In the previous posts in the Ideas and the Law Series I addressed the challenges people face protecting ideas once they have been disclosed to third parties. As noted earlier in the series, while the underlying ideas may be available for others to interpret, the way in which you manifest the ideas may be subject to copyright and patent protection. The final installment in the series looks at the roles trademark and trade secrets play.
Trademarks are classified as intellectual property because they are intangible. However trademark law is at its roots consumer protection law. The purpose of trademark law is to prevent consumers from being confused as to the source of goods and services. Marks are the words, logos, and designs that identify the source of goods and services: trademarks identify goods and service marks identify services. While trademark law has its roots in consumer protection, trademarks are now valuable corporate assets.
To qualify for trademark protection, a mark must be distinctive to identify the source of goods and services. The strongest marks are those that are arbitrary and unique (e.g. ACCORD for a car). Weaker marks are those that are descriptive and require secondary meaning to acquire distinctiveness over time, or through investment (e.g. a surname or geographic term). The weakest marks are generic marks where the mark is synonymous with the goods and services to which it applies.
In the United States, certain trademark rights attach automatically to the marks as a result of use in commerce. Fundamentally, under state law, users of a mark may prevent third parties from using the same or similar marks in a manner that could confuse consumers. The degree to which a user of a mark may enforce an unregistered mark depends on a number of factors which differ from state to state.
However, to obtain the greatest amount of protection available for a mark in the United States a mark should be registered with the United States Patent and Trademark Office. A registered trademark has additional rights and benefits otherwise unavailable to trademarks. The owner of a registered trademark has:
The ability to enforce the marks on a national basis;
Access to federal courts for enforcement and statutory damages for infringement
The legal right use of the ® symbol
Recording the mark with US Customs to prevent the importation of counterfeit goods
To obtain a federal registration for a mark, it must meet certain criteria. A mark will not qualify for trademark protection if it is generic. Additionally, a mark that is geographic in nature, primarily a surname or is otherwise merely descriptive may not qualify for trademark protection unless it has become distinctive. Significantly, the mark must not be confusingly similar to other registered marks, or marks pending review.
Trademark rights stem from use in the United States. In the rest of the world, a mark may be registered and protected even if it has not been used in commerce. To be in harmony with the rest of the world, the United States allows users to file applications for registration of a mark that is not yet in use but for which the applicant has a bona fide good faith intent to use within a specific period of time. The USPTO processes “Intent to Use” applications in the same manner as for those in use.
Common law trademark rights are enforceable as long as a mark is used in commerce. A registration with the USPTO is valid for ten years, and may be renewed for ten year terms indefinitely as long as the mark remains in use.
In other countries the first to file a trademark application has priority over other users, even those who have been using the mark. In the United States, a senior user will have priority over a junior user, even if the junior user has the registered mark. However, in other countries the owners of a registered mark will have priority over another user even if the registered mark is not being used in commerce. Therefore, companies launching products or services with the intent to distribute, or manufacture, outside of the United States need to implement a global strategy for trademark registration.
Strategic Practices:
1) Choose marks that are distinctive to identify the goods and services your company offers;
2) Search the USPTO database, and online resources, to determine if there are any marks in use, registered, or pending registration, that are confusingly similar to your mark; and
3) Pursue trademark registration in the countries in which your products will be sold, or manufactured.
Trade Secrets
Trade Secrets are an often overlooked, but incredibly valuable, form of intellectual property. From the original Coca Cola recipe to processes within Wal-Mart and Amazon, some of the most valuable corporate assets are trade secrets. State laws govern what qualifies as a trade secret, and how to protect them.
Nearly every state has adopted the Uniform Trade Secrets Act which defines a trade secret as “information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” However, what qualifies as protectable “information” differs from state to state.
To claim that information is subject to Trade Secret protection “reasonable efforts” to keep the information secret. There are no absolute guidelines as to what qualifies as a “reasonable effort” to maintain secrecy. In addition to limiting access to information to employees and others on a need-to-know basis, companies should implement a comprehensive program to maintain secrecy. The program should be adapted to meet the company’s specific needs but should include marking materials and documents confidential, locking files and doors, requiring passwords for computer access, obtaining non-disclosure and confidentiality agreements from employees, contractors and others.
Strategic Practices:
1) Identify the elements of your business that are unique and keep them secret;
2) Create and implement a “Trade Secret Policy;”
3) Notify recipients of information that the information is secret.
Conclusion
Sharing ideas is an important element of the startup ecosystem. The most common way to protect ideas when discussing business opportunities is to execute Confidentiality and Non-Disclosure Agreements. However, they are not always the best option, and sometimes are not available. Regardless, a Confidentiality and Non-Disclosure Agreement is only as good as the paper on which it written and the person across the table.
Therefore, founders, inventors and creators should implement an intellectual property strategy from the outset. Each form of intellectual property provides different benefits which when combined create the best opportunity to protect the idea which serves as the basis for companies.
