Back to Susan F. Olive Articles

Patents, Trademarks, Copyrights and Trade Secrets:
A PRIMER FOR BUSINESS EXECUTIVES, ENTREPRENEURS, AND RESEARCH ADMINISTRATORS

Susan F. Olive, Olive & Olive, P.A. Intellectual Property Law

I. INTRODUCTION

UNITED STATES CONSTITUTION, ARTICLE 1, SECTION 8, CLAUSE 3: The Congress shall have power... To regulate commerce with foreign nations, and among the several states, and with the Indian tribes.

UNITED STATES CONSTITUTION, ARTICLE 1, SECTION 8, CLAUSE 8: The Congress shall have power... To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.

The creators of the United States Constitution wrote a document of enduring strength and broad scope, which is the foundation for all of today's federal laws. Our laws protecting patents, copyrights, and federal trademark rights all have their basis in this amazing document, written more than 200 years ago. In addition, our states have chosen to provide further protection for intellectual property through trade secret laws and state trademark legislation.

"Intellectual property" is a term referring to patent, trademark, copyright, and trade secret rights. The words "intellectual" and "property" are aptly used in this context. "Intellectual property" is a form of property. It may be owned, sold, and licensed, and will be protected by law. The specific property rights protected are products of the intellect--inventive, literary, artistic, and other unique creations of the mind.

A major purpose of our national and state laws protecting intellectual property is to foster creativity, progress, and the prosperity that follows. Each of the types of intellectual property (patents, trademarks, copyrights, and trade secrets) is provided a different variety of protection and has a different set of criteria for qualifying for that protection.

This booklet briefly outlines the general characteristics and benefits of the four types of intellectual property. It will familiarize you with the basics, but is only intended to cover the highlights and is no substitute for the assistance of a qualified attorney should you need specific advice. Patent attorneys, for instance, must have passed a special qualifying examination and must be registered by the Patent and Trademark Office to represent clients applying for patents. The use of a knowledgeable professional can avoid expensive and time consuming pitfalls in applying for protection of your intellectual property, and the possible inadvertent loss of important rights.

Protection is available in most countries for most forms of intellectual property, but we focus hereafter on protection in the United States. A few cautions concerning major differences between most foreign countries and the United States are mentioned, but you should consult experienced counsel for advice about particular countries, because there is wide variation.

II. PATENTS

Patents prevent the unauthorized use by others of an inventor's discoveries; they are the form of legal protection for inventions. Although "mere ideas" are not patentable, patents come closer than any other form of intellectual property except trade secrecy to protecting ideas, because they can protect the essence of a product or manner of accomplishing a task.

Patents fall into three general groups: (1) utility patents, which cover new and useful machines, compositions of matter, products, and processes, or improvements of any of these; (2) plant patents, which cover distinct and new varieties of plants; and (3) design patents, which cover new, original and ornamental designs for articles of manufacture.

The "machine" and "product" categories of utility patents are self-explanatory. Examples of "compositions of matter" for which patents have been issued include laboratory-created life forms and new drug formulations. "Processes" have included not only methods of making products and machines, but also computer software.

Plant patents cover new varietals from ornamental rose bushes and Christmas cactuses to vegetable and other crop plants. This form of patent can be very important to our agricultural and ornamental plant industries.

Design patents can cover anything from the shape of a dining table, to the appearance of a pair of grass clippers, to the design of a computer terminal or even the icons which appear on the screen as a part of many computer programs. The ornamental appearance of all types of products, from socks to lollipops, can be protected by design patents.

Having a patent gives the patent owner the right to exclude all others from making, using, or selling the patented invention. The law does not, however, guarantee the patent owner a right to make the patented product or use the patented process, because someone else could own a prior patent on some essential part or element of the invention. If so, the second inventor will not be able to practice his invention until the prior patent owner's patents have expired, unless he gets the other patent owner's permission. For instance, if you were the first inventor of the rocking chair, but someone else already held a valid patent on the basic concept of a chair, your rocking chair could not be produced (unless you obtained permission from the chair patent owner) until the basic chair patent expired. Your patent, however, would prevent the basic patent owner from taking advantage of your improvements; the chair patent owner could not go into the rocking chair business without your permission. If no prior patents covered the invention, then you would typically be able to freely exploit your invention yourself, or license others to use it; and your patent would prevent others from duplicating the invention.

REQUIREMENTS FOR PATENTABILITY

An invention must be new and (in order to qualify for utility patent protection) useful, and must not have been obvious in light of existing knowledge in the specific field of endeavor at the time the invention was made. A patent will not be granted on an invention which can only be used for illegal purposes.

For an invention to be considered "new", it must not have been invented by any other person prior to the date of the claimed invention. In addition, it cannot have been published, used, sold or made publicly known more than one year prior to the date of filing of the patent application--whether by the inventor himself, or by others. While United States patent law gives the inventor a grace period of one year from the time of public disclosure to apply for a patent, most other countries do not have such a grace period. Thus, if an inventor is considering applying for foreign patents, total secrecy up to the time of application for the first patent should be maintained. (Bear in mind that Canada is a foreign country; many inventors seem to forget this because cross-border marketing is so common.) If only U.S. protection is of interest, the inventor can try to sell his invention, or disclose it for some other purpose, for up to one year before deciding to pursue patent protection. After the one year is up, however, it will not be possible to file a patent application, even where protection is to be limited to the United States. Because the requirement of novelty can be the decisive factor in settling competing claims to the same invention, it is an excellent idea for all inventors to keep dated and witnessed records (such as lab notebooks) showing the progress of their work. The requirement that the invention be "useful" means the invention must be capable of use for some beneficial purpose, and must actually work. Applications to patent "perpetual motion" machines, for instance, are routinely rejected by the examiners on grounds that they will not work as claimed. Vague ideas are not "useful" and hence are not patentable. Utility patent protection is not available for decorative features, because they are not useful. For design patents, however, the "utility" requirement is waived and a requirement that the invention be ornamental ("the ornamental design of an article of manufacture") is substituted.

The third requirement for patentability is that the invention be "non-obvious". This means that the invention would not have been readily apparent to someone who was familiar with what others had done in the same field, at the time of the invention. For example, in evaluating a new eyeglass frame, one would probably look to the relative skill and capabilities of an average optician or eyeglass manufacturer, and ask whether such a person would have known how to make the invention in question if he had wanted to do so at the time the invention was made.

THE PATENT SEARCH

Deciding whether inventions are "new", "useful" or "ornamental", and "nonobvious" is a task which requires familiarity both with the technology involved, and the technicalities of the patent law. Usually before incurring the expense of filing a patent application, and sometimes even before investing tremendous resources in new product development, it is advisable to have a search performed of earlier patents and relevant publications in the field. Based on the results of the search, a patent attorney can give an opinion as to the scope of coverage of prior patents, and whether it does or does not appear likely that a patent could be granted for the new invention. Often, the search results will not only tell the inventor what has been done in the past, but may suggest possible modifications to the new invention which may improve it and may make it more likely to be patentable.

Searches of varying complexity can be performed, depending on the budget, the value of the invention, the degree of certainty required, and the like. Different patent firms have different resources available to them for in-house searching; these may include copies of summaries of patents, issued weekly by the United States Patent and Trademark Office; copies of patent information on optical disks; access to on-line computer databases of patent and other scientific literature; paper copies of patents; and other material. Further searching may be conducted at the Patent Office in Washington, D.C., where paper copies of each of the more than five million patents issued to date are arranged in drawers by subject.

In addition, the budget-conscious North Carolina inventor is very fortunate to have available the resources of the Patent Depository located at N.C. State University's D.H. Hill Library, in the Government Documents section. Users of the Patent Depository have access to copies, on computer and/or microfilm, of each United States patent. Reference librarians will help the inventor try to determine which of the Patent Office's subject classifications best describes the invention; and then review abstracts or complete copies of each patent in the identified subject areas. This is a somewhat arduous task because of the form in which the data is maintained; but is an excellent, inexpensive way to get at least a beginning idea of prior patents related to the invention.

THE PATENT APPLICATION

In return for granting exclusive rights in his invention to a patent owner, the law requires a complete disclosure of the invention so that the public will know how to take advantage of the invention at the termination of the patent period. This disclosure is set forth in the patent application, which must include a description of how the invention works, drawings (in most cases), and an explanation of the best way known to the inventor of making and using his invention. The applicant must also disclose any known similar products or methods which exist, and which would be relevant to examination of the claims of the patent application.

The Patent and Trademark Office has very specific rules about the content and style of a patent application, as well as who can file and handle a patent application. Because these rules can be complex, and because the legal concepts which apply to patents can also be complex, most patents are filed by patent attorneys on behalf of individual or corporate clients. Individual inventors are allowed to file their own applications if they choose to do so.

The application must ordinarily be signed by the inventor or the inventors. Corporations and other business entities which may own patents or patent rights are not considered inventors. However, individual inventors may assign all their rights to corporations; and although the corporation cannot ordinarily sign the actual application, the corporate assignee is entitled to own the patent application and any patent which may ultimately issue, and can direct how the application is to be handled. Once it has been prepared, the application must be submitted to the Patent and Trademark Office along with a signed declaration attesting to the truth of everything set forth, and a filing fee. The filing fees, as well as other fees charged by the Federal government in connection with patent applications, are lower for individual inventors and small companies than for businesses with over five hundred employees. Hence, individuals and "small entities" should accompany their application with a declaration verifying that they meet the criteria for these reduced fees.

If the application meets the initial guidelines for entering the application examination process, it will be assigned a serial number and filing date, and the examination will commence.

There are approximately two thousand patent examiners in the United States Patent and Trademark Office. They are divided into groups, each with responsibility for a particular type of invention. Each application is assigned to one of these specialty technology groups, and to a particular examiner within the group. Depending on the workload in the group, the type of invention and the complexity and quality of preparation of the application, the patent application process may take from one to four years, the average being around two years. Most utility patent applications are initially rejected, often because the examiner has located one or more patents previously issued which he or she thinks are similar to what the patent application now claims, and would have made the invention obvious. Various technical objections are also not uncommon. A process of amending claims and arguing with the examiner about why prior inventions do not render the present invention unpatentable ensues. While many patents are granted, there is no guarantee, and many applications are rejected or abandoned. Ultimately, the examiners allow approximately eighty thousand applications which have been through this examination and amendment process to issue as patents each year. Being granted a patent on an invention is an achievement not only of creativity but also of complying with an array of legal and administrative requirements.

During the entire examination process, the contents of a U.S. patent application are kept secret. No one outside the Patent Office, other than the inventor's designated representative, is allowed to know the title of the inventor's application which has been filed, the name of the inventor, or anything else concerning the application. This is because the patent law's requirement of full disclosure is premised on the patent grant. If no patent ever issues, then the inventor is not prejudiced by having his invention revealed to the public. The same scale of secrecy is not granted in most foreign countries, and inventors seeking foreign protection may need to keep this in mind.

Once an application is approved, the Patent Office requires payment of an issue fee before the patent will actually be issued to the patent owner.

TERM OF PATENT PROTECTION

A utility patent gives the owner the right to exclude others from making, using or selling the patented invention. In general, this right to exclude will begin on the date the patent is issued and end twenty years from the date the patent application was filed.1 In the case of a design patent, the term is fourteen years from the date the patent is issued. Neither type of patent may be renewed. In special cases, such as a drug being certified by the Food and Drug Administration, the term may be extended for a limited period, in order to compensate the patent owner for the delay in marketable time caused by the government regulatory process. Other reasons for term extensions include delays in issuance of a patent due to appeals, or the existence of government secrecy orders which prevented commercial exploitation of a patent. No term extension greater than five years is presently allowed.

During the life of a patent, the invention and the patent may become more or less valuable. To maintain the exclusivity afforded by a utility patent, the patent owner must pay periodic maintenance fees which must be paid not later than four, eight, and twelve years from the date of issue, or all patent rights will be lost. In some cases, if a patent does not appear to be commercially valuable, the owner may choose to not pay the maintenance fee and let the patent lapse.

OWNERSHIP ISSUES: THE EMPLOYED INVENTOR

The inventor of a patentable invention will normally own the invention, the patent application and, ultimately, any issued patent. Employed inventors are in a different situation. If they have been "hired to invent", that is, hired specifically for the purpose of inventing products or methods of the type which they did create, then the invention ordinarily will belong entirely to the employer, and the inventor is not entitled to any rights in the application or the patent nor to receive any special payment.

In other situations, where an inventor who was not hired to invent nonetheless uses the employer's time and materials to invent, the resulting invention will ordinarily belong to the inventor himself, but the employer will often have what is called a "shop right" to use the invention, without paying the inventor anything.

Employers can give themselves additional rights in their employees' inventions by use of employment contracts and invention assignment agreements. State laws often restrict the terms of such agreements, to protect employees. In North Carolina, employers can by written agreement require employees to assign to their employer all inventions which were developed in whole or in part during the employee's work hours; or which were developed with the employer's facilities, supplies, equipment or trade secret information; or which relate to the employer's business or to its present or demonstrably anticipated research or development; or which result from any work performed by the employee for the employer. In addition, employers may require that their employees grant all rights in certain inventions to the United States government.

Employers can also require that employees disclose all their inventions, so that the employer can make its own determination whether these should belong to the company or Federal government.

Drafting these employment agreements is best handled by attorneys experienced in the field. Restrictions on employees are not favored. Overly broad agreements, even those which are acceptable in all but one respect, can be entirely invalidated by the courts. Properly drafted, however, and signed by employees who received something of real value in exchange (continuation of an existing employment relationship is not enough), such agreements can be a significant business asset.

COMMERCIALIZING THE INVENTION

Patents have a big gold seal with a red ribbon and look attractive, but their value is not as wall decor. It is difficult to market unpatented technology, because such technology gives little competitive advantage. Even if the technology is not known to competitors initially, once a product is placed on the market, it can usually be freely copied. Unprotected ideas may give a head start, but that is usually all. A patent, however, gives the patent owner, and anyone he may license, a monopoly over the patented technology.

As a result, patent rights are frequently licensed or assigned (sold entirely), at royalty rates ranging from two percent to six percent in the manufacturing industries, or even more depending on the industry, the nature of the invention, and the terms of the license. It is important to recognize that joint owners of a United States Patent have the right to independently exploit the patent, ordinarily without any obligation to the other owners unless there is an agreement to the contrary. Thus, where two or more inventors worked together, obtained a patent jointly, and have no agreement as to sharing of income, they can compete with each other in seeking licensees and each can keep for himself any income he generates, even if the one receiving the greatest income actually contributed least to the invention. In contrast, joint owners of foreign patent rights are typically required to act jointly. Properly drafted agreements can help avoid disagreements and resulting diminution in patent value.

It is not uncommon for licenses to be signed after a patent application has been filed but before the patent issues, based on an expectation that some type of patent protection will eventually be granted. In such situations, there is usually a provision that a lower royalty (or even no future royalties) will be paid if patent protection is not obtained.

The United States Patent and Trademark Office publishes a listing of United States patents which are available for licensing or sale. Inventors who have no other contacts may choose to try this avenue of publicizing the availability of their patent rights.

In negotiating any license, the patent owner must decide whether to grant exclusive rights (so that the invention can be exploited by one and only one licensee) or nonexclusive rights; what type of payment provisions to include (for instance, a lump sum payment or an advance and then regular royalty payments based on sales); and whether future patent rights are also included in the license; and must make many other very basic decisions that will affect the patent owner's relationship with the licensing company as well as the future income. No agreement should be signed, not even a "letter of intent", before it has been reviewed by an experienced attorney. Many inventors have learned to their sorrow that "letters of intent" were binding, and unfavorable, contracts.

ENFORCEMENT OF PATENT RIGHTS

The holder of a valid U.S. patent has the right to prevent others from making, using, or selling the invention in the United States for the life of the patent, but this right would be meaningless if it could not be enforced. Fortunately, our patent statutes provide very harsh penalties for willful violations of patent rights, and our federal courts are able to enforce these. Infringers (those who make, use or sell a patented invention without the patent owner's permission) can be sued. Even if the infringer can show that he developed his infringing product or process independently, and without knowledge of the patented product or process, he is still subject to suit. Upon proving that infringement has occurred, the infringer may be ordered to stop making his infringing product, or to stop using his infringing process. In addition, he may be required to pay the patent owner an amount equal to all the damages he has caused, such as lost sales and even loss of sales of related products, if this can be proven to have occurred due to the infringement. If the patent owner has not lost any money, but the infringer has made or saved money, the damage award may be based on these benefits to the infringer. The damages awarded can be trebled in appropriate cases, and the infringer can also be ordered to pay the patent owner's attorneys' fees.

The patent owner will not be awarded any money, however, unless the infringer "knew" that there was a patent on the item or process. Actual knowledge is not required; the patent law provides a means for the patent owner to give legal notice to the whole world: placing the patent number on each and every product covered by the patent. If for some reason the patent owner failed to do this (for instance, if the patent owner has not yet sold any products), notice can be given by a letter advising of the existence of the patent. Such letters must be carefully drafted; otherwise they can result in a lawsuit before the patent owner was ready, in a part of the country the patent owner did not choose.

The damage award may include all damages incurred from the date the patent issued or, if later, the date the infringer received notice of the patent's existence. There is no protection against infringement before the patent actually issues.

DEFENDING AGAINST CLAIMS OF PATENT INFRINGEMENT

A claim of patent infringement should not be taken lightly, and competent counsel should be consulted at the earliest opportunity. If threatening letters or verbal accusations are received, it is not wise to wait until suit is actually filed. As noted above, the damages that can be awarded can be substantial, and an injunction could put a product line, or even an entire firm, out of business.

Patents are, by law, presumed valid. Nonetheless, there may well be valid defenses to the claim of infringement. For instance, it may be that the claims of the patent, which define the scope of the protection granted, do not actually cover the allegedly infringing product or process. In that case, there is no infringement. Even if infringement is clear, there may still be defenses related to the patent's validity. A defense of invalidity attempts to show that for some technical or legal reason, the patent issued should not have been allowed and it is, in fact, an invalid patent. If either non-infringement or patent invalidity is proven, then infringement has not occurred and the suit must be dismissed. Other defenses can also be explored by counsel, depending on the facts of the specific case. For example, a law passed in 1996 gives physicians an exemption from infringement liability in many cases when they use patented medical or surgical procedures to treat their patients.

SUMMARY

The holder of a valid U.S. patent can prevent others from making, using, or selling the invention in the United States for the life of the patent. The patent owner may ordinarily make, use or sell the patented item or process, or license others to do so, so long as he does not infringe the prior patent rights of others. Stringent remedies are available against infringers, which enhance the value of the patent owner's exclusive rights. While obtaining patent rights can be a fairly lengthy and somewhat expensive process, these rights can be the backbone of a business and ensure an exclusive position in the market.

III. TRADEMARKS

Trademarks are used to identify products, services, membership in an organization, or approval from a quality assurance program; to distinguish such products, services or programs from those of others; and to indicate their source. A trademark can be letters and/or numbers, a word or words, a slogan, a single design or visual symbol, a combination of words and designs, or even the shape of a product (such as a Coke bottle), an architectural design, a sound, a smell, or a color. Virtually anything which can serve as an identifier of source can be a trademark.

Trademarks exist and are protected partly for the benefit of producers or distributors, and partly for the benefit of consumers. For the trademark owner, the mark serves to ensure that consumers can consistently recognize and come back to a product or service they have come to know and to appreciate. For the consumer, the trademark assures that the marked product or service is of a recognized quality. Whether or not one likes Kentucky Fried Chicken, the product itself is of a known quality regardless of where in the country it may be purchased; McDonald's golden arches serve the same purpose. Because of this quality assurance function, the owner of the mark is required to maintain quality control over the goods or services in connection with which the mark is used, or face loss of all rights in the mark. When a trademark is used to identify services (advertising services, for instance; or retail store services; or restaurant services) it is often called a service mark. Less frequently encountered, marks used to identify membership in a particular organization are called "collective membership marks"; and marks used to indicate that a particular organization has approved the quality of goods or services on which the mark is used are called "certification marks". GIRL SCOUTS OF AMERICA is an example of a collective membership mark; UL is a certification mark of Underwriters' Laboratory. "Trade dress" is the appearance of a product, which may in itself serve to identify the source and quality of the goods. In general, throughout this pamphlet, the word "trademark", or simply "mark", will be used to refer to all these forms of source indicators, including trademarks applied to products, service marks, collective membership marks, certification marks, and trade dress.

CHOOSING A MARK

Businesses want and need productive marks. A meaningless, unattractive symbol is worthless. In selecting a mark, therefore, the would-be owner must decide what he wants to convey to his prospective customers; how important it is that his product stand out as truly distinctive; and how much of an advertising budget he is prepared to spend.

Words or pictures which generically identify the particular products or services, immediately let the consumer know what he is getting, but provide no basis for differentiating amongst different companies' products. Such marks, which tell nothing about the source of the products and services are simply unprotectible. Hence, it would be imprudent to select "tomato sauce" as a trademark for tomato sauce. That term merely identifies the goods, and anyone else selling tomato sauce is equally free to use those words no matter how much money has been invested in advertising the words as a brand name.

Words which, while not generic terms, are "merely descriptive" of some aspect of the goods or services, or which function "merely as surnames", will not be protected unless, through years of use or substantial advertising, the public comes to recognize these terms as associated with particular goods or services from a particular source. For instance, CAROLINA REDS would be a "descriptive" mark for red North Carolina apples. When first adopted, it would be given only limited protection by the courts; but through advertising and use, the term could come to be a fairly strong mark. Even after years of use, however, the owner of the CAROLINA REDS trademark would not be able to prevent others from using the descriptive words in their true descriptive sense: "Our apples are the best red apples in the Carolinas". Descriptive and surname marks cannot initially be registered on the Principal Register of the United States Patent and Trademark Office, although a lesser degree of registered protection is available; full registration does become available once the mark has acquired strength through continued use or substantial advertising. The impact of this initial absence of full registration protection is discussed below when we explore the registration process.

On the other hand, a completely arbitrary or coined word or symbol, such as KODAK for film or CAMEL for cigarettes, is a very strong technical trademark; but initially requires a substantial advertising budget to build up consumer recognition of the term as identifying a particular type of product from a particular company. Even from the beginning of its use, courts will enforce the owner's rights against second comers who choose similar terms: KODAL or KODIAK, even though different, would undoubtedly be considered too close to KODAK when applied to film.

Between those two extremes, "suggestive" marks suggest some characteristic of a product or service, but do not literally describe it; some imagination is required to understand why the trademark was selected. DOWNY for fabric softener is an example of a suggestive mark; it suggests that the product will make clothes feel as soft as down. Suggestive marks are protectible from the time they are adopted, although they are not initially afforded the same scope of protection as truly arbitrary or coined marks.

While the widest scope of protection is given to the most distinctive marks, most marks selected by small businesses fall into the suggestive category. Suggestive marks do not require as much advertising expense to make them sound desirable to the average purchaser as do entirely meaningless words and phrases, but they are nonetheless protectible against infringement.

Whatever mark is chosen, consideration should be given to its reproducibility in a variety of media (designs should preferably be clean and crisp), how a word mark will sound when pronounced by consumers with a variety of accents, and, if the mark will be used overseas, what it will mean and connote in the native languages of the countries where it will be used.

Once a mark is tentatively selected, it is critical to ensure that it is actually available for use.

DETERMINING THE AVAILABILITY OF A MARK

Trademark rights, whether established through actual use or through the presumptive use that comes with the filing of a Federal trademark application on the Principal Register, belong to the first user of a mark. That owner has the right to exclude all others from using confusingly similar marks. If the public is likely to be confused, mistaken, or deceived about the origin of goods marked with a second-comer's trademark, then the latter's use must cease.

Hence, it is important to ensure that proposed marks are not going to conflict with pre-existing marks owned by others, before investing significant advertising and promotion expenses, and before printing labels. This warning applies not only to selection of product names, but also to selection of a business name, at least if the business is a service (in which case the business name will actually function as a service mark), or if the business name will be used on products (in which case it would function as a typical product trademark). Many businesses check only the Secretary of State's corporate name records before incorporating, and then are surprised to receive cease and desist letters from prior trademark owners when they actually begin public use of their corporate name.

An attorney who specializes in intellectual property law normally has access to a number of computerized databases which can be searched, to find out who is using and has registered marks which might conflict with a proposed mark. These databases include listings of all marks registered with the Federal government; all applications for registration pending in the U.S. Patent and Trademark Office; marks registered with the various state trademark offices; and information about canceled or abandoned Federal trademark registrations and applications. While less comprehensive, individuals can conduct their own manual searches of the Federal Trademark Office records in Washington, D.C.; or can obtain a certain degree of information concerning the marks from searching at North Carolina State University's D.H. Hill Library in Raleigh or on the Internet. In addition, information about common law marks (those which may be in use but which have not been registered with any Federal or State trademark office) can be searched on-line; and manual searches of product directories and other materials can be conducted. Business owners on a budget can obtain a great deal of preliminary information about common law uses of marks from going to their nearest public library and looking through trade directories such as the Thomas Register, magazines in their field, Dun & Bradstreet's microfiche business name listings, telephone books for major cities, and the like.

A substantial degree of security, although not a guarantee, is afforded by a well-conducted search; and the more comprehensive the search, the greater the degree of security. Searching can be carried on ad infinitum; an attorney with experience in trademark law can review plans for use of the proposed new mark and give advice as to the scope of search which is most practical under the circumstances. It is, however, generally advisable to have at least a search of Federal and state trademark records performed, to weed out the most obvious and compelling forms of conflict.

It is not enough, of course, to conduct a search. The results must be interpreted and the prospective mark owner should receive a reasoned opinion as to the results of the search and whether the proposed mark does or does not appear to be free for use. A number of courts have held that failure to conduct at least a minimal search and obtain a clearance opinion before adoption of a new trademark leaves the business owner open to charges of "willful" infringement, if it later turns out that the new mark has created confusion with a pre-existing registered mark.

Assuming the search is clear, or a decision is for some reason made to proceed without a search, the next move is to take steps to acquire rights in the mark.

ACQUIRING RIGHTS IN A MARK

Trademark rights are acquired in either of two ways: (1) by using the mark in commerce; or (2) by filing a Federal trademark application on the Principal Register, based on a bona fide intent to use the mark in commerce in the future. A trademark registration is not required either to use a mark, or as a prerequisite to owning rights in the mark; instead, use in commerce may suffice. However, as explained later, trademark registration is a very important means of protecting trademark rights, and of obtaining rights where use has not yet begun.

To acquire trademark rights based on use in commerce, the would-be owner of the mark must be the first person or entity to use the mark in commerce on or in connection with the goods or services for which protection is sought. The trademark could be used directly on the product, on tags or labels attached to the product, or in other similar fashion in direct conjunction with the goods. Service mark rights can be acquired by using the mark in commercial advertising for the services, on products used in connection with the service (such as restaurant menus), or in other promotional fashion. For example, if a company has developed a new line of socks, the socks can be put on the market and sold, with tags bearing the new mark (e.g., FUZZBALL). This use of FUZZBALL in commerce, in direct association with the goods (the socks) is sufficient to give the sock producer rights to the mark--provided no other company has previously acquired rights to use a confusingly similar mark for similar goods.

To acquire trademark rights based on an intent to use a mark in the future, the would-be owner of the mark must apply to register the mark on the Principal Register of the United States Patent and Trademark Office. State trademark applications are no substitute, nor will "coming soon..." advertising suffice. Unless a mark is in actual, genuine, commercial use, the only way to obtain trademark rights is by entering the Federal application process. A stop-gap measure for a small business which intends to operate locally only, and which intends to use its corporate name as its mark, is to reserve a corporate name with the Secretary of State. This reservation of name, however, is effective for only a relatively short time; and does not prevent others from acquiring trademark rights during the interim before the business begins operations, which would legally take trademark precedence over the reserved corporate name. While the legal effect of reserving a corporate name is thus negligible from a trademark point of view, it does make it less likely, as a practical matter, that another company would start up a new business under the same name in the same state during the next few weeks.

REGISTERING TRADEMARK RIGHTS

Trademarks can be registered with the United States Patent and Trademark Office and/or with the trademark offices of each of the various states.

At the state level, the registration process involves the filing of an application for registration, providing information as to the date and manner of use of the mark, and examples of how the mark is used. While the various state trademark offices differ, it ordinarily takes from two weeks to three months to obtain a registration. The state trademark examiners normally search only their own records for apparent conflicts; and make limited objections as to the legal basis for registrability. The cost of state registrations is hence fairly low. The scope of protection is also fairly low, being limited to the state boundaries and in some cases not even affording a presumption that the mark is entitled to protection. State registration of a mark will, however, normally entitle the registered owner to request attorneys' fees from infringers, if suit must be brought for infringement of the mark. It can be a viable alternative to Federal registration where use of the mark will be entirely local and/or cost is a major consideration. It can also be a valuable part of a protection portfolio for major marks, because it increases the mark's visibility and lessens the chances that someone else would innocently adopt the same or a similar mark. While conflicting uses can be stopped, it is often less expensive to take preventive measures.

The Federal application process is more complex. Depending on the type of mark, registration may be available on the Principal Register or on the Supplemental Register. An application on the Principal Register is not available for descriptive or surname marks which have not yet become distinctive. Such marginally protectible marks can only be registered on the Supplemental Register. Once they have become distinctive, they may be re-registered on the Principal Register.

Registration on the Principal Register, for marks which qualify, establishes "constructive use" of the mark throughout the entire United States, effective as of the date of filing of the application. Thus, even though the mark owner may never have actually placed the mark in use before the application was filed, or may have used it only in one small town in North Carolina, it is considered to have been placed in use all over the country. This gives the mark owner priority over subsequent users of the same or a confusingly similar mark. Constructive use is not available for marks which are merely descriptive or merely a surname; the mark must have acquired distinctiveness or be initially of a suggestive or more arbitrary nature, qualifying for Principal Registration.

In addition, the owner of a mark registered on the Principal Register may prevent importation of infringing goods by having Customs seize and impound them. Registration on the Principal Register is considered to give notice to everyone in the world of the owner's rights; there is no good faith defense for a party adopting a trademark subsequent to the registrant's date of registration. The registration is evidence of the validity of the registration itself, the registrant's ownership of the mark, and the registrant's exclusive right to use the mark in commerce in connection with the goods or services specified in the certificate.

Whether registered on the Principal or Supplemental Register, marks which are registered are entitled to bear the federal registration symbol (the letter R enclosed within a circle, ®). In addition, the owner of the registration can sue infringers in Federal court.

Applications for registration on the Principal and Supplemental Register are generally handled in the same way. In either case, an application is filed with the United States Patent and Trademark Office, describing the ways in which the mark is used or (for applications on the Principal Register only) is intended to be used, and the goods or services in connection with which the mark is used. The application must be accompanied by a drawing which, if a design or stylized mark is sought to be registered, must meet very specific drawing criteria. Actual samples of the mark in use must be submitted, unless the application was filed based on an intent to use the mark in the future, along with a check for the filing fee.

The Trademark Examining Division is divided into groups of examiners according to the type of product or services with which the proposed mark will be used. Assuming an application meets the technical requirements of an application, and is accepted for purposes of being given a filing date, it will be assigned to an individual examiner within the appropriate subject matter group. The examiner will conduct a search of prior registered marks, and will review the clarity of the description of the goods or services. The examiner may initially reject the application or require clarification of some aspect of the application, or request technical amendments. A response must be filed to any such objections; and the examiner may file still further objections, which again require response. If the examiner continues to refuse registration, his decision can be appealed to the Trademark Trial and Appeal Board.

Once the examiner approves the application, based on matters of record in the Trademark Office, the treatment varies depending on the nature of the application. Applications for registration of merely descriptive or surname marks on the Supplemental Register will, once allowed, result in issuance of a Certificate of Registration.

Applications on the Principal Register, once approved, will be published for any public opposition. Assuming no public opposition surfaces, if the application was filed based on actual use, a Certificate of Registration will issue. If, instead, the application was filed based on a bona fide intention to use the mark in commerce, a Notice of Allowance will be issued. The applicant then must submit proof of use of the mark, along with a further filing fee. If the proof is satisfactory, a Certificate of Registration will be issued.

TERM OF TRADEMARK REGISTRATIONS

The terms of state trademark registrations vary, from one year to an indefinite life, depending on the state. In North Carolina, the term is ten years. North Carolina law requires filing proof of continued use of the mark within 5-1/2 years after registration, or the registration will lapse. If other states are of interest, detailed information can be provided by trademark counsel or by the office of the relevant Secretary of State.

All Federal trademark registrations now being issued have a term of ten years (formerly, registrations were issued for twenty years). A registration may be renewed for additional ten-year terms indefinitely as long as the mark is in commercial use. Generally, the longer a trademark exists, the more valuable it becomes as its reputation grows.

During the first term of Federal registration of a mark, between the fifth and sixth years of registration, an Affidavit of Use must be filed, verifying that the mark is still in commercial use. This is not required during the second and subsequent terms. Failure to file the Affidavit of Use, or to renew a registration, will result in loss of the registration.

ENHANCING AND MARKETING TRADEMARK RIGHTS

Trademark rights gain value through proper use (and, conversely, can be lost through improper use). When printed, trademarks should be accompanied by a symbol indicating that the mark is claimed as a trademark. For Federally registered marks, the symbol ® should always be used in close association with the mark. For unregistered marks and for marks registered only at the state level, either the symbol Ô or, for service marks, _ may be used. Wording such as "XYZ is a [registered] trademark of ABC, Inc." is also appropriate where space permits.

Trademarks should always be used as trademarks. They are not nouns; they are not the generic names of products. If used generically, they may become generic and in that case, they will no longer be capable of functioning as trademarks. Aspirin was once a trademark of the Bayer Company; cellophane and elevator were also once trademarks. In each case, they began to be used generically and lost their trademark significance; their former owners saw competitors adopt the same words to describe their competitive products, and were unable to prevent that use. You may have noticed an extensive ad campaign for XEROX® photocopiers which focused exclusively on telling the public that XEROX is a trademark and not a substitute term for "photocopier". Proper and consistent trademark usage from the beginning can help avoid the need to conduct such corrective campaigns later on, and avoid loss of trademark rights. It is best to use trademarks as adjectives, accompanied by a noun which is the generic name for the product or services. For instance, "NABISCO® brand cookies", "XEROX® photocopier", and "McDONALD'S® restaurants" are all examples of appropriate trademark usage with generic nouns.

A strong trademark is frequently a marketable trademark. The owner of a valid trademark cannot only use the mark himself, but can also license others to use the mark. Because trademarks are a quality symbol, the mark owner must maintain control over the quality of the goods or services in connection with which the licensed mark is used; otherwise, the trademark rights may become abandoned. It is important that license agreements be in writing; and that appropriate language covering quality control aspects of the relationship be included.

Ownership of trademarks and trademark registrations can be transferred to others by sale or gift, but only in connection with a transfer of the goodwill of the business associated with the mark. An agreement which says "XYZ herewith sells to ABC the trademark CAROLINA REDS" is not only invalid, but may result in both parties' losing all rights in the mark. A transfer agreement need not be lengthy, but must be carefully worded.

Trademark rights frequently form the basis of a franchising business. Compliance with the Federal Trade Commission regulations on franchising requires that a Franchise Disclosure Document be prepared and given to all prospective franchisees at the earlier of the first meeting, or ten days before any contract is signed or money changes hands. Many states have even more stringent regulations incorporated in Business Opportunity laws or in their own state franchising statutes, including requirements that Disclosure Documents and proposed advertising be registered with state authorities before the franchise may be offered within that state. Franchising can be lucrative, but failure to comply with all legalities in a timely fashion can be very dangerous, not only giving the franchisees the right to revoke their contract and obtain the return of their money (possibly trebled), but also leading to criminal penalties.

ENFORCEMENT OF TRADEMARK RIGHTS

Trademark rights can be enforced through lawsuits brought either in state or in Federal court. Proof of trademark infringement requires proof that the alleged infringer was the second user of the mark, and that his mark is confusingly similar to the senior party's mark. Actual confusion is not required. Showing that the two marks are substantially similar, and that the goods or services in connection with which the two marks are used are either competitive or closely related, will ordinarily suffice to demonstrate infringement.

Even before a full trial is held, so long as the senior party can show it is likely to win, the judge can issue an order requiring that the allegedly infringing goods be withdrawn from the market. In fact, judges are authorized to allow the seizure of apparently counterfeit goods without prior notice to the alleged infringer, if the senior party shows not only that it is likely to win but also that the apparent counterfeiter would probably destroy or hide the goods if prior notice were given. If the senior party does win, the judge can then order that all infringing products be destroyed. This is in addition to money damages that may be awarded.

Money damages are measured by either the senior party's losses due to the infringement, or profits made by the junior party from the infringement. It may be presumed that all profits from sales of goods marketed under infringing trademarks are due to the infringement, and overhead expenses are frequently not considered part of the "costs" which are deducted in determining how much profit was made. Thus, even though a company's internal accounting system may show that a particular product was marketed at a loss or minimal profit, the "profit" which must be paid over to the owner of the infringed trademark can be a very significant sum.

Where willful infringement of registered marks can be proven (for instance, where the junior user had actual knowledge of the senior party's mark, and copied it), the damages awarded will typically be trebled, and the infringer may be required to pay the senior party's attorneys' fees.

In appropriate cases, Federal criminal charges can be brought against infringers. Passing off "counterfeit goods" is forbidden and can result not only in forfeiture of the products bearing counterfeit marks, but also in fines of up to $2 million and prison terms of up to ten years for a first offense. Still greater penalties can be imposed for second offenders and for corporations. Usually, a preliminary case is developed with the assistance of privately retained counsel, who then enlist the help of the Federal government. Federal law enforcement officers (with the assistance of the privately retained counsel) conduct the seizure and gather evidence for prosecution, and the infringers are prosecuted by the U.S. Attorney's office.

DEFENDING AGAINST CLAIMS OF TRADEMARK INFRINGEMENT

As soon as an accusation of trademark infringement is received, experienced trademark counsel should be retained. There may well be defenses available, but because injunctions (orders to stop selling the allegedly infringing product, or providing the allegedly infringing service) can be issued on short notice, it is important to be prepared, and unwise to delay. If Customs officials or Federal Marshals appear, or if criminal charges are brought, absolutely no statement should be made without having your attorney present. Even if there is no reasonable possibility of criminal charges, it is still best to consult counsel before making any response.

Unless infringement is quite clear, as a part of the defense, trademark counsel will often first perform a fairly extensive search to evaluate the strength of the asserted mark. If numerous companies use very similar marks on very similar products, the mark would be considered dilute, and given protection only on a narrow range of goods and only against virtually identical marks. Conversely, a strong mark (such as KODAK) would be protected against virtually any unauthorized use by others, regardless of the goods or services.

Counsel will also explore the extent of use of the competing marks, the dates when the marks were first used (sometimes junior users who failed to conduct sufficiently thorough investigations write cease and desist letters to companies whose use preceded theirs, triggering problems for themselves), the extent to which the claiming party may have failed to maintain quality control, the nature of any registrations, and various technical defenses.

Even where infringement has occurred, it is often possible for counsel in a non-criminal case to arrange a timed phaseout of the infringing uses, minimizing the losses which would otherwise be incurred.

SUMMARY

Our society seems increasingly driven by name recognition. Children are no longer satisfied with "sneakers"; they want a particular recognized name brand. We do not stop to eat at a "hamburger joint"; we identify our favorite restaurants by name. The names and logos of products and services from pizza to computers, to electron microscopes, drive purchasing decisions on a daily basis.

Selection of an appealing and protectible trademark for a new product or service can be one of the most important decisions a company will make. Conversely, selecting an unprotectible (or, worse, infringing) mark can mean that the entire advertising budget is wasted, and that any name recognition benefits a competitor.

Tentative name or logo choices should be presented to an attorney experienced in trademark law, who can conduct a search on a fairly rapid basis, and advise as to the likelihood that the mark is free for use and will be protectible if adopted.

Assuming the mark is free for use, applications for Federal or state trademark registration can be filed (the latter only after the mark has actually been used). Others throughout the nation are on notice of Federally registered marks, and adopt competing marks at their peril. The owner of a Federally registered mark can sue to enforce these trademark rights throughout the United States, can force users of confusingly similar marks to stop such use, and can obtain an award of money damages for any confusion which has resulted from the infringing use. In appropriate cases attorneys' fees may be awarded; and under certain circumstances, criminal charges can be brought against infringers.

Others can be authorized to use trademark rights, but because trademarks serve as an indicator of quality, the mark owner must maintain quality control over all labelled goods or services. License and franchise agreements should be carefully drafted to maintain sufficient quality control while avoiding unnecessary exposure to liability for the trademark owner. Franchises must also meet the frequently complex requirements of state and Federal regulators. Properly structured, however, licensing and franchise arrangements can be highly profitable.

IV. COPYRIGHTS

A copyright is the right of an author to prevent others from copying his creative work. Copyright protects the form in which a creative idea is expressed; it does not protect the underlying idea. Thus, ownership of a copyright does not prevent others from creating their own, differently expressed works using similar ideas; nor does it prevent virtually identical works from being created and exploited, so long as they were created entirely independently.

The owner of copyright has the exclusive right to do and to authorize others to do each of the following:

· reproduce the work by any means, including paper copies, recordings, or otherwise;

· prepare derivative works based on the original creative work (for instance, revised editions, translations into foreign languages, movies based on books, posters made from oil paintings, songs based on poems, etc.);

· distribute copies or recordings of the work to the public by any means, including sale, lease or rental;

· perform the work publicly, if it is a literary, musical, dramatic, or choreographic work; or if it is a pantomime, motion picture or other audiovisual work;

· perform the work publicly by means of a digital audio transmission, if it is a sound recording; and

· display the work publicly, if it is a literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, and including the individual images of a motion picture or other audiovisual work.

In addition, visual artists have been given further exclusive rights, often referred to as "moral rights", which are included in the copyright statute:

· the right of attribution, that is, the right to be identified as the author of their work; and to prevent the use of their name as author of visual art which they did not create or which has been modified in a way which would be prejudicial to their honor or reputation; and

· the right of integrity, that is, the right to prevent mutilation, distortion or any other modification of their work, and to prevent destruction of their work.

These Federal statutory moral rights, which became effective June 1, 1991, apply only to paintings, drawings, prints, sculptures, and photographs, and cover only original and limited edition works (200 or fewer numbered and signed copies). However, it is important to be aware that various states have adopted, and others are considering, legislation protecting moral rights of authors and artists. California in particular has been a leader in this area, including as part of its legislation a right on the part of visual artists to receive a portion of the proceeds if their work is resold at a profit. The right of attribution, and occasionally the right of integrity, have also been protected by the courts even in the absence of specific "moral rights" laws.

Copyright protects not only such "literary" and "artistic" properties as poems, books, paintings, and sculptures, but also typical business documents such as sales and training manuals, advertising, and other printed materials. Computer software is covered by the copyright laws. The purely ornamental aspects of many products, from clothing to vases, figurines, and toys, are covered by copyright. The copyright laws may be a useful tool in minimizing the risk of public access to documents required to be filed with the various branches of Federal and state government--if competitors or the public would need to copy substantial portions of those documents to derive competitive benefit from them, copyright protection may prevent such copying. You can readily understand, with this background, that copyrights can be very valuable business assets.

ACQUISITION AND OWNERSHIP OF COPYRIGHTS

A copyright is the easiest form of intellectual property protection to obtain. It comes into being, immediately and automatically, as soon as a work exists. Although, as discussed below, copyright registration conveys many advantages, it is not required to secure copyright. Once an individual has written, drawn, carved, sculpted, or otherwise given tangible form to a creative expression, that original work is protected by copyright.

Exactly who owns the copyright can be somewhat more difficult to determine. Ownership is important because only the copyright owner can exploit the work--make copies, authorize others to make copies, revise the work, and exercise the other benefits of copyright.

Generally, the individual who created a work is its copyright owner. Where two or more persons collaborate to produce a work, then they are ordinarily joint owners of the copyright. In most cases, each joint owner is entitled to independently exploit the work, but also has a duty to share with the others any and all profits earned as a result of that exploitation. Because collaborations often involve unequal contributions, it is usually advantageous to have a written agreement between the authors, defining their respective rights and responsibilities; otherwise, the author who created even a minuscule portion of the work can go off on his own, negotiating licenses or sales of the work that may be counter to the main author's plans and may result in diminished overall profitability.

While the actual creator(s) usually own the copyright in their work, there are circumstances where the creator of a work is not considered its author and is not the owner of the copyright. One such circumstance is when the creator was an employee who prepared the creative work as a part of his duties of employment. In this case, his employer is considered the author and copyright owner of the work, and the work is called a "work for hire".

Companies typically think they own all rights in whatever they have paid for, and thus the "work for hire" doctrine comes as no surprise. What is often a surprise, though, is that the doctrine does not apply to all situations where a work was created in exchange for payment. Independent contractors, for instance, are not normally considered "employees"; and mere use of an employer's facilities, use of time which the employee should have devoted to his duties of employment, or use of an employer's personnel will not necessarily bring a work within the "scope of employment." Many companies who have hired outside consultants, artists, and computer programmers to perform specific tasks find that they do not own the underlying rights in the work for which they paid. This often comes to light when the independent contractor decides to sell the same work to a competitor, often at a less expensive price than the first client paid because there are no more development costs to amortize.

If a company wants copyright ownership of a work which is not being prepared in the course and scope of an employee's duties, the principal alternatives are to use a written agreement to transfer ownership, or to set up a very specific type of work for hire relationship that would not otherwise exist. If the work in question is an artistic work, it is particularly helpful to structure a relationship that will meet "work for hire" tests, so as to avoid the obligation to respect the artist's "moral rights". Likewise, if the value of the copyright is expected to be fairly long-lived, structuring copyright ownership to come as a result of work for hire rather than by assignment or license avoids a rather nasty wrinkle in the copyright laws: the author of any work other than a work for hire, who has licensed or assigned any of his copyrights, has a five-year "window" beginning in the thirty-fifth year during which he may terminate the grant by complying with certain formalities, no matter what his agreement says.

Virtually all of the rights of the copyright owner may be transferred. (Moral rights and the statutory thirty-fifth-year right to terminate are the exceptions; these rights may not be conveyed to others.) However, a transfer of exclusive rights is not valid unless it is in writing and signed by the owner of the rights conveyed, or his authorized agent. Agreements to convey or acquire copyright ownership or any of the associated rights, can be critical to protection of a company's interests and should be carefully drafted with the assistance of copyright counsel.

NOTICE OF COPYRIGHT

The copyright notice, placed in a reasonably prominent location on each visually perceptible copy of a work, advises the public that the work is protected by copyright, identifies the copyright owner, and shows the date of first publication so that the expiration date of the copyright can be calculated.

Although the use of a copyright notice is not required for works first published on and after March 1, 1989, it is still highly recommended. Not only does it have "scare value", but by law, in the event that a work is infringed, if the work carried a proper notice, the court will not allow the infringer to claim that he or she did not realize the work was protected. (A defense of such "innocent infringement", when allowed and successful, results in a reduction of the damages the infringer would otherwise have to pay.)

Registration of a work is not a prerequisite to use of the notice. The notice can and should be placed on all distributed copies of the work.

A proper copyright notice has three elements:

· the copyright symbol, ©, or the word "copyright" or the abbreviation "copr." (use of the copyright symbol, rather than the other alternatives, is necessary for foreign copyright protection in some instances and is therefore advisable in all cases);

· the name of the copyright owner, or an abbreviation by which the name can be recognized or a generally known alternative designation of the owner; and

· the year of first publication of the work, which may be omitted where a pictorial, graphic, or sculptural work, with accompanying textual matter, if any, is reproduced in or on greeting cards, postcards, stationery, jewelry, dolls, toys, or any useful article.

As an example, if John Doe has written a poem, and first distributed any copies of his work in 1991, a correct copyright notice would be: © John Doe 1991.

Where copyright is being claimed in sound recordings (for instance, recordings on audio tapes or compact discs), the form of the notice is somewhat different. Instead of using the letter C in a circle, the letter P is substituted.

Many books and textual works incorporate public domain material from the United States government. Where a work consists primarily of such material, it is required by law that any copyright notice must also include a statement that identifies either those portions of the work in which copyright is claimed or those portions that constitute U.S. government material. For example, a book on AIDS first distributed in 1997, consisting almost exclusively of material by the Centers for Disease Control, but compiled for the first time by the editor, and with an original preface, could properly bear a copyright notice such as the following:

© Jane Smith 1997. Copyright claimed in compilation and preface.

or, alternatively:

© Jane Smith 1997. No copyright claimed in the contents of Chapters 1-25, authored by the U.S. government.

Failure to disclaim rights in the government-owned material results in invalidation of the otherwise valid copyright claim to the original portions of the work. In addition, placing a false copyright notice on a work is a Federal crime, punishable by a fine of up to $2,500.

REGISTRATION OF COPYRIGHTS

While copyright exists in a work as soon as it is created, there is an organized system of copyright registration which has definite value. Although moral rights cannot be registered, claims to copyright ownership can and should be registered unless the value of the copyright is insignificant. In most cases, copyright owners cannot bring suit for infringement until their claim to copyright has been registered; and, as discussed below, the court's ability to penalize an infringer is much greater if the work was registered before the first act of infringement. Provided registration is accomplished within three months from the date of first publication, the work will be considered to have been registered as of the date of publication, for purposes of computing damage awards and the like. In addition, if registration is accomplished within five years of the date of first publication, everything stated in the application for registration will be presumed true for purposes of any lawsuit.

Registration is a relatively simple matter of supplying copies of the work to the Register of Copyrights, along with an application for registration and an appropriate fee. There are specific forms available from the Copyright Office to be used in applying for registration, depending on the type of work to be registered. These can be obtained by writing to the Copyright Office, Library of Congress, Washington, DC 20559, or by downloading them from the Copyright Office's website on the Internet.

The work which is the subject of the application is not examined for conflict with the work of another. The Copyright Examiner will, however, review the application and copies of the work to be sure the legal requirements as to copyrightable subject matter are met (for instance, an application to register a blank form will typically be rejected as not being "creative") and to be sure the questions on the application have been fully answered.

In contrast to patent and trademark applications, in many instances the copyright registration process can be adequately completed without involving an attorney. The Copyright Office has a cadre of "Copyright Information Specialists", who can be reached by calling (202) 479-0700. While the telephone number of their office is also the number for the Library of Congress, and hence often somewhat busy, once reached, these personnel are ordinarily very friendly and helpful. They are forbidden to give legal advice, but can answer general inquiries about the meaning of questions on the application forms and the number and format of copies of the work to be submitted, and can send free brochures which the Copyright Office has prepared on a number of "hot topics" relating to copyright. Alternatively, a one-hour training session with an attorney specializing in copyright law, using one of the trainee's own works as an example, is usually adequate to teach someone how to complete the application process both for the work in question and for similar works and revisions which will be produced in the future.

Where computer software is involved, where the work to be protected has had input from a number of different persons who may or may not be "authors", where ownership of the work has changed hands or has been acquired as a result of work for hire, or where the value of the work is great, it is ordinarily advisable to consult copyright counsel to ensure that the proper authors and owners are identified and that the claim to copyright is worded so as to maximize the protection the registration will give. Overly broad statements as to the scope of protection to which the work is entitled, failure to disclose pre-existing works on which the present work is based, failure to correctly identify the nature of the work, as well as other errors that can occur in completing the application, can result in invalidation of the registration and thus an inability to enforce the copyright.

TERM OF COPYRIGHT PROTECTION

Works first created or first published (and not previously registered) on or after January 1, 1978, are ordinarily given a term of protection enduring for the author's life, plus an additional 50 years after the author's death. In the case of works authored by several persons jointly, the term is measured by the life of the last surviving author. In the case of works for hire, and (unless the author's identity is revealed in the Copyright Office records) for anonymous and pseudonymous works, the term is 75 years from publication or 100 years from creation, whichever is shorter.

The law in effect prior to January 1, 1978, provided for a first term of 28 years from the date copyright was secured by publication or by registration, whichever occurred first. Provided an application for renewal has been or is filed with the Copyright Office, the term can now be extended to a total term of 75 years. It is absolutely critical, for works falling under the earlier statute, that applications for renewal be filed on time or protection will lapse at the end of the initial term.

Moral rights are generally protected for the life of the author (or, in the case of joint works, the life of the last surviving author), although there are special provisions and exceptions for works as to which rights were conveyed prior to June 1, 1991.

After expiration or lapse of a copyright, as with other forms of intellectual property, the work becomes public property and can be used freely by all.

Ordinarily, once the work has thus entered into the public domain, it can never again be claimed as the exclusive property of anyone. The exception to this general rule has to do with works authored by foreign citizens and first published overseas which, once published in the United States, for any of various reasons spelled out in the copyright statute never acquired (or acquired and then lost) copyright protection. Under the GATT Treaty amendments (the "Uruguay Round Agreements," effective in 1995), the copyright in those foreign works can in many instances be restored. Once restored, the copyright term is the same as though it had come into effect on the date of original publication in the United States and had never lapsed.

COMMERCIALIZING COPYRIGHTS

Assuming that a copyright owner does not choose to exploit his monopoly over the copyrighted work himself, there are a variety of options available for commercial exploitation. The owner of copyright can transfer all or any part of his rights, other than his moral rights. For instance, he could transfer his right to publicly perform a dramatic work, while retaining the right to make copies of the work and the right to prepare derivative works. He can transfer a geographically limited right ("North American rights" is a term frequently seen in commercial art contracts, and book publishing contracts are often geographically limited).

The owner of copyrights can accomplish his transfer of rights in any way that other property can be transferred, but in all cases the contract should be in writing; and where ownership is being conveyed, the transfer is invalid unless it is in writing.

In negotiating the terms on which others will be allowed to use the work, the owner of copyright should consider whether to allow only one entity to use the work for all purposes, presumably giving them the incentive to spend more on advertising because such expenditures would benefit only them; whether the property is so valuable that nonexclusive licenses should be granted to numerous parties who will compete with each other; or whether different entities should be granted nonoverlapping rights (divided geographically, by field of use, by type of copies to be distributed, or in some other rational fashion). Businesses which routinely perform independent contract work for others should consider incorporating language in their standard work orders that would clarify copyright ownership and grant limited (perhaps even one-time-only) rights in the work to the contracting business.

Payment terms are of course negotiable. These can range from single cash payments, with no more money to be paid in the future; to no up-front payment and royalties based on sales. It is rare for commercial artists to be paid royalties; single cash payments are the norm, although some contracts provide that if the work is used in other ways in the future, additional lump sum payments will be made. On the other hand, authors of books and musical works typically receive the bulk of their income from royalties based on sales; and may receive an advance against those royalties at the time the contract is signed and/or at the time a publishable manuscript is accepted by the publisher. The amount of royalties, and the amount of advances, vary dramatically depending on the type of work and the prior commercial success of the author. Just as an example, with computer software, royalties may be in the range of 25% to 50% of sales, while textbook authors more often receive royalties in the 10% to 14% range. The royalty rate often increases as sales increase; is often a different amount for foreign sales than for sales in the United States; and often varies depending on the form in which the work is reproduced (e.g., rates are normally different for paperback copies of a book than for hardback; and different rates may be paid for record, tape and compact disc versions of musical works, although that is less common).

While it is no longer required that transfers of copyright interests be recorded, the Copyright Office will accept and file such documents. This can protect the purchaser against fraudulent transfers and against certain consequences which would otherwise result from bankruptcy of the copyright holder.

ENFORCING COPYRIGHTS

The owner of a registered copyright can enforce his rights by bringing a civil lawsuit in Federal District Court. Moral rights under the copyright statute are enforced in the same manner. In addition, the Federal government itself can act. Criminal actions can be brought by the U.S. Attorney; and Customs and Postal officials may seize and impound infringing articles that are being imported.

Lawsuits are expensive and time consuming. Although recovery of attorneys' fees is possible if the suit is successful, it is not assured. Except where infringement is obviously willful and part of a counterfeiting or similar scheme, it is our firm's belief that suit should seldom be filed without a first attempt to settle outside of court. Experience shows that the vast majority of these cases can be settled out of court--it is not in any client's interest to spend money on attorneys that could bring more tangible business results if spent elsewhere. A carefully worded letter from the copyright owner's attorney, bringing the possible infringer's attention to the existence of the client's copyright registration, to the similarities between the possibly infringing material and that of the client, pointing out the available remedies for infringement under the federal law, and requesting a prompt response will usually elicit an appropriate response.

The remedies for infringement, if proven, can be substantial. In civil actions brought by the copyright owner, the court may order forfeiture and/or destruction not only of all infringing articles, but also of any implements used to manufacture the infringing articles. Where a strong case of infringement can be shown, the court may even order seizure and impoundment of such articles prior to trial, and in some cases, without prior notice to the alleged infringer. For instance, counsel in our firm, representing the copyright owner, have descended on the place of business of a computer software infringer, accompanied by Federal Marshals, and left with not only the infringing diskettes but also the computers used in connection with the unauthorized copying. Similarly, where T-shirt manufacturers are copying protected designs, raids and seizures without prior notice are not uncommon. It is important not to engage in such tactics without clear evidence of unlawful activity, since the copyright owner may be required to pay heavily for any wrongful seizure.

Assuming the copyright owner can successfully prove infringement has occurred, in addition to obtaining an order stopping the infringement and ordering destruction of infringing articles, he can recover any provable damages, including lost profits. The copyright owner need only show the infringer's gross revenue from exploitation of the infringing work, and it is up to the infringer to prove any deductible expenses and the extent to which the profits result from elements other than the infringement. If the work was registered before the first act of infringement, then even if no actual damages can be shown, the copyright owner can elect to receive "statutory damages". Provided that copyright notices were properly affixed to the work, the minimum amount of statutory damages that can be awarded for copyright infringement is $500; and the maximum is $20,000. In certain cases, where the infringer can prove he acted innocently, the minimum can be reduced to $200 or even (for nonprofit infringers) to nothing. On the other hand, if the infringement was willful, the potential statutory damage award is increased to $100,000 for each act of infringement. In addition, attorneys' fees may be awarded.

In addition to civil penalties, copyright infringers can be prosecuted under the federal criminal laws. All willful copyright infringement is a criminal offense. The lowest penalty is conviction of a federal misdemeanor, with a prison sentence of up to one year and a fine of up to $5000. More serious penalties are levied against infringers who make multiple copies of a work, or who copy expensive works. It is a felony, punishable by up to five years in prison and a fine of up to $250,000 to willfully infringe copyrights of others by making, during a 180-day period, ten or more copies of a work which have a cumulative value of $2500 or more. Second and subsequent offenses carry a prison term of up to ten years in addition to the fine. Companies which willfully infringe can be assessed up to $500,000 in fines.

DEFENDING AGAINST ALLEGATIONS OF COPYRIGHT INFRINGEMENT

Even where the accused infringer did copy the work in question, or used it as a basis for a new work, his actions may be lawful. Common defenses include: (1) that the accused copied only the idea of the copyrighted work, and not the protected manner in which the idea was expressed; (2) that the accused was making a "fair use" of the copyrighted material (for instance, for educational or other nonprofit purposes, which did not harm the value of the copyrighted work, under circumstances where it was not practical to request permission; or where the use was a parody; or was a news report); or (3) that the copyright is invalid.

Each of these defenses is quite complex. It is not enough to say that one is a nonprofit institution to avoid copyright liability; educators, nonprofit theaters, and arts institutions, and even the Boards of Directors of charitable organizations, can all be held accountable for unauthorized use of copyrighted works.

In view of the draconian punishments that can be imposed on infringers, it is wise to consult experienced copyright counsel as soon as an accusation of infringement is made; and preferably even before that time arises, when you are even contemplating engaging in questionable use of the works of others. In most cases, if the work to be copied or adapted was created 200 years ago, there is no reasonable likelihood that infringement can be claimed. On the other hand, if it was published or created within the last 50 years, there may be copyright protection outstanding and infringement is much more likely.

Never forget that willful copyright infringement is a crime, and can be prosecuted as such. The accused's own statements can form the basis of the prosecution. If Federal Marshals appear, or if criminal charges are brought, absolutely no statement should be made without having your attorney present. Even if criminal charges seem unlikely, it is still best to consult counsel before making any response.

Taking reasonable care to avoid unlawful copying remains the simplest and most effective way to avoid successful infringement suits. If you are planning to generate a work very similar to that which a competitor publishes, it is important to maintain accurate records showing independent creation. If possible, creation of the competitive work should be entrusted to someone who has not seen the original work, so that he does not inadvertently copy remembered portions of it. Copying sentence structure but substituting different words of identical meaning is still infringement, in most cases. For instance, if a company developing a product catalog simply translates the competitor's "It permits the use of flexible telco cable instead of bulky RS-232 cable" to read, "It allows the use of twistable telephone wires instead of larger RS-232 cable," and treats remaining copy in the competitor's catalog the same way, a judge would have no doubt as to the origin of the catalog and would probably find infringement. One or two similar sentences may be inevitable; whole paragraphs and pages are evidence of copying. We find that clients are frequently tempted to cut and paste attractive pictures they have seen, or competitors' photographs, or the like, into their own ads. You should consider that in such cases, the damages plus "actual profits of the infringer" which the owner of the copied materials may have a right to collect could include profits from sale of the goods promoted in the advertisement; the burden is on the infringer to show that the ad did not contribute to sales. The safer course is simply not to copy or adapt the works of others. Independent generation of a similar work is, in the long run, frequently less expensive.

THE SEMI-CONDUCTOR CHIP PROTECTION ACT: RELATED BUT DIFFERENT

"Mask works" representing the pattern of the various layers used in manufacturing semi-conductor chips are protected by Federal legislation technically falling under the Copyright Act, but different in a number of critical aspects from the scheme of copyright protection.

The owner of a protected mask work has the exclusive right to do, or authorize others to do, three things:

· reproduce the mask work by optical, electronic, or any other means;

· import or distribute a semiconductor chip product in which the mask work is embodied; and

· induce or knowingly cause another person to do any of the acts described above.

As with copyright, protection does not extend to any underlying ideas. In addition, the mask work owner's rights do not prevent others from reproducing the work solely for the purpose of teaching, analyzing, or evaluating the concepts or techniques embodied in the mask work, or the circuitry, logic flow, or organization of components used in the mask work; nor can he prevent anyone who carries out such analysis from using the results of the analysis to create his own original mask work.

Unlike copyrights, registration of claims to ownership in mask works is absolutely required. Registration must be accomplished within two years from the date the mask work is first commercially exploited anywhere in the world. From the date of registration, protection endures for a ten-year term.

Notice of the claim to mask work protection should be given, but, as with copyright, is not required. There are only two elements in a mask work notice: (1) the mask work owner's name, and (2) either of two special mask work symbols: the symbol *M*, or the letter M enclosed within a circle.

Owners of registered mask works may bring suit for infringement of their rights. As with copyrights, the court may impound the infringing products and order cessation of the infringement; may award damages; and may require the infringer to pay the mask work owner's attorneys' fees. Even if the owner has not suffered any actual damages, or has been injured only slightly, the court is authorized to award statutory damages of up to $250,000 per work infringed. Defenses are available to accusations of infringement, including that the alleged infringer engaged in the type of reverse engineering permitted under the Act.

While the Semi-Conductor Chip Protection Act is considerably more complex than this brief overview can set out, it should be clear that companies engaged in any aspect of semi-conductor chip design and manufacture should consult with counsel to maximize their rights, and avoid infringing the rights of others, under the Act.

SUMMARY

Although copyright is the easiest form of intellectual property protection to acquire and maintain (coming into being and continuing to exist under the present laws without any act on the part of the author other than creation of the copyrighted work), ownership rights and analysis of fair use issues can be very complex.

Copyrighted works can be valuable business assets. These assets are not fully protected unless copyright notices are used properly, and claims to copyright are registered.

Businesses entering into contracts with outside consultants should consider who will own resulting copyrightable works, and provide for that in advance, by agreement. Moral rights must also be considered and, where appropriate, expressly waived in writing. Otherwise, purchasers may spend a great deal of money and have less to show for it than they thought they had. Likewise, independent contractors (including independent artists, authors, and others) need to protect their rights when entering into contracts to produce copyrightable works for others. Obtaining United States copyright registrations is in most cases not difficult. The Copyright Office publishes booklets and forms with instructions that provide a great deal of assistance, and there is backup assistance available from the Public Information Specialists. Assistance of copyright counsel should be sought for applications which are not routine, especially in the computer software area and where the work in question is expected to be particularly valuable. Questions involving infringement issues call for legal counsel at the earliest opportunity. Usually, disputes can be settled without lawsuits, but if suit must be brought, substantial remedies are available to the copyright owner.

V. TRADE SECRETS

In the area of Intellectual Property Law, trade secrets are an oddity. Unlike patents, trademarks and copyrights, they were not historically protected by any Federal law. Moreover, there is no procedure for examination, approval, or registration. Just as the name implies, "trade secrets" must be secret.

This does not mean that a trade secret is without legal protection or status. Many states have enacted legislation to define a trade secret and outline the legal remedies for its misappropriation, and the common law also recognizes the right of a business to protect its confidential information. In 1996, additional protection was made available under Federal law: persons who misappropriate trade secrets can now be prosecuted under the Federal criminal statutes.

Provided a business has taken reasonable steps to maintain secrecy, valuable business information will normally be protected. If someone acquires this knowledge through wrongdoing, without authorization from its owner, misappropriation has occurred and the misappropriating person is subject to court action.

NORTH CAROLINA'S STANDARD FOR TRADE SECRECY

North Carolina is among those states which has a law to protect trade secrets. It first defines a trade secret as:

business or technical information, including but not limited to a formula, pattern, program, device, compilation of information, method, technique, or process that:

a. Derives independent actual or potential commercial value from not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure or use; and

b. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The law goes further to state:

The existence of a trade secret shall not be negated merely because the information comprising the trade secret has also been developed, used, or owned independently by more than one person, or licensed to other persons.

As it sounds, the law is fairly broad, potentially covering a wide variety of valuable business information, from lists of customers to formulas for manufacturing the information, as long as the information is intentionally kept secret, is not generally known, and cannot be easily reverse engineered.

If a trade secret is discovered by a competitor without any wrongdoing, there is no legal recourse. If the discovery results from misappropriation, the law offers injunctions to prevent continued use of the information, possible royalty payments to the originator for continued use, and restitutionary or punitive damages.

THE FEDERAL STANDARD FOR TRADE SECRECY

Under the Economic Espionage Act of 1996, theft of trade secrets has become a Federal crime. In order to define what is punished, Congress for the first time provided a Federal definition of "trade secret." In general, the definition is similar to that set out in the North Carolina statute; if anything, it is broader:

The term "trade secret" means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if--

(a) the owner thereof has taken reasonable measures to keep such information secret; and

(b) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public...

The Act defines "theft of trade secrets" as including outright theft of trade secrets, concealment of trade secret information, copying, photographing, uploading or downloading trade secret information, destroying trade secret information, knowingly receiving misappropriated trade secret information, and, in general, otherwise interfering or attempting to interfere with the trade secret owner's exclusive enjoyment of his property.

BENEFITS OF TRADE SECRECY

A trade secret is quick and easy to establish. The process requires no application, examination, or registration. Trade secret protection exists as soon as valuable business information is confidentially developed, and can be maintained by such simple measures as keeping confidential data in a private file or one's head, although it is certainly preferable to take additional measures to ensure confidentiality.

A trade secret can last indefinitely. One example, frequently discussed, is the formula for making Coca Cola syrup. It has been secret since its inception and is said to be still only known by two people. Kentucky Fried Chicken's "secret formula" of spices is another example.

DRAWBACKS

While the owner of a trade secret has the option to enjoin and to obtain a damage award against a misappropriator, there is no protection against one who acquires the information by honest means. Both independent development and reverse engineering (analyzing a lawfully acquired product to discover its secret method of design or manufacture) are permitted under state law, although it remains to be seen whether at least some forms of reverse engineering will now be considered a Federal criminal offense. (The Federal Economic Espionage Act of 1996 includes downloading, uploading, and "replicating" trade secret information within its definition of wrongful conduct.)

A trade secret holder cannot know when the secret will be lost, and once it is lost, it can virtually never become a trade secret again. Trade secrets do not have a fixed or known term like the seventeen years of a patent or ten years of a trademark. In spite of the fascinating history of the Coca Cola formula, statistics have been compiled which indicate that the average trade secret is secure for only about four to five years. This average life will decrease in the future, as technological advances make reverse engineering easier.

WHY KEEP IT SECRET?

Many of the items kept as trade secrets could be the subject of a U.S. Patent. In some cases a patent is not the best way to protect the information. Take, for example, a process for efficiently producing a product, which is currently produced under a traditional, inefficient process. Assume the resulting product will look identical to that produced by the old method. One cannot determine, by examining the product, how it was made. If a patent were obtained, the process would become publicly known, but policing it would be extremely difficult. Maintaining the process as a trade secret, rather than securing patent protection, avoids giving the secret to potential infringers in a situation where infringement would be very difficult to discover or prove.

Another situation in which the trade secret route would make sense is in a market of rapidly changing technology. Some products in today's commercial environment have a life of only a few years before a replacement evolves. Others are mere fads, or novelty items. Since patent applications can take from one to four years to mature into a granted patent, the entire useful life of the item may have passed before a patent could be acquired. To the extent that there is anything "secret" about the production or technology of such items, it may be more economical to rely on trade secrecy for protection, coupled with copyright protection and the use of trademarks wherever possible.

Business plans, customer lists, and financial data are also typically protected by trade secrecy; there is no other viable protection for such information.

MAXIMIZING TRADE SECRET PROTECTION

Because maintaining trade secret protection is entirely dependent on maintaining confidentiality, all reasonable steps which can be taken to maintain and enhance security should be taken. At a minimum, the trade secret owner should acquire and use a "CONFIDENTIAL" stamp or other means of putting "CONFIDENTIAL" notices prominently on documents which are to be kept secret. Employees should be told that they are not to discuss confidential information with anyone except those involved in the work, and not to discuss company business outside the place of employment.

It is safer to have written confidentiality agreements with those who will be exposed to company secrets. Noncompetition agreements may be included in appropriate cases. Advice of counsel should be sought in drafting such agreements, and in obtaining employee signatures. The agreements should be tailored to the specific requirements of the business owner, because the courts generally do not favor restrictions on use of information or on employment, and will invalidate overly broad contracts. In addition, unless the persons who are agreeing to maintain confidentiality receive something in return for their agreement, the contract will be invalid. Counsel with experience in this field can advise, based on the particular circumstances of the business, what types of remuneration are likely to be sufficient.

ENFORCEMENT OF TRADE SECRETS

Lawsuits can be brought in state court to enforce trade secrets and to enforce confidentiality and noncompetition agreements. Suit may also be appropriate in Federal Court in some circumstances, such as when the parties are from different states, or when patent, trademark, Federal unfair competition, or copyright claims are also included. In addition, under the Federal Economic Espionage Act of 1996, the United States Attorney is authorized to bring criminal charges against those who have misappropriated trade secrets.

The disadvantage of litigation is that the defendant normally has a right to know what is alleged to be secret, so that he can prepare a defense. The secret may thus be exposed to a potential direct competitor, as well as to expert witnesses who become involved. Although judges can issue orders that the alleged secret be kept confidential by all parties while the suit is pending, the risk of inadvertent exposure increases as the number of people with knowledge increases. If the suit is lost, the secrecy order will often be lifted, and a competitor has thus probably been given more information than it had to begin with.

Successful litigation, however, can deter employees from setting up competitive businesses based on stolen corporate information; and can enforce ethical business practices by competitors who, without such deterrence, would thrive on stolen data.

Theft of trade secrets is usually coupled with unfair trade practices. As a result, the trade secret owner, if successful, can usually not only recover his actual, provable damages (or the misappropriator's profits), but can also have these damages trebled; or receive an additional award of punitive damages. The defendant may also be required to pay the trade secret owner's attorneys' fees.

In criminal cases, a guilty defendant can be imprisoned up to ten years as well as fined; and corporations can be fined up to $5 million. If the trade secret was stolen for the benefit of a foreign government or foreign instrumentality or agent, then the potential term of imprisonment becomes fifteen years, and the potential fine is also increased ($500,000 for an individual; $10 million for a corporation). The guilty defendant will also forfeit to the United States government any profits earned from use of the trade secret and any property purchased with the money that was earned; and may also forfeit any property that was used in stealing the trade secret (computers or automobiles, for example).

DEFENSES IN TRADE SECRET CASES

Misappropriation of trade secrets is most often alleged against former employees and their new employers. The interests of the defendants are not always identical. The employee is caught in a real bind. He often has little money to defend against a suit, but his future employability may depend on a successful defense. While his new employer may assist, it is often strategically best for the new employer to take the position that even if the employee did take information to which he was not entitled, the data has not been passed on to the new employer, and the new employer is not at fault in any way.

Success in defense of trade secret cases often depends on thorough investigation. It is important to have a clear statement of the material alleged to be trade secret, and then to intensively investigate the extent of public knowledge of that information. Any glitches in the trade secret owner's methods of maintaining confidentiality should be explored. Are outside salesmen taken into areas where the allegedly secret process is being used? Are family members allowed inside the plant? Is confidential data stamped "confidential" and kept in locked file cabinets, or strewn about on desks where anyone could see it? Has the company obtained patents, which of course are public documents, on aspects of the supposedly secret apparatus or method? Have other companies used the same technology, showing that it is "generally known" and thus does not qualify as a trade secret. How easy would it be to compile the same data? If "secret" customer lists are merely a listing of all companies that appear under certain headings in the phone book, or in trade directories such as the Thomas Register, then the same data would be "readily ascertainable through independent development" and does not qualify as trade secret.

Even where a contract was signed, promising confidentiality and noncompetition, it may be invalid. For instance, the trade secret owner may have failed to give adequate compensation for the agreement.

Thus, the mere accusation of trade secret misappropriation, although traumatic, is not grounds for despair. Nonetheless, trade secret litigation is expensive, and should be avoided whenever possible.

SUMMARY

While trade secrecy is an inexpensive form of protection in many ways, maintaining confidentiality requires constant vigilance. Without such vigilance, however, the trade secret and all its value to the company will be lost. Use of confidentiality agreements, "CONFIDENTIAL" stamps, and similar steps will help maintain trade secrecy. If litigation must be brought, consultation with experienced counsel as early as possible will help in planning a strategy to enforce the secrets without unduly risking their disclosure and loss.

VI. POSTSCRIPT

Patents, trademarks, copyrights and trade secrets... Together, they are called Intellectual Property; and together they can be some of the most valuable assets of a business. The wise business owner will review his own company's activities in each of these areas, list possible assets that could be covered by each form of protection, and evaluate their commercial importance to the company. Many forms of protection require minimal expense; and fairly modest expenditures to develop enforceable agreements and forms for routine use can pay significant dividends in enhanced protection. With the assistance of attorneys experienced in Intellectual Property Law, the business owner can develop a realistic plan and budget for acquiring, protecting, marketing and enforcing the company's intellectual property rights. 1This term applies to utility patents based on applications filed on or after June 8, 1995. Patents resulting from earlier-filed applications have a term which varies depending on exactly when they were filed and how long they were in the processing stage. The term can be either seventeen years from the date of issue, or twenty years from the date the application was filed. In some cases, where successive related patent applications have been filed, the date for measuring the start of the twenty-year term may be earlier than the filing date of the current application. If it is important to know the precise expiration date of a patent, an experienced practitioner should be consulted for advice. ??

OLIVE & OLIVE, P.A.

OLIVE & OLIVE, P.A. INTELLECTUAL PROPERTY LAW

500 MEMORIAL STREET P. O. BOX 2049 DURHAM, NORTH CAROLINA 27702

PHONE: (919) 683-5514

This work is Copyright © by Olive & Olive, P.A. 1997.

The complete work may be copied and distributed, provided no changes are made, including the cover and copyright notices; provided the recipients are not charged for the copies; and provided the firm is notified of the reproduction.

Requests for reproduction on any other terms should be addressed to Olive & Olive, P.A. 500 Memorial Street Post Office Box 2049 Durham, North Carolina 27702

We suggest you may wish to contact the firm before making multiple copies in any event, to find out whether the manuscript has been updated.