Chapter 45

Intellectual Property and Licensing

 

45.1.       Introduction

 

In today’s electronic world, it has become easier to make use of materials (including software and writings) created by other people, but this doesn’t make it legal or ethical to do so.  This general subject is commonly referred to as intellectual property.  This chapter is concerned with intellectual property and its protection.

 

45.2.       What Does Intellectual Property Include?

 

Intellectual property is usually intangible; its values results from its appeal to others who wish to use it or what it describes.  There are five different forms of intellectual property as shown in Figure 45-1; they are: (1) copyrights, (2) patents, (3) trademarks, (4) trade secrets, and (5) mask works.  Intellectual property examples include, but are not limited to: (1) works of authorship including software covered by copyrights, (2) inventions covered by patent protection, (3) electronic circuit layouts covered by trade masks, (4) reserved names, slogans, and logos covered by trademarks, (5) formulas and recipes covered by trade secrets, and (6) proprietary materials such as biological materials with potential commercial value.  Patents are used to protect inventions and offer the most protection. Trade secret laws are intended to provide protection of cover the “know how” to do something.  Copyright laws are intended to protect the works of authors and artists.  Trademarks laws are intended to protect product and company identification.

 

 


45.3.       Copyrights

 

A copyright is used to protect the expression of ideas of a creative endeavor including writing and artistic items whether published or unpublished, against copying.  Some of the items covered and not covered by copyrights are shown in Table 45-1.

 

 

Table 45-1. Examples of items covered and not covered by copyrights

 

Examples covered:

1.      Literary works

2.      Dramatic works

3.      Musical works (both music and lyrics)

4.      Software and computer programs

5.      Video and audio recordings

 

Examples not covered:

1.      Titles, names, short phrases, and slogans

2.      Ideas, procedures, methods, systems, processes, concepts, principles,

      Discoveries, and devices

3.      Information that is common knowledge or common property

4.      Materials that contain no original authorship

 

 

Copyrights merely prevent a person from copying any of the above items, but not from making the article described or using the process described.  Copyrights are different from other forms of intellectual property in that the copyright becomes effective the instant the material is created.  In general, the copyright becomes effective when copies of the work are distributed or offered to be distributed (published) to the public by sale, other transfer of ownership, rental, lease, or lending.  A public performance, including radio or television, or a public display is not considered a publication since it does not change hands.

 

Copyrights are issued only by the U.S. Copyright Office, which is a part of the Library of Congress.  To be eligible for a copyright, the material must be original and in a fixed format (i.e., written, recorded).  A copyright does not need to be registered to be valid, but greater remedies are available to those that are registered.  Before March 1, 1989 a copyright notice (see Figure 45-2) was mandatory on all published works.  Since that date, the copyright notice is optional, but highly recommended.  

 

Only the original author or those deriving their rights through the author are eligible to copyright an item.  Unless an employee has previously and formally waived his/her rights (such as a condition for employment), he/she, and not the employer, is considered the author of the item.  A copyright allows the original, exclusive owner to do any of the items shown in Table 45-2.

 

 

 

Table 45-2. Copyright owner’s rights

 

1.      To reproduce the work

2.      To prepare derivative works based on the original work

3.      To distribute copies of the work

4.      To perform or display the work publicly

 

 

The life of a copyright is a lengthier topic.  For materials created before January 1, 1978, but not published or registered by that date, the copyright lasts until the last surviving author’s death plus fifty years if the work was not done for hire.  For works done for hire, the copyright lasts for the shorter of seventy-five years from publication or 100 years from creation.  For anonymous or pseudonymous (unless the author’s identify is revealed in Copyright Office records), the same test is applied.  In no case will the copyright expire before December 31, 2002.  For work published on or before December 31, 2002, the copyright will not expire before December 31, 2027

 

For materials created after January 1, 1978, the copyright lasts until the last surviving author’s death plus fifty years if the work was not done for hire.  For materials made for hire, the copyright lasts for the shorter of 75 years from publication or 100 years from creation. The same is true for anonymous or pseudonymous (unless the author’s identify is revealed in Copyright Office records).

 

A copyright may be transferred by an exclusive transfer of rights that are contained in a written, signed document.  It also may be transferred by a non-exclusive transfer of rights, which does not require a written document.  Finally, a copyright may be transferred by the execution of a will.

 


45.4.       History of Copyright

 

The basis of copyright law began in England in 1710 when the Statute of Anne was enacted by the British Parliament.  The United States Congress first passed its first copyright law in the Copyright Act of 1790, which subsequent Congresses have revised in 1831, 1870, 1909 and 1970.  The Berne Convention provide for mutual recognition of copyrights among different nations.  The first Berne Convention was held in 1886 and the results have been revised five times (1908, 1928, 1948, 1971, and 1988).  The United States, as a result of international political pressure, joined in 1988.  It is one of 96 countries that joined the Berne Convention.  All World Trade Organization (WTO) members agreed in 1996 to abide by the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement.  Some of the other major copyright legislation and activities in the United States are listed in Table 45-3.

 

45.5.       Patents

 

A patent is a grant of a property right by the U.S. government to the inventor to exclude others from making, selling, or using the item or process that is patented.  Patents may cover a new and useful machine, process, manufacture, or composition of matter.  It is granted for seventeen years except for design patents, which are for a period of fourteen years.  After the patent has expired, all rights are lost.  Patents are issued by the U.S. Patent and Trademarks Office.

 

Three different types of patents exist as shown in Table 45-4.  Typical coverage for the utility patent includes a new and useful process or method, chemical compositions of matter, and any new or useful improvement thereof.  Design patents cover new, original and ornamental designs for an article of manufacture.  Plant patents cover new varieties of plants including cultivated sports, mutants, hybrids, and seedlings.

 

Only the original inventor may apply for and receive the patent.  After receiving the patent, the patent owner may sell all or part of the ownership to a second party.  Often one sees the phase “patent pending” or “patent applied for” on an object.  This means that an application for a patent has been file by the manufacturer or seller of the item.  In this case, the patent law and any fines for false use may be enforced until the patent application is approved and a patent number issued or the application is rejected.  Once a patent number has been received, it is common practice to the words “U. S. Patent” followed by the applicable patent number(s) on the product.

 

In order to obtain a patent, a patent search must be made and an application must be made to the Commissioner of Patents and Trademarks.  The patent application must include a specification including a detailed description and associated claims of capability.  The application also includes an oath or declaration concerning the originality of the item.  Drawings are to be included where needed or necessary.  There are some formal requirements for obtaining a patent. The item must be new (other people cannot have used it or known about it before its invention.)  The patent must be applied for within twelve months of any public knowledge.  The item being patented must be non-obvious.  Thus, it cannot be evident to another person skilled in the same field as the inventor.  Finally, the item is supposed to be used, but it doesn’t always happen (i.e., http://www.patent.freeserve.co.uk.)  The application must be accompanied by the appropriate fee. 

 

 

Table 45-3. Other significant copyright activities

 

Date

Item or Activity

1841

Folsom vs. Marsh

1973

Williams and Wilkins vs. National Library of Medicine

1976

Classroom Guidelines

1976

National Commission on New Technological Uses of Copyrighted

 

Works Guidelines

1983

Encyclopedia Britannica vs. Crooks

1986

Maxtone-Graham vs. Burtchaell

1987

Salinger vs. Random House

1990

Circulation of computer Software

1991

Immunity of State Governments

1991

Basic Books vs. Kinko’s Graphics Corporation

1991

Feist Publications vs. rural Telephone Service Company, Inc.

1992

American Geophysical Union vs. Texaco

1992

Amendment to Section 304 of Title 17

1993

Playboy Enterprises, Inc. vs. Frena

1993

National Information Infrastructure Initiative

1994

Campbell vs. Acuff-Rose Music, Inc.

1995

Religious Technology Venter vs.  Netcom

1996

Princeton University vs. Michigan document services, Inc.

1996

Database Protection Legislation

1997

No Electronic Theft Act

1998

Sonny Bono Copyright Extension Act

1998

Digital Millennium Copyright Act

 

 

 

Table 45-4. Types of patents

 

1.      Utility patent

2.      Design patent

3.      Plant patent

 

 

Generally, a patent attorney is needed.  Most patent attorneys have both an engineering degree and a law degree.  Thus, these attorneys make big money.  The typical cost of a U.S. patent is approximately $12,000 to $15,000.  A U.S. patent only covers and protects the own within the United States.  Foreign patent coverage may cost in excess of $100,000.

 

Once a patent is issued, copies of the patent including the materials included in the patent application are available to anyone who request a copy and pays the copy fee.  This means that the original inventor must rely on the legal system to protect his invention.

 

Certain technologies rely heavily on patent protection.  A portion of the medical drug industry is a good example.  Developing new drug is very expensive.  Drug companies are divided into two groups: (1) those companies that develop new drugs and (2) those companies that produce drugs on which the patents have expired.  Because new drugs are often very expensive to develop, drug companies could not afford to do the research and development necessary without patent protection to recover their initial costs.  It has been reported that International Business Machines, better know as IBM, owns more U.S. patents that any other company.

 

45.6.       Trademarks

 

A trademark is a word, phrase, symbol, or combination thereof, which identifies and distinguishes the source of goods or services from one party to goods or services from other parties.  “Coke” and the Nike symbol are two of the best known trademarks.  Trademarks are used to protect businesses, product or service names, slogans, and logos.  A trademark differs from other forms of intellectual property.  Remember that a copyright protects an artistic or literary work while a patent protect an invention.  A trademark protects an identifier whose financial value may be quite large. 

 

Trademarks are established by actual use of the trademark and by filing an application to the U.S. Patent and Trademark Office.  U.S. trademark registrations are valid for ten years if properly documented.  Between the fifth and sixth years of the original registration, an affidavit must be file that contains certain information in order to maintain the registration; otherwise it is cancelled.  The trademark can be renewed indefinitely under the appropriate conditions.  Servicemarks are similar to trademarks, but are used for services.  For the U.S. Patent and Trademark office to register a trademark, it must meet the following conditions: (1) it must be used in multiple states, (2) it must be associated with a unique goods or services, and (3) it must be sufficient different from other trademarks that it will not be confused.  Violation of trademark rights also may result in large fines and a court order to cease using the offending trademark.

 

There are three different types of trademark applications.  These include: (1) an already in-use application, (2) an intent-to-use application, and (3) an international application if the appropriate international agreement exists (non-U.S. applicants must have a domestic representative.)

 

Two types of rights are associated with trademarks.  The first type of right is the right to register.  This right goes to the first party to use the trademark in commerce or to file an application for a trademark.  The second type of right is the right to use the trademark.  If a possible trademark encroachment occurs, a legal court will make the decision including rights, infringements, and any damages.

 

45.7.       Trade Secrets

 

Trade secrets are information that would provide competitor an unfair, competitive advantage.  The economic value of the trade secret is lost forever once it becomes known.  The list of trade secrets is virtually endless; a few examples are shown in Table 45-5.

 

 

Table 45-5. Trade secret examples

 

Blueprints

Models

Business plans

New product plans

Computer source codes

Processes

Customer lists

Quality control data

Design reports

Receipts

Drawings

Research results

Formulas

Sales forecasts

Manufacturing techniques

Supplier lists

Measurements

Test results

 

 

Trade secrets involve a balance between the employer’s right to protect its products and its operation and its employees’ right to pursue their own careers and livelihood.  Sometimes an employee is required not to go to work for any of an employer’s competitors for a specified period of time (i.e., five years) after resigning from or being terminated by the employer.  This same condition is often a part of one company buying a second company and the owners of the first company don’t want the previous owners of the second company to again become competitor in a short period of time.  From an ethical point-of-view, a company should not hire key personnel from its competitors without their knowledge and permission.  However, these ethics are not always employed.  The court system usually attempts to employ common sense in cases involving trade secrets.  The system needs to separate basic industry knowledge and common business sense from company specific knowledge and procedures.

 

Many different types of current and former employees may divulge trade secrets; examples include: (1) disgruntled employees, (2) uniformed employees, and (3) employees seeking career advancement.  It is often difficult to determine what qualifies as a trade secret and what doesn’t qualify.  The federal government doesn’t have an office of trade secrets where a company files an application and receives a certificate of trade secret.  In fact, the more people that know about the information, the less likely the courts are to consider it as a trade secret.  The rule-of-thumb is to disclose only on a “need to know” basis.

 

Trade secret audits occasionally have been recommended, generally after-the-fact.  These audits are expensive and, therefore, not commonly used.  Further, they are only good at a specific point in time and rapidly become out dated.  Employee education is usually the best method to prevent the loss of trade secrets.  This education should include not only what is important, but how it may accidentally be divulged.  Critical information can be lost simply by employees talking as they pass through the company’s main lobby or a slip of the tongue at a conference or trade show.

 

A six-factor test has been established by the law to help identify trade secret information.  This test (http://www.thetso.com/Info/sorry.html) is summarized in Table 45-6.  By looking at these six factors, it should be apparent that the more common knowledge of the information is, both inside and outside the company, the less likely it is to be considered a trade secret. The value of the information and the expensive to obtain the information also are considerations.  Two of the most famous trade secrets are the formula for Coca Cola and the spices used in KFC’s chicken recipes.

 

 

Table 45-6. Factors in considering trade secret cases

 

1.      The extent to which the information is known outside the company

2.      The extent to which the information is known within the company

3.      The extent of the measures taken to protect the secrecy of the information

4.      The values of the information to the company and its competitors

5.      The amount of time, money, and effort spent developing the information

6.      The easy or difficulty with which the information could be duplicated or acquired

 

 

45.8.       Mask Works

 

Masks are used in the semiconductor industry to produce/reproduce both printed circuit boards and semiconductor chips.  Mask works refers to series of related images used to create the aforementioned items.  Obviously, these mask works are extremely valuable.  Mask works can be protected by registering them with the U.S. Copyright Office.  To register a mask work with the U.S. Copyright Office, the owner of mask work must be either a U.S. citizen or company or from a country that a treaty with the United States regarding the protection of mask works.  The mask work has to be first commercially used in the United States.

 

45.9.       Myths About Intellectual Property

 

There are a number of myths about intellectual property.  Some of these myths are described in this section.  Rather than list several of these myths, actual facts will be given.  Intellectual property is a relatively recent concept (the first patents were assigned in 1623 and copyrights were first recognized in 1710).  Protection of intellectual property rights only exists in the countries that have laws and treaties with other countries governing the use of intellectual properties.  Obviously, many inventions and literary/artistic works were completed before intellectual property rights were created.  Laws regarding intellectual property were enacted to project the developer.  The net value of intellectual property today probably would approach a major portion of the world’s assets.  Intellectual property in itself is not a reason to produce originals works. Original works are created to makes one’s life easier, to gain fame, and to make money.   The concept of intellectual property does nothing to improve the quality of the product or service, nor is it required to cause creation.  Profit could still be made without the concept of intellectual property.  Intellectual property is not based on physical property, since physical property can only be in one location at a time.

 

There is a second set of myths that are less abstract and more concrete.  Once again, facts will be stated as opposed to the myths.  Even though a document doesn’t have a copyright on it, doesn’t mean it is public domain material.  Only those documents that specifically state that they are public domain can be freely copied and distributed, regardless of whether one is considering hard copies or electronic copies.  Electronic materials, the Internet for example, is no different from other published materials.  Receiving a document by email does not mean the document is public domain or that it can be posted to the Internet.  While copying small portions of a larger document is allowed, the word “small” is undefined. In at least one instance copying 0.15% of a document was legally decided to be a copyright infringement.  Acknowledging the original author doesn’t eliminate possible copyright infringement.  Remember that copyrights protect the concept as well as the actual words.  Copyright infringement can copy one a significant amount of money along with public embarrassment.

 

45.10.   Non-Disclosure Agreements

 

Non-disclosure agreements are used between two parties when one of the parties is concerned about certain information not being made available to third parties, particularly competitors.   There are several situations when this might occur.  Some examples are shown in Table 45-7.

 

There are several examples of non-disclosure agreements available on the Internet.  Certain information is common in most of these agreements and it includes the information shown in Table 45-8.  Except in the simplest of cases, non-disclosure agreements should be specifically written for the specific circumstances.

 

Non-disclosure agreements may include a financial penalty that the recipient agrees to pay if the information is made available to any third parties accidentally or intentionally.   The amount may be very significant depending on the value of the information.


 

 

Table 45-7. Examples of reasons for non-disclosure agreements

 

1.      A company has an idea for a new product or service, but needs technical help

      in evaluating a portion of the project or advice on how to proceed.

2.      A company wants to submit a proposal in response to a request for proposals

      (RFP) and needs help in either producing the proposal or conducting a portion

      of the work should it win the contract.

3.      A person or a company wishes to sell a product or a company to an outsider

     and must make certain information available to the buyer.  The seller doesn’t

     want the potential buyer to further disclose the information or to use the

     information if the sale is not completed.

4.      A person or a group of people has an idea for which venture capital is needed.

      If a suitable arrangement is not made, there is concern that the venture

      capitalist might develop the idea independently.

5.      A company needs an outside company to act as a subcontractor. The

      subcontractor needs certain proprietary information to make a cost estimate.

 

 

 

Table 45-8. Typical non-disclosure agreement content

 

1.      Name of the company or person supplying the information.

2.      Name of the company or person receiving the information.

3.      Date of the agreement.

4.      Description of the activity involved.

5.      Period of confidentiality.

6.      Description of the information to be provided.

7.      Disposition of the information after use (returned, destroyed, etc.)

8.      Signature of the person supplying the information and receiving the agreement.

9.      Signature of the person receiving the information and agreeing to the non-

      disclosure

10. Title and contact information for the person receiving the information.

 

 

45.11.   Summary

 

There is a tremendous amount of information on the Internet regarding intellectual property and non-disclosure agreements.  These are topics with which you should not only be familiar, but ones with which you observe the rules.  Remember this the next time that you are tempted to go the copy machine, to use something off of the Internet, or to use an illegal copy of software.