradoiplaw.com. Visit www.coloradoiplaw.com for further information, including Leyendecker & Lemire’s weekly blog, “Control, Protect & Leverage.” 

Moving on up – and out

Some of you may have noticed that our firm has not published a new column in a few weeks now. The reason for this is that we were engaged in a Major Office Move.  You know the kind: anguished over for months, thought about repeatedly at 3 a.m. and again at 6 a.m. and over dinner with your spouse. But our move was inevitable. The firm has grown and along with that, we had outgrown our old office suite in more ways than one. In addition to simply needing much more space, we also wanted to be in offices that better reflected the firm’s character and personality.

This is, technically, our third space in the company’s history and we have been able to learn from our past experiences and plan for the future. For example, we learned that as you add attorneys to your staff, those attorneys tend to schedule meetings with clients and prospective clients. Also, if you have multiple meetings back-to-back and your main lobby is the size of a British phone booth, things will get crowded and look like I-25 prior to T-REX.

Generally speaking, this is not good for business.

While I can’t say that moving a law firm, or any business for that matter, is something I would want to do on a regular basis (particularly when it comes to getting employees packed up and ready to go prior to the movers arriving), businesses can seize the move as a great opportunity to reflect upon where they have been and where they are going.

A few columns ago I talked about the opportunities that spring provides to do some spring cleaning for your business. It was essentially a mini-audit for the business owner to determine if they were covering all the legal details necessary to ensure the vision they have for their company. As we were going through the process of finding new offices, I became aware that the moving process itself forces you to take stock of your company and start thinking about what that company will look like years down the road.

Through the myriad of necessary decisions inherent in moving a business — like office location, size, configuration and the type of building finish and personality — you are organically lead to essentially constructing a strategic plan for the length of the term of your lease.

Where do I want to be located? How many employees do I have now and will have in the future? What does the space say about my company (or does it even matter)? How long do I want the lease to be? What are the main functions of my business and will we be adding any lines of business in the future that might need special accommodations or a special environment?

It’s easy to consider staying put: but if one thing is certain it is the inevitable, change.

It’s easy to think of the headaches of moving, but what if, instead, you and your staff spent the time leading up to the move as a fun exercise of strategic planning, goal setting and visionary pursuits that can revitalize your business and possibly open up opportunities that were not perceived before? What inadvertently happens is that you become more in touch with your company’s mission and can therefore take measure of how successful you are in keeping true to that mission.

Sure: No one necessarily wants to stop and carefully think through the details of a strategic company vision. And the actual act of moving is often painful, much like herding cats.

But a business move can be cathartic. Furthermore, the momentary pain of moving is temporary, yet the fruits of your labor are everlasting – especially if the new space has a great view, like Leyendecker & Lemire, LLC’s new offices. Come see the digs: 5460 S. Quebec St., Suite 330, Centennial, Colo., 80111. We make good coffee.