Intellectual Property (West's Encyclopedia of American Law)
Intangible rights protecting the products of human intelligence and creation, such as copyrightable works, patented inventions, TRADEMARKS, and trade secrets. Although largely governed by federal law, state law also governs some aspects of intellectual property.
Intellectual property describes a wide variety of property created by musicians, authors, artists, and inventors. The law of intellectual property typically encompasses the areas of COPYRIGHT, PATENTS, and trademark law. It is intended largely to encourage the development of art, science, and information by granting certain property rights to all artists, which include inventors in the arts and the sciences. These rights allow artists to protect themselves from infringement, or the unauthorized use and misuse of their creations. Trademarks and service marks protect distinguishing features (such as names or package designs) that are associated with particular products or services and that indicate commercial source.
Copyright laws have roots in eighteenth-century ENGLISH LAW. Comprehensive patent laws can be traced to seventeenth-century England, and they have been a part of U.S. law since the colonial period. The copyright and patent concepts were...
(The entire section is 3346 words.)
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Intellectual Property (Encyclopedia of Small Business)
Intellectual property is an intangible creation of the human mind, usually expressed or translated into a tangible form, that is assigned certain rights of property. Examples of intellectual property include an author's copyright on a book or article, a distinctive logo design representing a soft drink company and its products, unique design elements of a web site, or a patent on the process to manufacture chewing gum. Intellectual property law covers the protection of copyrights, patents, trademarks, and trade secrets, as well as other legal areas, such as unfair competition. In effect, intellectual property laws give the creator of a new and unique product or idea a temporary monopoly on its use. The value of intellectual property to an individual or company is not based on physical properties, such as size and structure. Instead, intellectual property is valuable because it represents ownership and an exclusive right to use, manufacture, reproduce, or promote a unique creation or idea. In this way, it is perhaps the most valuable asset a person or small business can own.
DEVELOPMENT OF INTELLECTUAL PROPERTY LAWS
The laws protecting intellectual property in the United States exist at both the state and federal levels. State laws cover a broad spectrum of intellectual property fields, from trade secrets to the right of publicity. The laws differ somewhat from state to state. At the federal level, the Constitution and legislation authorized under the Constitution deal exclusively with patents and copyrights, and partially with trademarks and related areas of unfair competition.
Intellectual property protection first became an important issue at an international level during trade and tariff negotiations in the nineteenth century, and has remained so ever since. One of the first international treaties relating to intellectual property in the broadest sense was the International Convention for the Protection of Industrial Property, or the Paris Convention. Written in 1883, the treaty created under the Paris Convention provided protection for such properties as patents, industrial models and designs, trademarks, and trade names. Over 100 countries have signed the Paris Convention treaty, and it has been modified several times. Two of the most important provisions of the treaty relate to the rights of national treatment and priority.
The right of national treatment ensures that those individuals seeking a patent or trademark in a foreign country will not be discriminated against and will receive the same rights as a citizen of that country. The right of priority provides an inventor one year from the date of filing a patent application in his or her home country (six months for a trademark or design application) to file an application in a foreign country. The legal, effective date of application in the foreign country is then retroactively the legal, effective filing date in the home country, provided the application is made within the protection period. If the invention is made public prior to filing the home country application, however, the right of priority in a foreign country is no longer applicable.
Enforcement and protection of intellectual property at the international level has historically been extremely complex. Laws have varied significantly from country to country, and the political climate within each country has influenced the extent of protection available. Separate legislation and treaties specifically addressed relevant procedures, conventions, and standards for each area within the scope of intellectual property, such as copyright or trade secrets.
Many U.S. and international laws relating to intellectual property were significantly altered with the 1994 passage of the General Agreement on Tariffs and Trade (GATT). In fact, the member nations that signed the GATT committed themselves to a higher degree of intellectual property protection than had been provided under any earlier multinational treaties. Under the guidance of the World Trade Organization (WTO), all member nations were required to adopt specific provisions for the enforcement of rights and settlement of disputes relating to intellectual property. Under these provisions, trademark counterfeiting and commercial copyright piracy are subject to criminal penalties.
Today, the strong protections of intellectual property are recognized as one of the cornerstones of the formation and growth of small businesses in the United States, especially since the advent of the Internet and other new technologies have placed a premium on new ideas and innovations. Intellectual property allows individuals who come up with a new idea to enjoy the exclusive use of that idea for a certain period of time, which can be a significant monetary incentive for entrepreneurs. But intellectual property law is extraordinarily complex, so small business owners interested in IP issues should consult a legal expert in order to protect themselves to the full extent of the law. "The law on intellectual property is everywhere both comparatively new and in flux, " observed The Economist (US). It is also important for would-be entrepreneurs to be aware of the legal rights of others as they prepare to engage in business activities. After all, few small companies can withstand the rigors of defending themselves from patent infringement lawsuits (especially if the charge is legitimate).
Epstein, Eve. "What Is Intellectual Property?" Info World. June 19, 2000.
Foster, Frank H., and Robert L. Shook. Patents, Copyrights & Trademarks. Wiley, 1993.
Gartman, John, and Kevin McNeely. "A Summary Checklist for Dealing with Intellectual Property." Providence Business News. June 26, 2000.
Lickson, Charles P. A Legal Guide for Small Business. Crisp Publications, 1994.
"Markets for Ideas: Rights in Intellectual Property." The Economist (US). April 14, 2001.
McCarthy, J. Thomas. McCarthy's Desk Encyclopedia of Intellectual Property. Bureau of National Affairs, 1991.
Miller, Arthur R., and Michael H. Davis. Intellectual Property: Patents, Trademarks, and Copyright in a Nutshell. West, 1990.
Prencipe, Loretta W. "Intellectual Property Due Diligence." Info World. October 30, 2000.
"Protecting Intellectual Property: An Introductory Guide for U.S. Businesses on Protecting Intellectual Property Abroad." Business America. July 1991.
Tabalujan, Benny. "Keeping the Fruits of Your Intellectual Pursuit to Yourself." Business Times. July 1993.
SEE ALSO: Inventions and Patents; Work for Hire
Copyright (Encyclopedia of Everyday Law)
Definition of Copyright
A COPYRIGHT is an intangible right granted by STATUTE to the originator of certain literary or artistic productions, including authors, artists, musicians, composers, and publishers, among others. For a limited period copyright owners are given the exclusive privilege to produce, copy, and distribute their creative works for publication or sale.
Copyright is distinct from other forms of legal protection granted to originators of creative works such as PATENTS, which give inventors exclusive rights over use of their inventions, and TRADEMARKS, which give businesses exclusive rights over words, symbols, and other devices affixed to goods for the purpose of signifying their authenticity to the public. All three types of legal protection comprise an area of law known as intellectual property.
History of Copyright
U. S. copyright law is an outgrowth of English COMMON LAW. When the printing press was created in the fifteenth century, rights were at first granted to printers rather than to authors. The English Common law protected printers' intellectual property rights until 1710, when Parliament passed the Statute of Anne, which conferred upon authors the right to control reproduction of their works after they were published. The right lasted for 28 years, after which an author's work was said to enter the PUBLIC DOMAIN, meaning that anyone could print or distribute the work without obtaining the author's permission or paying the author a royalty for the right to distribute it.
By the late eighteenth century, protecting intellectual property interests was considered an important means of advancing the PUBLIC INTEREST in both Great Britain and the United States. Granting a MONOPOLY to the originator of a creative work provided incentive for authors and inventors to make things the public found valuable enough to buy for personal, commercial, and governmental uses. The PATENT and Copyright Clause, contained in Article I, Section 8, Clause 8 of the U. S. Constitution, recognized the growing importance of protecting intellectual property interests. It empowers Congress to "promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors exclusive Right to their respective Writings and Discoveries."
Congress passed the first copyright statute in 1790 and has substantially revised it five times: in 1831, 1870, 1909, 1976, and 1998. In 1831 musical compositions were granted copyright protection over objections made by opponents who claimed that the such works did not fall within the Constitution's definition of a "writing." In 1870 Congress granted copyright protection to paintings, statues, and other works of fine art. In 1909 copyright owners were given the right to renew a copyright for 28 years beyond the initial 28-year term established by the first statute.
In 1976 Congress brought unpublished works within the ambit of federal copyright law. Prior to 1976, unpublished works were only afforded protection by state common law. The protection was perpetual in nature, meaning that authors could prevent others from copying their works during their lifetimes, and then pass this right on to their heirs. However, once an authorized person published a work, the common law copyright was extinguished, and the only protection afforded was by federal statute. The 1976 act abolished nearly every significant aspect of common law copyright, creating a unified system for both published and unpublished works (see 17 U.S.C.A. section 102[a]). The 1976 act also made U. S. copyright law conform more to international standards, particularly with regard to the duration of copyright protection and the formalities of copyright registration.
In 1998 Congress passed the Digital Millennium Copyright Act (DMCA) to address a number of concerns relating to copyright INFRINGEMENT in the computer age. The DMCA limited the liability of Internet service providers (ISPs) for copyright infringement by Internet content providers, enabled Internet content providers to require immediate removal of infringing material, and made it illegal to circumvent encryption technologies designed to protect copyrighted works from unauthorized APPROPRIATION. Legal observers expect more intellectual property legislation to follow in the new millennium.
What is Copyrightable
Applicants seeking copyright protection for their works must establish that the works are original and have been reduced to "tangible medium of expression." (see 17 U.S.C.A section 102[a]). The phrase, "tangible medium of expression," means that the work must be reduced to some concrete form, as when something is written on a piece of paper, recorded on an audiotape, captured on a videotape, or stored on a computer disk or hard drive.
"Originality" does not mean "novelty" for the purposes of copyright law. It simply means that the work in question is the work of the person seeking copyright protection and not the creation of a third-party from whom the work was copied. The law allows for old works to be recreated with new themes or characters, adapted to new settings, or updated with fresh data so long as the new variation is something more than trivial and reflects the creator's contribution. However, courts will not sit in judgment of a work's artistic merits or aesthetic qualities.
What is not Copyrightable
Copyright protects the expression of an idea but not the idea itself. Concepts, plots, procedures, processes, systems, methods of operation, principles, and discoveries are thus not copyrightable until they have been reduced to some TANGIBLE form, no matter how original they might be. Nor is everything that has been reduced to a tangible form eligible for copyright protection. Words, phrases, slogans, blank forms, phone listings, and standard calendars will not receive copyright protection without proof that the originator contributed something new to the work. However, a reproduction of an original copyrighted work constitutes a violation of copyright law. Thus, one commercial entity may not simply reproduce another entity's phone directory without running afoul of copyright law. But each entity is free to gather the same facts and arrange them in nearly the same manner, so long as both entities invest some original labor.
Registration, Deposit, and Notice
Registration of copyright requires applicants to record the existence of authored works and the identity of their authors with the Copyright Office in the Library of Congress. Copyright deposit involves placing the work in its written, recorded, or other physical form with the same office. Notice of copyright means marking the authored work with the word "Copyright," the abbreviation "Copr.," or the letter "C" in a circle, along with the year of first publication and the name of the copyright owner.
For nearly two centuries after the U. S. Constitution was ratified by the states, several major copyright acts required that applicants register and deposit their works with a federal district court or the Library of Congress before a copyright could be enforceable. The Copyright Act of 1976 eliminated these requirements, giving authors exclusive federal copyright protection from the moment they reduce their work to a tangible medium of expression.
Nonetheless, registration, deposit, and notice still have significant legal and practical consequences. Copyright owners may not sue for infringement unless they have first registered the copyright (see 17 U.S.C.A sections 411, 412). Although deposit is not a pre-condition to bringing a suit for infringement, federal law requires that two copies of a published work be deposited within three months of publication, and failure to deposit a copy after it has been demanded by the Copyright Office is a criminal offense punishable by a fine. Notice provides immediate warning that a work is protected by copyright and may help stave off legal disputes with potential infringers.
The author of an original work is the copyright owner, except in the case of a "work for hire." A work for hire can arise in two situations: (1) when an employee creates a work within the scope of his or her employment; (2) when two parties enter a written agreement designating the work as a work for hire and the work falls within certain categories designated by copyright law. If a work qualifies as a work for hire, the employer owns the copyright and enjoys the same rights of copyright ownership as if the employer had created the work itself. If a work does not qualify as a work for hire, then the employee who authored the work retains copyright ownership and transfer of the copyright can only be accomplished through a written assignment of copyright.
Attributes of Ownership
Copyright affords an author of an original work five exclusive rights: (1) to reproduce or copy the work; (2) to prepare new works that derive from the copyrighted work; (3) to distribute the work to the public by sale or other arrangement; (4) to perform the work publicly; and (5) to display the work publicly. The last three rights are infringed only when violated publicly, that is, before a "substantial number of persons" outside family and friends (see 17 U.S.C.A section 101). The first two rights are infringed whether violated in public or in private. In general, copyright of popular works can be extremely lucrative for the owner, since it includes the right to any profits from dramatizations, abridgements, and translations. It also includes the right to sell, license, or transfer one or more of the exclusive rights afforded by copyright law.
Duration of Ownership
Protection from copyright infringement for works created after 1977 extends throughout the life of the author who created the original work, plus fifty years after the author's death (see 17 U.S.C.A. section 302[a]). When an original work is joint-authored, the copyright expires fifty years after the death of the last surviving author. Copyright is considered PERSONAL PROPERTY that may be transferred to the author's heirs upon his or her death. For works created prior to 1977, the duration of ownership depends upon the law that was in effect at the time a work was created. In many cases, original works were protected for only 28 years and have long since passed into the public domain, unprotected by U. S. copyright law.
Definition of Infringement
Copyright infringement is the violation of any exclusive right held by the copyright owner. Infringement may be intentional or unintentional. Often called "innocent infringement," unintentional infringement occurs when an author creates an ostensibly new work that later proves to be a mere reproduction of an existing work, though the author was unaware of the identity between the two at the time the copy was made. For example, former Beatle musician George Harrison was guilty of innocent infringement when he released the song "My Sweet Lord," which a court found was the same song as the Chiffons' "He's So Fine," only with different words. The court said that Harrison had "subconsciously" borrowed the Chiffons' unique motif (see Bright Tunes Music Corp. v. Harrisongs Music, Ltd., 420 F.Supp. 177 [S.D.N.Y. 1976]).
Defense to Infringement: Fair Use
Fair use is a judicial doctrine that refers to a use of a copyrighted work that does not violate the exclusive rights of the copyright owner. Examples of fair use include the reproduction of original works for the purpose of criticism, comment, news reporting, teaching, scholarship, or research (see 17 U.S.C.A. section 107). Whether a particular use is "fair" depends on a court's application of the following factors:
(1) the purpose and character of the use, including whether the use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for the copyrighted work, including the extent to which the use diminishes the economic value of the work. Courts have ruled that the fair use doctrine allows individuals to use video cassette recorders (VCRs) to tape television shows and movies for home use without fear of being sued for copyright infringement.
However, in a case closely watched by the public, the U. S. Court of Appeals for the Ninth Circuit ruled that the fair use doctrine does not allow an Internet service to store digital audio files of copyrighted sound recordings for downloading by service subscribers who pay no fee to the copyright owners (see A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 [9th Cir. 2001]). Recognizing that the individual subscribers were mostly high school and college students downloading the music for personal consumption, the court still found that the purpose and character of their use was commercial in nature. "Napster users get for free something they would ordinarily have to buy," the court observed. The court said that Napster's service reduced audio CD sales among those students, thereby diminishing both the size of the copyright owners market and the value of the copyrighted work.
Remedies for Infringement
Copyright is valuable to the extent it protects an author's investment in an original work. Infringement directly injures the copyright owner by depriving the owner of the revenue that is generated by the infringer's work and indirectly injures the owner by softening demand for his work. A copyright owner who has been injured by an infringing work may file a law suit requesting one of two types of remedies. First, the owner may ask the court to grant an injunction ordering the offending party from continuing to infringe on the copyright. Or the owner may instead choose to receive STATUTORY damages for the infringement, which range from as little as $100 for innocent infringement to as much as $50,000 for willful infringement.
Willful infringement is also a federal criminal offense, a MISDEMEANOR punishable by a fine of up to $10,000 and up to a year in prison (see 17 U.S.C.A. 506[a]). However, the law requires that the prosecution demonstrate that the infringement was willful and that it was for the purpose of "commercial advantage or private financial gain." Mass PIRACY of sound or motion picture recordings without permission of the copyright owner is a separate criminal offense, punishable by a fine of up to $250,000 and five years in prison under the Piracy and COUNTERFEITING Amendments Act of 1982 (see 18 U.S.C.A. section 2318).
American Jurisprudence. West Group, 1998
http://profs.lp.findlaw.com/copyright/index.html. FindLaw for Legal Professionals: Copyright Law.
http://www4.law.cornell.edu/uscode/17/index.text.html. Title 17 United States Code: Copyrights.
Intellectual Property in a Nutshell: Patents, Trademarks, and Copyright. West Group.
West's Encyclopedia of American Law. West Group, 1998.
Intellectual Property Owners Association
1255 23rd St., NW, # 200
Washington, DC 20037 USA
Phone: (202) 466-2396
Fax: (202) 466-2366
Primary Contact: Ronald E. Myrick, President
Recording Industry Association of America
1330 Connecticut Ave., NW, Suite 300
Washington, DC 20036 USA
Phone: (202) 775-0101
Fax: (202) 775-7253
Primary Contact: Hilary B. Rosen, Chief Executive Officer
United States Copyright Office, The Library of Congress
101 Independence Avenue, SE
Washington, DC 20559-6000 USA
Phone: (202) 707-3000
Fax: (202) 707-2600
Primary Contact: Marybeth Peters, Register of Copyright
Patents (Encyclopedia of Everyday Law)
Article I of the United States Constitution provides Congress with the power to "promote the progress of science and useful arts, by securing for limited times tonventors the exclusive right to theirdiscoveries." Pursuant to this provision, Congress established rules and regulations governing the granting of PATENTS. Congress delegated the administration of these duties to the PATENT and Trademark Office. The STATUTORY provisions are contained in Title 35 of the United States Code. The federal statutory scheme was modified considerably in 1995 with the ADOPTION of the General Agreement on Tariffs and Trade (GATT), which aligned U. S. patent law with patent laws in other countries.
Issuance of patents is exclusively a federal concern, so state governments cannot issue patents to protect inventions. However, some state laws may provide protection to inventors if the inventor does not attain a patent.
Only certain types of inventions may be patented. The three major types of patents are utility, design, and plant patents, definitions of which appear in the federal STATUTE. If an invention falls within one of the appropriate types of patents, the invention must still be patentable. First, the invention must be novel, meaning no other prior invention description anticipates or discloses the elements of the new invention. Second, the invention must have utility, that is, usefulness. Third, the new invention must not be obvious to those skilled in an art relevant to the invention. The latter requirement is referred to as "nonobviousness."
Congress and the Patent and Trademark Office require that applicants follow specific steps in order for a patent to be issued. Once a patent has been issued, the right is considered the PERSONAL PROPERTY of the inventor, so it can be sold, assigned, etc. The length of the patent depends on the type of patent issued. Generally, the length is either 20 years (utility and plant patents) or 14 years (design patents). Damages for patent INFRINGEMENT are rather severe, thus providing greater incentive for inventors to follow proper procedures to apply for a patent.
Types of Patents
Not all inventions may be patented, even those that are novel and unique. The most basic restriction is that while the application of a certain idea may be appropriate for a patent, the mere idea cannot be patented. Thus, DISCOVERY of a scientific formula may not be patented, but development of a method using this formula may be patented. The restriction against patenting ideas is often referred to as the "law of nature" doctrine.
Perhaps the most familiar of the types of patents, utility patents may be issued for "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." In the patent application, an inventor must include a detailed description of how to make and use an invention, "claims" that define the invention, and drawings of the invention, in addition to other procedures required by the Patent and Trademark Office and the federal patent statute.
Design patents may be issued for a new, original, or ornamental design for an article of manufacture. This type of patent is limited to the unique shape or design of an object and only applies to the ornamental or aesthetic value of the object. If the shape serves some function, then the inventor should apply for a utility patent. The design cannot be an adaptation of a known form or ornament to a different article. The patent application for a design patent is similar to a utility patent, though the description and "claim" that defines the design are usually very short.
A plant patent may be issued to someone who invents or discovers a unique variety of plant and asexually reproduces such a plant. This category includes cultivated spores, mutants, hybrids, and newly found seedlings, subject to some restrictions. Plant patents do not apply to sexually reproducible plants, but the Plant Variety Protection Act may provide protection for these types of plants.
An applicant for a utility patent must satisfy three basic requirements for a patent to be patentable: novelty, nonobviousness, and utility. Requirements for a design patent or a plant patent are similar, except that ornamentality (design patent) or distinctiveness (plant patent) is required instead of utility.
The patent statute requires that each invention is novel as a condition for the issuance of a patent. For an invention to be considered "novel," no other reference in "prior art" may anticipate or disclose each of the elements of the invention in the patent application. The term "prior art" is somewhat confusing, as it refers to the state of knowledge existing or publicly available at some time before the application for the patent is filed. Prior art may include prior printed publications from anywhere in the world, patents filed prior to the current patent application, publicly available knowledge or use of an invention in the United States, a foreign patent filed by the applicant, a prior invention in the United States, or the previous sale of an item. The time frame in which prior art refers to an invention is set forth in the statutory section defining prior art. The question in most common cases is whether the publication, patent, etc., existed prior to the earliest provable date of invention or more than one year before the patent application was filed.
Even if prior art exists that relates to an invention, a variation in prior art will likely satisfy the novelty requirement. The most common method to prove the difference between prior art and an invention is to demonstrate physical differences between the two. Other methods for proving novelty may include a showing that a new combination of components of an existing item was used or that the invention is a new use for an existing item.
Even if a patent satisfies the novelty requirement, it must still satisfy the requirement of nonobviousness. Under this requirement, if the differences between the subject matter of a new invention and the subject matter of prior art would have been obvious to a person of ordinary skill in the art relevant to the subject matter of the invention, then the nonobvious requirement has not been met. In other words, a new invention must be more than different from prior art; the difference (or different use) must not be obvious to someone who has ordinary skill in using such an invention.
Utility, Distinctiveness, or Ornamentality
A final requirement for a utility patent is that the invention has utility, which refers generally to the usefulness of the invention. Practically any level of utility is sufficient; the invention must provide some identifiable benefit. However, if an invention can be used only for a scientific curiosity or could only be used for illegal purposes, the patent application is more likely to be denied.
An applicant for a plant patent needs to demonstrate that the plant is clearly distinguishable from existing plants but does not need to prove usefulness or utility of the new plant. An applicant must similarly prove ornamentality rather than utility. Thus, the inventor must show that the invention serves some ornamental or aesthetic purpose.
Inventors Entitled to Patents
Under the Patent Act, only the original and authentic inventors may claim patent rights. Even if an invention may be patentable, the patents will not be granted if the wrong individual applies for the patent. The idea for an invention cannot generally be assigned to another person; only the original inventor may apply for the patent. Thus, if an employee invents an item, he or she cannot assign the right to patent the item to an employer in the name of the employer, even if the original inventor used the employer's resources and created the invention during the inventor's employment. The only permitted assignment is one that permits the assignee to obtain a patent in the name of the original inventor. Note that it is common for employees to agree to assign patents to employers.
Provisional Patent Application
The Patent statute permits an inventor to file an abbreviated version of a patent application, called a PROVISIONAL Patent Application (PPA). The PPA allows an inventor to establish a filing date earlier than the filing date of a Regular Patent Application (RPA). The PPA must be filed within one year of the filing of the RPA. The PPA is beneficial to an inventor if he or she is concerned that someone else may develop the invention, or the inventor does not want to build and test an invention immediately.
The PPA must describe the invention, including a description of how to make and use it; drawings of the invention, if these are necessary to describe how to make and use the invention; a cover sheet; payment of a fee; and a filing of a small entity declaration, if applicable. If a PPA is filed, and the RPA is filed at a later date, the length of the patent is measured by date of the filing of the RPA.
Two or more inventors can be granted a patent for a joint invention; in fact, if a joint invention is appropriate, none of the joint inventors can claim to be the original inventor individually. Should an application omit parties erroneously or the application otherwise names a wrong party, the application could fail. The Patent Act does allow parties to correct mistakes in some circumstances, such as exclusion of an original inventor from the application.
The determination of the appropriate inventor or inventors in a particular case may not be clear. For example, two individuals may have collaborated throughout a project in which something is invented, while a third individual may have assisted from time to time but added nothing by way of original thought or contribution. The appropriate test for determining whether an individual should be included as an inventor is whether the individual worked on the subject matter and made some original contribution to the thought and final result of at least one claim in the application. In the example above, the first two inventors would most likely be considered joint inventors, while the third most likely would not.
Specifications and Claims
The Patent Act includes two main requirements in a patent application: a specification and a claim. The specification generally requires the applicants to describe why the invention differs from prior art, show that the invention is, in fact, useful, and show that the invention would not be obvious to someone skilled in the art relevant to the invention. The patent statute requires that the application describe the invention in its "best mode" to enable an individual skilled in the art relevant to the invention to be able to repeat the invention. The specification cannot be indefinite and must be "clear, concise, and exact." Moreover, the specification must disclose specifically how to use the invention, including specific times, dosages, etc., that are necessary to use the invention.
A claim defines the inventor's right and illustrates how the invention meets the three requirements for patentability: novelty, nonobviousness, and utility (note that these are described in the specification). The claim should describe the invention and should not merely include functional language. Functional language would include, for example, how a new chip performs in a computer system without describing the chip itself or indicating specifically why it is patentable. Functional language cannot establish patentability, and the application will be rejected because the claim is barred.
Patent Oath and Fees
An inventor must include with a patent application a signed statement indicating that the applicant is the original and first inventor of the subject matter claimed in the application. The application must also identify each inventor by full name, the country in which each applicant is a citizen, plus several requirements related to foreign applications. Moreover, an applicant must acknowledge that he or she is aware of the necessity to disclose information that is material to the review of the application and must state that he or she understand and has reviewed the specifications and claims.
The applicant must sign the application and be sworn to under oath or include a declaration. The inventor or inventors must make the oath or declaration personally. A LEGAL REPRESENTATIVE may satisfy these requirements only in certain circumstances described by the Patent Act and the regulations of the Patent and Trademark Office. Fees must accompany the application, as set forth in the statute and the regulations.
Review by the Patent and Trademark Office
When the Patent and Trademark Office receives an application, it can make an initial allowance, a partial rejection, or a complete rejection. If an application is rejected, the inventor may contest the rejection by introducing EVIDENCE in reply to the rejection, amend or modify the specification and/or claim, or both. If the application is rejected twice, the applicant must appeal the decision.
The first appeal of a rejected application is to the Patent and Trademark Office's Board of Appeals. The Patent Office will engage in informal communications and interviews with both the EXAMINER and the applicant. The Board will generally raise all issues that give rise to the rejection, including discovery of prior art or problems with patentability. The applicant must refute these problems with particularity. This means the applicant must state precisely why the application is satisfactory, why the invention is indeed patentable, etc. The process may continue through several cycles of rejection, amendments, and refilling of an application (though the amendments are limited after a second rejection). The Patent Office may declare a final rejection any time after a second EXAMINATION on the merits.
If the Board rejects the application then the applicant may appeal to the United States District Court for the District of Columbia or the United States Court of Appeals for the Federal Circuit. However, courts typically give a considerable amount of deference to the decision of the Patent Office, so prevailing in an appeal is unusual.
Duration of Patents
The duration of a patent depends on the type of patent that has been granted. One of the more significant effects of the General Agreement on Tariffs and Trade was the duration of a patent in the United States. Prior to 1995 (and dating back to 1861), the length of a typical patent was 17 years. After GATT came into effect in 1995, the length increased to 20 years.
Utility patents filed after June 8, 1995 extend 20 years from the date the application was filed. Plant patents also extend 20 years from the date of filing. Design patents extend 14 years from the date the patent was granted. Once the term of the patent has expired, the invention becomes public property and may be used, sold, and reproduced. In some limited cases, such as proceedings to determine the priority of an invention, the length of a patent may be extended up to five years.
Assignment and Licensing
The original and authentic inventor or inventors are preserved to be the owner of any patent application, unless this right has been assigned. An application may be assigned before or after the application is filed, and the assignment must be recorded with the Patent and Trademark Office. The right to sue for present or past infringement cannot be assigned, except as it relates to the assignment itself. An assignment transfers all rights of the inventor, and the assignee takes the application subject to licenses granted by the assignor.
An inventor may also issue a license, which gives the license holder permission to make, use, or sell the invention. The rights transferred in a license depend on the actual transfer. For example, a license may be for exclusive or non-exclusive use of the license. A joint owner of a patent may generally give a valid license without the permission of the other joint owners, unless the joint owners agree otherwise. As noted above, even if the rights to a patent are assigned, the license nevertheless survives according to the terms of the license agreement.
The applicant through an express writing that is signed by the applicant and filed with the Patent and Trademark Office may abandon a patent application. The Patent Office will also consider an application abandoned if the inventor fails to PROSECUTE the application within six months of the filing. A patent may also be abandoned if the applicant fails to pay required fees within three months of a notice of allowance sent to the applicant.
ABANDONMENT of an application differs from an abandonment of an invention. An abandonment of an application does not transfer right to the public, while an abandonment of an invention surrenders or dedicates the invention to the public. Abandonment of an invention may be express or implied.
A patent owner may protest his or her invention by suing for patent infringement, which is a tort for the unauthorized making, using, selling, offering to sell, or importing the subject matter of the patent. To determine whether an infringement has occurred, a court will compare the infringing subject matter with the subject matter covered by the patent. Infringement cannot occur before the issuance of a patent, but an individual may infringe a patent right even if he or she does not know the existence of a patent. Infringement may be direct; indirect, where the infringer encourages someone else to infringe the patent; or contributory, where an individual knowingly sells or supplies a component of a patented machine or other invention to another.
A patent owner may recover significant damages in a successful action for patent infringement. The Patent Act permits a court to award treble damages, which means the court can increase damages by up to three times the amount of the actual damages. Courts may also award attorneys fees in exceptional cases.
The minimum award a patent owner may receive for patent infringement is a reasonable royalty, plus costs and interest fixed by the court. A patent owner may also recover the profit the patent holder would have made on sales of the subject matter relevant to the patent. Profits earned by the patent infringer constitute a factor for determining the appropriate royalty or other damages.
Applicability of State Law to Patents
An inventor may have rights based on state law in addition to patent rights to protect the intellectual property related to an invention. However, the Patent Act preempts many state causes of action, especially because Congress is granted the right to issue patents in the United States Constitution. The Supreme Court has held that state UNFAIR COMPETITION laws are generally preempted by the Patent Act insofar as the state law provides a cause of action that is functionally similar to recognition of a patent right and a cause of action for patent infringement.
State law governing trade secrets are generally not preempted, so an inventor may be able to protect his or her rights through this cause of action. On the other hand, the protection offered through this cause of action is considerably weaker than the rights protected when a patent is granted. More specifically, a patent right is a MONOPOLY to make, use, and sell an invention, while trade secrets law focuses on the conduct of a party that violates the trade secrets of a party. Stated simply, obtaining a patent right is virtually always preferable.
Code of Federal Regulations, Title 37: United States Patent and Trademark Office, Department of Commerce. U. S. Government Printing Office, 2001. Available at http://www.access.gpo.gov/nara/cfr/waisidx_01/37cfrv1_01.ht... .
Intellectual Property: Patents, Trademarks, and Copyright in a Nutshell. Miller, Arthur R., and Michael H. Davis, West Group, 2000.
McCarthy's Desk Encyclopedia of Intellectual Property, Second Edition. McCarthy, J. Thomas, Bureau of National Affairs, 1995.
Patent It Yourself, 4th Edition. Pressman, David, Nolo Press, 1995.
Patent Law Precedent: Key Terms and Concepts. Aisenberg, Irwin M., Little, Brown, and Company, 1991.
U. S. Code, Title 35: Patents. U. S. House of Representatives, 1999. Available at .
American Intellectual Property Law Association (AIPLA)
2001 Jefferson Davis Highway, Suite 203
Arlington, VA 22202 USA
Phone: (703) 415-0780
Fax: (703) 415-0786
Primary Contact: Mike Kirk, Executive Director
National Association of Patent Practitioners (NAPP)
4680-18i Monticello Ave., PMB 101
Williamsburg, VA 23188 USA
Phone: (800) 216-9588
Fax: (757) 220-3928
National Congress of Inventor Organizations (NCIO)
P.O. Box 93669
Los Angeles, CA 90093-6690 USA
Phone: (888) 695-4455
Fax: (213) 947-1079
Primary Contact: Stephen Paul Gnass, Executive Director
U. S. Patent & Trademark Office (USPTO), General Information Services Division
Crystal Plaza 3, room 2C02
Washington, DC 20231 USA
Phone: (800) 786-9199
Trademarks (Encyclopedia of Everyday Law)
A trademark is a device used by businesses to distinguish their goods and services from competitors' goods and services. It may consist of a word, a symbol, a logo, or any combination thereof, so long as it clearly signifies the source of ownership for a product or service. Adidas is an example of a trademarked name, McDonald's golden arches is an example of a trademarked symbol, and the NIKE name written above the "swoosh" symbol is an example that combines two types of trademark devices. When a trademark is used to distinguish a service, it is usually called a service mark. "American Express" is the service mark for a well known provider of credit card services.
Consumers rely on TRADEMARKS when making their purchases. Trademarks can reflect a product's authenticity, quality, and accumulated customer good will. When a product or service is defective, of poor workmanship, or otherwise unpopular with consumers, its trademark can reflect those undesirable qualities as well. Even when two products are of seemingly equal quality, like two cola soft drinks, their trademarks simply communicate to customers which is which.
Moreover, trademarks serve to protect a business owner's investment in a particular product by preventing competitors from capitalizing on the reputation affiliated with a particular name in the marketplace. They also save new companies from wasting their time trying to market a product under an existing trademark. Before individuals or entities start selling products or services that bear a certain name or logo, they often hire an attorney to investigate prior or existing marks that are in any way the same or similar to the mark they intend to use. Companies that fail to conduct this kind of search or blatantly ignore the existing use of a trademark risk being sued for INFRINGEMENT and ordered by a court to cease promoting their products with a particular mark.
The presence of trademark protection for a good or service is often indicated by a small "R" inside a circle placed near the trademark. The "R" means that the mark has been registered with the U. S. PATENT and Trademark Office and serves as a warning against unauthorized use of the mark. Individuals may also claim rights to a particular trademark by displaying the letters "TM" near the mark. Trademarks bearing the "TM" symbol are not registered, but the symbol indicates the owner's intent to register it.
Trademarks are distinct from trade names or TRADE DRESS. A TRADE NAME is the name or designation used by a business to identify itself and distinguish it from other businesses. By contrast, a trademark distinguishes the line of products from all other product lines, particularly those offered by competing businesses. For example, Ford Motor Company is the trade name for a particular maker of automobiles, trucks, and vans that bear the trademark "Ford." Trade dress is the manner in which a business distinguishes a product's appearance from the appearance of a rival's product. Something as simple as a grille on the front end of an automobile may constitute trade dress if it is sufficiently distinctive and the manufacturer takes deliberate and TANGIBLE steps to market the grille over a long period of time.
The Lanham Act
Trademark law in the United States is governed by the Trademark Act of 1946, also known as the LANHAM ACT (15 U.S.C.A. section 1051 et seq). The Lanham Act codified much of the then existing COMMON LAW of trademarks, and it also clarified some areas where jurisdictions differed in their approach to particular issues. Congress has since amended the Lanham Act several times, addressing new concerns as they are presented by both trademark owners and consumers. Many states have enacted trademark statutes of their own, which may be applied to legal issues that are not pre-empted by Lanham.
Lanham defines trademarks to include words, names, symbols, and logos that businesses use or intend to use in commerce for the purpose of distinguishing their goods from those made or sold by competitors. The key to any claim for trademark rights is the distinctiveness of the proposed mark. Roughly analogous to the originality requirement for COPYRIGHT, the distinctiveness requirement for trademarks may be satisfied by proof that the mark is descriptive, suggestive, arbitrary, or fanciful. Proof that a mark is generic will defeat a claim for trademark protection.
A generic name is the common name for a product and thus does nothing to distinguish itself from other products of the same genre. Shoe, ball, hat, and lightbulb are all generic product names that will never receive trademark protection. Conversely, trademarks that are distinctive and have qualified for trademark protection may lose that protection by becoming generic in the mind of the public. This transition happens when a substantial segment of consumers in the relevant market adopt a trademark as the general name for an entire line of products. Examples of once distinctive trademarks that have since become generic include aspirin, cellophane, escalator, and thermos. The trademark owners of Kleenex, Xerox, Sanka, and Teflon have successfully prevented their marks from becoming generic, despite many consumers' strong identification of their individual products with the product lines as a whole.
For a trademark to receive and retain its distinctiveness, the mark must fall into one of four categories: descriptive, suggestive, arbitrary, or fanciful. One level more distinctive than a generic mark, descriptive marks will not receive trademark protection unless they have acquired a secondary meaning, which happens when a significant portion of consumers identify the mark as signifying a particular manufacturer's good. Suppose the Jones Sport and Recreation Company sought trademark protection for their line of bicycles known as the "blue bike." The word blue does almost nothing to distinguish Jones' product from other bikes with the same color being sold by competitors. But now suppose that Jones has spent millions of dollars over the last several years marketing its product, and sales of the "blue bike" have grown to such a degree that bicycle-buying Americans now identify blue bikes as originating from the Jones' company. Then Jones' mark may have acquired secondary meaning, and thus its "blue bike" is much more likely to receive federal trademark protection.
Suggestive marks imply a quality or characteristic of a product that goes beyond merely describing it. These kinds of marks require consumers to use their imaginations to make the connection between the mark itself and the product it represents. As a result, suggestive marks can receive federal trademark protection immediately upon their first use. Examples of suggestive marks include Orange Crush (orangeflavored soft drink), Playboy (sexually oriented magazine for men), Ivory (white soap), and Sprint (longdistance telephone company).
The strongest marks are arbitrary and fanciful marks. Their strength lies in the fact that they bear little or no obvious relationship to the products with which they are affiliated, and yet they serve as a source of immediate authenticity in the minds of consumers. As a result, arbitrary and fanciful marks most effectively serve the dual role of trademarks, promoting fair competition between rivals in the marketplace and communicating the source and ownership of products to potential buyers. Arbitrary marks can be actual words that have their own meaning, but when associated with a particular product they do not describe the product or suggest anything about it. Examples of arbitrary marks include Pledge for furniture polish, Camels for cigarettes, and Dial for soap. Fanciful marks are not words at all and have no meaning apart from their affiliation with a good or service. They are inherently distinctive. Examples of fanciful marks include Kodak, Exxon, and Rolex.
Trademark registration begins with an application to the commissioner of PATENTS and trademarks at the U. S. Patent and Trademark Office (USPTO). One may apply with either the principal register or the supplemental register of the USPTO. The principal register records descriptive, suggestive, arbitrary, and fanciful marks that have acquired secondary meaning. The supplemental register records descriptive marks that are capable of acquiring secondary meaning but have not yet acquired that meaning in the minds of many consumers. Once a mark acquires secondary meaning, however, it can be transferred from the supplemental register to the principal register.
Registration with the principal register is proof that the mark is valid, registered, and the intellectual property of the registrant, who has exclusive rights to use the mark in commerce. Registration with the principal register is deemed to put potential infringers on constructive notice of the registrant's ownership interests in the trademark and entitles the owner to bring an infringement suit against the bearers of any offending marks. Individuals or entities who COUNTERFEIT registered trademarks also face criminal and civil penalties.
Applications for offensive, immoral, deceptive, or scandalous marks will be denied (see 15 U.S.C.A. 1052[a]). Marks such as "bubby trap" for a brassiere is an example of an offensive mark, In re Riverbank Canning Co., 95 F.2d 327 (Cust. & Pat.App. 1938), AS IS the mark "a breast in the mouth is better than a leg in the hand" for a chicken restaurant, Bromberg, Et Al. v. Carmel Self Service, Inc., 198 U.S.P.Q. 176 (Trademark Tr. & App. Bd. 1978). Offensive marks cannot be cured by acquiring a secondary meaning that is inoffensive, unless the secondary meaning entirely replaces the primary, literal, or obvious meaning.
Despite the advantages of registration, it is actually the use or intended use of a mark that confers upon the mark federal trademark protection. As a general rule, conflicting claims to a trademark are resolved according to priority of APPROPRIATION. The first to use a mark will normally be given PROPRIETARY rights over the mark. Although this rule seems clear cut, demonstrating first use or first intended use can often prove difficult in court. Consequently, the law gives businesses incentive to register their marks concomitantly with the date of first use by presuming that registered marks have been in continuous use from the date the trademark application was filed and by prohibiting court challenges to trademarks that have been in continuous use for five years from the date of registration. Registration also demonstrates to a court that the user has done everything to protect its mark.
A rule favoring the first user of a trademark protects what is assumed to be an established identification between consumers and a trademarked product. Nonetheless, it is possible that a second user may establish stronger consumer identification with its product in a geographical market different from the market where the first user is doing business. When this happens, courts will often recognize the trademark rights of both the first and second users, so long as the second user established its mark in GOOD FAITH and confines its use to a market distant from the first user.
Trademark registrants can FORFEIT their rights to a mark by using them in a FRAUDULENT or deceptive manner. They can also lose their rights by abandoning the mark. However, nonuse by itself does not constitute ABANDONMENT. Acts of abandonment must also be accompanied by an intent not to use the mark again. Finally, registrants can lose their rights to a trademark if the public adopts a trademark as the general name for a type of goods, as happened with the aspirin and cellophane examples mentioned above. Trademark owners typically take great efforts to prevent their marks from becoming generically used by the public. Rollerblade, for example, spent millions of dollars in advertising and law suits to prevent its new brand of roller skate from becoming the generic name used to describe in-line skates, after both consumers and rivals began referring to all such skates as rollerblades regardless of who made them.
Trademark infringement suits generally involve claims that the bearer of an allegedly offending similar mark is creating the likelihood of customer confusion over competing products, diluting the distinctiveness and value of an existing mark or COUNTERFEITING an existing mark with an identical "knock-off" mark.
Likelihood of confusion is shown by proof that the allegedly offending mark is causing "probable" confusion among consumers, such that buyers in the relevant market are mistaking the defendant's name or logo for the plaintiff's trademark. Proof that confusion among consumers is only possible will not suffice to establish an infringement claim. On the other hand, the EVIDENCE need not rise to the level of actual confusion. Instead, courts will evaluate claims of customer confusion on a case-by-case basis in light of the following factors: (1) the similarity of the marks; (2) the similarity of the products; (3) the degree in which the markets for the competing products overlap; (4) the degree of care likely to be exercised by consumers; (5) the strength of the marks; (6) the amount of actual confusion; and (7) wrongful intent.
Trademark dilution is shown by proof that the defendant's use of an allegedly offending mark is likely to tarnish, degrade, or lessen the individuality, distinctiveness, or consumer impact of the plaintiff's mark. Trademark dilution suits seek to protect the advertising value of particularly strong and well-recognized trade symbols by stopping other businesses from using similar symbols to promote their products, even though no consumer confusion affects actual results and even though the rivals' products are not in direct competition with each other. Thus, Polaroid could successfully prevent an Illinois company from using the word "polaroid" in marketing its refrigerator and heating installation business (see Polaroid Corp. v. Polaroid, Inc., 319 F.2d 830 [7th Cir. 1963]).
The Lanham Act defines a counterfeit mark as a "spurious mark that is identical with, or substantially indistinguishable from, a registered mark" (see 15 U.S.C.A. § 1127). All counterfeit marks are infringements, unless the offending mark is associated with a type of product or service that is wholly different from the plaintiff's mark. Individuals who intentionally traffic in counterfeit trademarks or attempt to traffic in them also face criminal punishment, including fines up to $2 million, IMPRISONMENT up to ten years, or both (see 18 USCA § 2320).
Defendants can raise several defenses against infringement suits, many of which are addressed briefly above. First, a DEFENDANT can claim that the plaintiff's mark is generic and thus not of sufficiently distinctive quality to qualify for federal trademark protection. Second, a defendant can offer proof that the plaintiff abandoned its trademark and thus is no longer the owner of the mark. Third, a defendant can charge that it had first use of a mark and thus that the plaintiff is actually engaging in infringement of the defendant's mark. Fourth, a defendant can claim that it is making "fair use" of the defendant's mark, meaning essentially that the defendant is using the plaintiff's mark for non-commercial purposes, as when a teacher uses a mark for the educational benefit of students. Finally, the defendant may plead that the plaintiff has unclean hands, meaning the plaintiff has acted in an illegal, unfair, or deceptive manner that should prevent the court from enforcing the plaintiff's trademark.
State Court Decisions Interpreting State Trademark Statutes
In addition to relying on federal law when enforcing a claim against an alleged trademark infringer, trademark owners may turn to state trademark law as well, unless the state law governs an area that is pre-empted by federal law. Below are a sampling of cases decided at least in part based on the court's interpretation of a state's trademark law.
ARKANSAS: The state's Trademark Act does not empower the Secretary of State to register trademarks or service marks for a limited geographical area within the state so as to accommodate similar marks used by businesses that are not directly competing with each other over the same consumers (see A.C.A. §§ 4-71-101 to 4-71-114; Worthen Nat. Bank of Batesville v. McCuen, 317 Ark. 195, 876 S.W.2d 567 [Ark. 1994]).
ILLINOIS: A maid service that was named "Maid To Order" was not entitled to injunction prohibiting the showing of a film by the same name, even if its name was deemed to be "distinctive" under state antidilution law, absent proof that the maid service would be irreparably harmed by consumers seeing the film (see Ill.Rev.Stat.1987, ch. 140, par. 22; Kern v. WKQX Radio, 175 Ill.App.3d 624, 529 N.E.2d 1149, 125 Ill.Dec. 73, [Ill.App. 1 Dist. 1988]).
NEW MEXICO: The state's trademark STATUTE specifically preserves the common-law rights of trademark owners, such that the rights of a trademark owner registered with the state trademark office could be qualified by the bona fide rights of common-law users (see NMSA 1978, § 57-3-12; S & S Investments, Inc. v. Hooper Enterprises, Ltd., 116 N.M. 393, 862 P.2d 1252 [N.M.App. 1993].
UTAH: The Lanham Act does not pre-empt the state's criminal simulation statute which prohibits anyone from selling or possessing with intent to sell a counterfeited object or from authenticating or certifying such an object as genuine (see U.S.C.A. Const. Art. 1, § 8, cl. 8; Art. 6, cl. 2; U.C.A.1953, 76-6-518; Lanham Trade-Mark Act, §§ 1-45, 15 U.S.C.A. §§ 1051-1127).
WASHINGTON: Under the state's trademark laws, the remote possibility of future competition between a national bank and a federal SAVINGS AND LOAN ASSOCIATION in a county where the national bank was located and where the savings and loan conduct incidental business did not justify enjoining the national bank's use of the same name as the savings and loan association (see Pioneer First Federal Sav. and Loan Ass'n v. Pioneer Nat. Bank, 98 Wash.2d 853, 659 P.2d 481 [Wash. 1983])
American Jurisprudence. St. Paul: West Group, 1998.
http://www.findlaw.com/01topics/23intellectprop/ 03trademark.FindLaw for Legal Professionals: Trademark Law.
Intellectual Property in a Nutshell: Patents, Trademarks, and Copyright. St. Paul, West Group.
McCarthy on Trademarks and Unfair Competition. St. Paul: West Group, 2001.
West's Encyclopedia of American Law. St. Paul: West Group, 1998.
Intellectual Property Owners Association
1255 23rd St., NW, # 200
Washington, DC 20037 USA
Phone: (202) 466-2396
Fax: (202) 466-2366
Primary Contact: Ronald E. Myrick, President
International Trademark Association
1133 Avenue of the Americas
New York, NY 10036 USA
Phone: (212) 768-9887
Fax: (212) 768-7796
Primary Contact: Nils Victor Montan, President
U. S. Patent and Trademark Office
Crystal Plaza 3, Room 2C02
Washington, DC 20231 USA
Phone: (800) 786-9199
Fax: (703) 305-7786
Primary Contact: Nicholas Godici, Director
Unfair Competition (Encyclopedia of Everyday Law)
UNFAIR COMPETITION means any FRAUDULENT, deceptive, or dishonest trade practice that is prohibited by STATUTE, regulation, or the COMMON LAW. It consists of a body of related doctrines that gives rise to several different causes of actions, including (1) actions for INFRINGEMENT of PATENTS, TRADEMARKS, or copyrights; (2) actions for wrongful APPROPRIATION of trade names, TRADE DRESS, and trade secrets; and (3) actions for publication of defamatory, false, or misleading representations.
The law of unfair competition serves five purposes. First, it seeks to protect the economic, intellectual, and creative investments made by businesses in distinguishing themselves and their products. Second, the law seeks to preserve the good will that businesses have established with customers over time. Third, the law seeks to deter businesses from appropriating the good will of their competitors. Fourth, the law seeks to promote clarity and stability by encouraging customers to rely on a merchant's TRADE NAME and reputation when evaluating the quality and prices of rival products. Fifth, the law of unfair competition seeks to increase competition by providing businesses with incentives to offer better goods and services than others in the same field.
Although the law of unfair competition helps protect consumers from injuries caused by deceptive trade practices, the remedies provided to REDRESS such injuries are generally only available to business entities and proprietors. Consumers who are injured by deceptive trade practices normally must avail themselves of the remedies provided by CONSUMER PROTECTION laws. Businesses and proprietors, however, may typically avail themselves of two remedies offered by the law of unfair competition, injunctive relief (a court order restraining a competitor from engaging in a particular unlawful action) and money damages (compensation for any losses caused by the unlawful practice). These remedies may be available in both state and federal court, depending on the circumstances surrounding the unlawful act.
Free Market Theory Underlying the Law
The freedom to pursue a livelihood, operate a business, and otherwise compete in the marketplace is essential to any free enterprise system. Competition creates incentives for businesses to earn customer loyalty by offering quality goods at reasonable prices. At the same time, competition can also inflict harm. The freedom to compete gives businesses the right to lure customers away from their competitors. When one business entices enough customers away from a competitor, the competitor may be forced to shut down its business or move to a different location.
The law of unfair competition will not penalize a business merely for being successful in the marketplace and will not subsidize a business for failing in the marketplace. Liability will not be imposed for aggressive, shrewd, or otherwise successful marketing tactics that are not deceptive, fraudulent, or dishonest. The law will assume, however, that for every dollar earned by one business, a dollar will be lost by a competitor. Accordingly, the law prohibits businesses from unfairly profiting at a rival's expense. What constitutes an "unfair" trade practice varies according to the cause of action asserted in each case.
Interference with Business Relations
No business can effectively compete without establishing good relationships with its employees and customers. In some instances the parties execute a formal contract to memorialize the terms of their relationship. In other instances business relations are based on a less formal oral agreement. Most often, however, business relations are conducted informally with no contract or agreement at all. Grocery shoppers, for example, typically have no contractual relationship with the supermarkets that they patronize. The law of unfair competition regulates all three types of relationships, formal, informal, and those falling somewhere in between.
Many businesses depend on formal written contracts to conduct business. Employer and employee, wholesaler and retailer, and manufacturer and distributor all frequently reduce their relationships to writing. These contractual relations create an expectation of mutual performance, meaning that each party will perform its obligations according to the terms of the agreement. Protecting these relationships from outside interference facilitates performance and stabilizes commercial undertakings. Interference with contractual relations upsets commercial expectations and drives up the cost of doing business by involving competitors in squabbles that can find their way into court.
Virtually every contract, whether written or oral, qualifies for protection from unreasonable interference under the law of unfair competition. Noncompetition agreements are a recurrent source of LITIGATION in this area of the law. These types of agreements are generally struck up in professional employment settings where an employer requires a skilled employee to sign an agreement promising not to go to work for a competitor in the same geographic market. Such agreements may also expressly prohibit the employee from taking client files, customer lists, and other TANGIBLE and intangible assets from the employer.
Noncompetition agreements are generally enforceable, unless they operate to deprive the employee of the right to meaningfully pursue a livelihood. Employees who choose to violate the terms of a noncompetition agreement may be sued for breach of contract, but the business that enticed the employee away from the employer may be held liable for tortious interference with an existing business relationship. The elements of this tort are: (1) the existence of a business relationship or contract; (2) the wrongdoer's knowledge of the relationship or contract; (3) the wrongdoer's intentional action taken to prevent contract formation, procure contractual breach, or terminate the business relationship; (4) lack of justification; and (5) resulting damages.
Informal trade relations that have not been reduced to contractual terms are also protected from outside interference by the law of unfair competition. Businesses are forbidden from intentionally inflicting injury upon a competitor's informal business relations through improper means or for an improper purpose. Improper means include the use of violence, undue influence, or COERCION to threaten competitors or intimidate customers. For example, it is unlawful for a business to blockade an entryway to a competitor's shop or impede the delivery of supplies with a show of force. The mere refusal to deal with a competitor, however, is not considered an improper means of competition, even if the refusal is motivated by spite.
Malicious or monopolistic practices aimed at injuring a rival may constitute an improper purpose of competition. Monopolistic behavior includes any agreement between two or more people that has as its purpose the exclusion or reduction of competition in a given market. The Sherman Anti-Trust Act of 1890 makes such behavior illegal by proscribing the formation of contracts, combinations, and conspiracies in restraint of trade. 15 U.S.C.A sections 1 et seq. CORPORATE mergers and acquisitions that suppress competition are prohibited by the CLAYTON ACT of 1914, as amended by the Robinson-Patman Act of 1936. 15 U.S.C.A. sections 12 et seq. The Clayton Act also regulates the use of predatory pricing and unlawful tying agreements. Predatory pricing is the use of below-market prices to inflict pecuniary injury on competitors. A tying agreement is an agreement in which a vendor conditions the sale of one product upon the buyers promise to purchase an additional or "tied" product. For example, the U. S. Department of Justice sued Microsoft Corporation for allegedly tying its Internet Explorer web-browsing product to the sale of its Windows operating system. U. S. v. Microsoft Corp., 253 F.3d 34 (D.C.Cir. 2001). The case was settled before the issue was finally resolved by a court.
Infringement upon Trademarks, Trade Names, and Service Marks
Before a business can establish commercial relations with customers and other businesses, it must create an identity for itself, as well as for its goods and services. Economic competition is based on the premise that consumers can intelligently distinguish between products offered in the marketplace. Competition is made difficult when rival products become easily mistaken for each other, since one business may profit from the sale of a product to consumers who believe they are buying a rival's product. Part of a business's identity is the good will it has established with customers, while part of a product's identity is the reputation it has earned for quality and value. As a result, businesses spend tremendous amounts of resources identifying their goods, distinguishing their products, and cultivating good will.
The four principal devices businesses use to distinguish themselves are trademarks, service marks, trade names, and trade dress. Trademarks consist of words, logos, symbols, slogans, and other devices that are affixed to goods for the purpose of signifying their origin and authenticity to the public. The circular black, blue, and white emblem attached to the rear end of motor vehicles manufactured by Bavarian Motor Works (BMW) is a familiar trademark that has come to signify meticulous craftsmanship to many consumers. Whereas trademarks are physically attached to the goods they represent, service marks are generally displayed through advertising. "Orkin" is the service mark for a well-known pest-control company.
Trade names are used to identify CORPORATIONS, partnerships, sole proprietorships, and other business entities. A trade name may be the actual name of a business that is registered with the government, or it may be an assumed name under which a business operates and holds itself out to the public. For example, a husband and wife might register their business as "Sam and Betty's Bar and Grill," while doing business as "The Corner Tavern." Both names are considered trade names under the law of unfair competition.
Trade dress refers to a product's physical appearance, including its size, shape, texture, and design. Trade dress can also include the manner in which a product is packaged, wrapped, presented, or promoted. In certain circumstances particular color combinations may serve as trade dress. For example, the trade dress of Chevron Chemical Company includes the red and yellow color scheme found on many of its agricultural products. Chevron Chemical Co., v. Voluntary Purchasing Groups, Inc., 659 F.2d 695 (5th Cir. 1981).
When a business uses a trademark, service mark, trade name, or trade dress that is deceptively similar to competitor's, a cause of action for infringement of those intellectual property interests may exist. The law of unfair competition forbids companies from confusing customers by using identifying trade devices that make their businesses, products, or services difficult to distinguish from others in the market. Actual confusion need not be demonstrated to establish a claim for infringement, so long as there is a likelihood that consumers will be confused by similar identifying trade devices. Greater latitude is given to companies that share similar identifying trade devices in unrelated fields of business or in different geographic markets. A court would be more likely to allow two businesses to use the identifying trade device "Hot Handguns," when one business sells firearms downtown and the other business runs a country western dance hall in the suburbs.
Claims for infringement of an identifying trade device are cognizable under both state and federal law. At the federal level, infringement claims may be brought under the Lanham Trademark Act. 15 U.S.C.A. sections 1051 et seq. At the state level, claims for infringement may be brought under analogous intellectual property statutes and miscellaneous common-law doctrines. Claims for infringement can be strengthened through registration of the identifying trade device. For example, most states require that businesses register their trade names with the government and provide protection against infringement to the business that registers its trade name first.
Infringement upon Copyrights and Patents and Theft of Trade Secrets
The intangible assets of a business include not only its trade name and other identifying trade devices but also its inventions, creative works, and artistic efforts. Broadly defined as trade secrets, this body of commercial information may consist of any formula, pattern, process, program, tool, technique, mechanism, or compound that provides a business with the opportunity to gain an advantage over a competitor. Although a trade secret is not patented or copyrighted, the law of unfair competition awards individuals a property right in any valuable trade information they discover and attempt to keep secret through reasonable steps
The owner of a trade secret is entitled to its exclusive use and enjoyment. A trade secret is valuable not only because it enables a company to gain advantage over a competitor, but also because it may be sold or licensed like any other property right. On the other hand, commercial information that is revealed to the public, or at least to a competitor, retains limited commercial value. Consequently, courts vigilantly protect trade secrets from disclosure, appropriation, and theft. Businesses may be held liable for any economic injuries that result from their theft of a competitor's trade secret, as may other opportunistic members of the general public. Employees may be held liable for disclosing their employer's trade secrets, even if the disclosure occurs after the employment relationship has ended.
Valuable business information that is disclosed to the public may still be protected from infringement by COPYRIGHT and PATENT law. Copyright law gives individuals and businesses the exclusive rights to any original works they author, including movies, books, musical scores, sound recordings, dramatic creations, and pantomimes. Patents give individuals and businesses the exclusive rights to make, use, and sell specific types of inventions, such as mechanical devices, manufacturing processes, chemical formulas, and electrical equipment. Federal law grants these exclusive rights in exchange for full public disclosure of an original work or invention. The inventor or author receives complete legal protection for his or her intellectual efforts, while the public obtains valuable information that can be used to make life easier, healthier, or more pleasant.
Like the law of trade secrets, patent and copyright law offers protection to individuals and businesses who have invested considerable resources in creating something useful or valuable and who wish to exploit that investment commercially. Unlike trade secrets, which may be protected indefinitely, patents and copyrights are granted protection only for a finite period of time. Applications for copyrights are governed by the Copyright Act, 17 U.S.C.A. section 409, while patent applications are governed by the Patent Act, 35 U.S.C.A. section 111.
False Advertising, Trade Defamation, and Misappropriation of a Name or Likeness
A business that successfully protects its creative works from theft or infringement may still be harmed by FALSE ADVERTISING. Advertising need not be entirely false in order to be actionable under the law of unfair competition, so long as it is sufficiently inaccurate to mislead or deceive consumers in a manner that it inflicts injury on a competitor. In general businesses are prohibited from placing ads that either unfairly disparage the goods or services of a competitor or unfairly inflate the value of its own goods and services. False advertising deprives consumers of the opportunity to make intelligent comparisons between rival products. False advertising also drives up costs for consumers who spend additional resources in examining and sampling products.
Both state and federal laws regulate deceptive advertising. The Lanham Trademark Act, 15 U.S.C.A. section 1051, regulates false advertising at the federal level, while many states have adopted the Uniform Deceptive Trade Practices Act (UDTPA), which prohibits three specific types of representations: (1) false representations that goods or services have certain characteristics, ingredients, uses, benefits, or quantities; (2) false representations that goods or services are new or original; and (3) false representations that goods or services are of a particular grade, standard, or quality. Advertisements that are only partially accurate may give rise to liability if they are likely to confuse prospective consumers. Ambiguous representations may require clarification to prevent the imposition of liability. For example, a business which accuses a competitor of being "untrustworthy" may be required to clarify that description with additional information if consumer confusion is likely to result.
Trade DEFAMATION is a close relative of false advertising. The law of false advertising regulates inaccurate representations that tend to mislead or deceive the public. The law of trade defamation regulates communications that tend to lower the reputation of a business in the eyes of the community. A species of TORT LAW, trade defamation is divided into two categories, LIBEL AND SLANDER.
Trade libel generally refers to written communications that tend to bring a business into disrepute, while trade slander refers to defamatory oral communications. Before a business may be held liable under either category of trade defamation, the First Amendment requires proof that a defamatory statement was published with "actual malice," which the Supreme Court defines as any representation that is made with knowledge of its falsity or in reckless disregard of its truth. New York Times v. Sullivan, 376 U.S. 254, 84 S. Ct. 710, 11 L. Ed. 2d 686 (1964). The actual MALICE standard places some burden on businesses to verify, prior to publication, the veracity of any attacks they level against competitors.
It is also considered tortious for a business to appropriate the name or likeness of a famous individual for commercial advantage. All individuals are vested with an exclusive property right in their identity. No person, business, or other entity may appropriate an individual's name or likeness without permission. Despite the existence of this common law tort, businesses occasionally affiliate their products with popular celebrities without first obtaining consent. Although movie stars and televisions actors can lend prestige to the goods and services they promote, a business which falsely suggests that a celebrity has sponsored or endorsed one of its products will be held liable for money damages in amount equal to the economic gain derived from the wrongful appropriation.
State Law of Unfair Competition
The body of law governing unfair competition is comprised of a combination of federal and state legislation and state common law. Below is a sampling of state court decisions decided at least in part based on their own state's STATUTORY law, common law, or both.
CALIFORNIA: A manufacturer's price policy, which set minimum resale prices for its products and informed retailers that the manufacturer would refuse to sell products to any retailer who did not comply, was permissible under the state's unfair competition law. West's Ann.Cal.Bus. & Prof.Code §§ 16720 et seq. Chavez v. Whirlpool Corp., Cal.Rptr.2d , 2001 WL 1324737 (Cal.App. 2 2001).
HAWAII: Where the seller of a solar water heating unit incorrectly represented to a purchaser that it had been in business for 16 years and that it had licensed engineers on its staff, and then failed to scientifically tailor an efficient water heating system for the purchasers' home, installed the system knowing it was defective in design, and failed to provide a reasonable and effective service and repair program to correct the faulty system after its installation, the seller's conduct and representations constituted acts or practices violating the state's statute governing unfair competition and deceptive trade practices. HRS § 480-2. Rosa v. Johnston, 3 Haw.App. 420, 651 P.2d 1228 (Hawaii' App. 1982).
ILLINOIS: A competitor of a flashlight bulb distributor was free to copy the bulb's information chart and reorder card that was used by the distributor in connection with the sale to retail merchants of bulbs that were not copyrighted, and the only restriction imposed by the state law of unfair competition was that the competitor sufficiently identify the source of the chart and card to customers by providing proper labeling. S.H.A. ch. 121 =, § 312. 15.Duo-Tint Bulb & Battery Co., Inc. v. Moline Supply Co., 46 Ill.App.3d 145, 360 N.E.2d 798, 4 Ill.Dec. 685, (Ill.App. 3 Dist. 1977)
INDIANA: The appropriate remedy for the misappropriation of a university's name or likeness by a professor for his website and e-mail addresses was under the state's unfair competition law, trademark statutes, and the common law of tortious interference with business relations. West's A.I.C. 24-2-1-1 et seq. Felsher v. University of Evansville, 755 N.E.2d 589, (Ind. 2001).
NEW JERSEY: The "rule of reason" analysis, rather than a "per se" approach, is required for restraint of trade claims alleging CONSPIRACY to damage or eliminate a competitor by unfair means, and thus a distributor's failure to establish probable or actual injury to competition caused by a processor's conduct precluded the imposition of liability upon the processor. Ideal Dairy Farms, Inc. v. Farmland Dairy Farms, Inc., 282 N.J.Super. 140, 659 A.2d 904, (N.J.Super.A.D. 1995).
NEW YORK: The plaintiff's allegations failed to state a claim for unfair competition arising out of miscellaneous business relations, where the complaint did not state the requisite elements of a confidential business relationship between the parties or indicate that the parties had entered a valid agreement to refrain from the alleged acts of unfair competition. Ponte and Sons, Inc. v. American Fibers Intern., 222 A.D.2d 271, 635 N.Y.S.2d 193 (N.Y.A.D. 1 Dept. 1995).
OHIO: Actions under the state's deceptive trade practice and unfair competition law have been restricted by court interpretation of federal copyright law to lawsuits seeking to redress violations of a company's trade dress and labeling so as to prevent purchasers from being misled as to the source of goods. 17 U.S.C.A. § 301. George P. Ballas Buick-GMC, Inc. v. Taylor Buick, Inc., 5 Ohio Misc.2d 16, 449 N.E.2d 805, 1983 Copr.L.Dec. P 25,550, 5 O.B.R. 236 (Ohio Com.Pl., 1981).
WASHINGTON: A state court's issuance of an injunction against a national bank's use of a name was inconsistent with the authority of the COMPTROLLER of Currency to approve names for national banks, and thus the court's reliance on the state's law of unfair competition was preempted by the Comptroller's congressionally-approved discretion to approve bank names. National Bank Act, 12 U.S.C.A. § 30. Pioneer First Federal Sav. and Loan Ass'n v. Pioneer Nat. Bank, 98 Wash.2d 853, 659 P.2d 481 (Wash. 1983).
American Jurisprudence. West Group, 1998.
http://profs.lp.findlaw.com/copyright/index.html. FindLaw for Legal Professionals: Copyright Law.
http://www4.law.cornell.edu/uscode/17/index.text.html. Title 17 United States Code: Copyrights.
http://www.findlaw.com/01topics/23intellectprop/03trade mark. FindLaw for Legal Professionals: Trademark Law.
Intellectual Property in a Nutshell: Patents, Trademarks, and Copyright. West Group.
McCarthy on Trademarks and Unfair Competition. West Group, 2001.
West's Encyclopedia of American Law. West Group, 1998
Intellectual Property Owners Association
1255 23rd St NW # 200
Washington, DC 20037 USA
Phone: (202) 466-2396
Fax: (202) 466-2366
Primary Contact: Ronald E. Myrick, President
Recording Industry Association of America
1330 Connecticut Avenue NW, Suite 300
Washington, DC 20036 USA
Phone: (202) 775-0101
Fax: (202) 638-0862
Primary Contact: Hilary B. Rosen, Chief Executive
U. S. Patent and Trademark Office
Crystal Plaza 3, Room 2C02
Washington, DC 20231 USA
Phone: (800) 786-9199
Fax: (703) 305-7786
Primary Contact: Nicholas Godici, Director
Intellectual Property (Encyclopedia of Business)
A major component of what many posit is the emerging knowledge economy, intellectual property consists of items that represent the expression of ideas or intellectual pursuits and that are assigned certain rights of property. It is an intangible creation of the human mind usually expressed or translated into a tangible form. Examples of intellectual property include an author's copyright on a book or article, a distinctive logo design representing a soft drink company and its products, or a patent on the process to manufacture chewing gum. Intellectual property law covers the protection of copyrights, patents, trademarks, and trade secrets, as well as other legal areas such as unfair competition. Patents, trademarks, and similar business-oriented creations are sometimes known as industrial property.
The concept of intellectual property developed and evolved through its individual components. There is no history of intellectual property per se, but the history of trademarks, for example, extends back to the medieval period.
The laws protecting intellectual property in the United States exist at both the state and federal level. State laws cover a broad spectrum of intellectual property fields from trade secrets to the right of publicity. Laws differ somewhat from state to state. At the federal level, the Constitution and legislation cover patents, copyrights, and trademarks and related areas of unfair competition.
U.S. intellectual property laws were most recently modified through the Digital Millennium Copyright Act of 1998, which granted broader and more explicit protections to information on digital media, notably movies on digital versatile discs (DVD) and sound recordings. Greater protection of industrial designs was another provision of the legislation. The act also ratified the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty, two major new international treaties.
Intellectual property is recognized internationally through a system of treaties and international organizations. The most important organization is the World Intellectual Property Organization (WIPO), a special agency of the United Nations. Founded in 1967, the Geneva-based organization administers most of the current international treaties concerning intellectual property issues. The World Trade Organization, a trade dispute resolution and trade negotiation body founded in 1995, is also involved in certain intellectual property matters.
In the late 19th century, intellectual property protection at an international level became an important issue in trade and tariff negotiations and has remained so ever since. One of the first international treaties relating to intellectual property in the broadest sense was the International Convention for the Protection of Industrial Property, commonly known as the Paris Convention. First signed in 1883, the Paris Convention provided protection for such properties as patents, industrial models and designs, trademarks, and trade names. As of 1998, 151 countries had signed the Paris Convention, including several nations such as China that are often cited publicly as poor enforcers of intellectual property rights.
Two of the most important provisions of the treaty relate to the right of national treatment and the right of priority. The right of national treatment ensures that those individuals seeking a patent or trademark in another Convention country will not be discriminated against and will receive the same rights as a citizen of that country. The right of priority provides an inventor one year from the date of filing a patent application in his or her home country (six months for a trademark or design application) the right to file an application in a foreign country. The legal, effective date of application in the foreign country is then retroactively the legal, effective filing date in the home country, provided the application is made within the protection period. If the invention is made public prior to filing the home country application, however, the right of priority in a foreign country is no longer applicable.
The Paris Convention is supported by a number of additional treaties that provide for protection and registration of industrial property. Among the most important are the Madrid Agreement Concerning the International Registration of Marks (1891), the Patent Cooperation Treaty (1970), and the Hague Agreement Concerning the International Deposit of Industrial Designs (1925).
The central international agreement on copyright protection is the Berne Convention for the Protection of Literary and Artistic Works (1886). As of 1998, 133 nations were party to this agreement. The Berne Convention outlines principles of protection similar to those of the Paris Convention: 1) member states enforce copyrights originating in other member states; 2) copyright protection is automatic and not dependent on formalities of registration; 3) protection of a work in one country is independent of its protection status in its country of origin (until the minimum period of protection expires).
WIPO COPYRIGHT TREATY.
Because older copyright conventions were ambiguous concerning how computer software and electronic information would be protected, the World Intellectual Property Organization Copyright Treaty was concluded in 1996 to clarify the protections for ideas expressed via electronic media. This agreement was intended to eliminate potential loopholes and uncertainties regarding the protection of intellectual creations on electronic media and their various modes of dissemination, including the Internet. As of 1999 the treaty was not yet in effect because it hadn't been ratified by a sufficient number of countries.
Various industry and professional groups disagree about the ideal levels of intellectual property protection. Parties that tend to hold copyrights or patents, such as publishers, recording labels, and innovative manufacturers, usually favor strong property rights and stiff penalties for violators. Meanwhile, some users of copyrighted or patented goods, including consumers, libraries, and educators, favor looser regulations so that one party's commercial interests don't override the fair use and intellectual freedom of others. A number of free-speech advocates go further, suggesting that copyrights shouldn't be viewed as property at all, but as protected free speech that cannot be censored economically or otherwise.
SEE ALSO: Intangible Assets; Intellectual Capital
Elias, Stephen, and Lisa Goldoftas. Patent, Copyright & Trademark: A Desk Reference to Intellectual Property Law. 2nd ed. Berkeley: Nolo Press, 1997.
Guthrie, Lawrence S., III. "Copyright: Free Speech or Property Right?" Information Outlook, August 1997.
Miller, Arthur R., and Michael H. Davis. Intellectual Property: Patents, Trademarks, and Copyright in a Nutshell. 2nd ed. St. Paul, MN: West/Wadsworth, 1990.
Reid, Calvin. "AAP Hails WIPO Bills; Libraries, Consumer Groups Voice Opposition." Publishers Weekly, 22 September 1997.
Roos, Johan, ed. Intellectual Capital: Navigating in the New Business Landscape. New York: New York University Press, 1998.
World Intellectual Property Organization. "What Is WIPO?" Geneva, Switzerland, 1998. Available from www.wipo.org.