© Copyright 2010 Saul Ewing LLP Intellectual Property American Style Mark D. Simpson Saul Ewing LLP...

© Copyright 2010 Saul Ewing LLP

Intellectual PropertyAmerican Style

Mark D. Simpson

Saul Ewing LLP

Philadelphia, Pennsylvania USA


Saul Ewing

• Philadelphia based business law firm with 9 offices from Washington DC to Boston

• Focus is on the needs of business clients: all aspects of IP, corporate issues, M&A and associated due diligence, employment, environmental, insurance, litigation


Who am I?

• IP Attorney since 1988• US Patent Examiner (one year)• Practiced as an Engineer prior to law school• Represent clients of all sizes, worldwide, with

present focus on European clients

• [email protected]


Overview

• Different types of IP and how to protect them

• Exploiting your IP

• Freedom to operate

• Enforcing your IP

• Business issues


Creativity

• Creative projects create intellectual property– Property rights

• Creative projects use intellectual property– Liability!

• Must be aware of and consider both


Types of IP

• Copyright

• Trademark

• Patent

• Trade Secrets


Copyright Basics

• Copyright protects “original works of authorship”

• Many different types of works protected– Literary works– Musical works (including lyrics)– Dramatic works (including accompanying music)– Pantomimes & choreography– Pictorial, graphic, and sculptural works– Motion pictures and other audiovisual works– Sound recordings– Architectural works


Copyright Basics

• “Works” should be viewed broadly

• Example – a “literary work”:


Copyright Basics

• How is copyright in a work secured?– Automatically, as soon as it is fixed in a

tangible form of expression• Translation from legalese to English: the first

time it is in a form you can hold in your hands or can be visually perceived by something you can hold in your hands (e.g., a computer)


Copyright Basics

• Who owns the copyright?– Initially, the “author”

• A company can be the “author” if it is created as a “work for hire”

– Within scope of employment– If created by a contractor, can be work for hire under

certain circumstances

– Author can assign to another


Copyright Basics

• Copyright does NOT protect:– Works not fixed in a tangible form– Titles, names, short phrases, slogans– Ideas, methods, concepts– Work that is essentially common property

and containing no original authorship• Example – a standard calendar


Copyright Basics

• Copyright Notice– Not required but highly recommended– © 2011 Partnership of ABC

– © 2011 ABC Inc.

– (C) 2011 ABC Inc.– Copyright 2011 ABC Inc.


Copyright Basics

• Copyright Registration– Legal formality making a public record of a

copyrighted work– Not required, but beneficial:

• Must be registered to file suit• Certain damages unavailable if infringement

occurs before registration


Trademark Basics

• Trademark vs. Service Mark• Word, phrase, symbol design, that identifies and distinguishes

the source of goods/services of one party from those of others• Trademark rights are established by USE of the mark in

connection with goods/services.• Like copyright, registration is not required, but gives certain

benefits:– Public notice

– Essentially “reserves” rights in the mark nationwide

– Access to Federal Courts



Trademark Basics• Who owns the mark?

• Trademark rights created by use of mark with goods/services

• Creator of the mark can contract to be paid for creativity involved in creating the mark, but trademark rights belong to user

• Logo design could be copyrightable artwork– Initial ownership goes to “author”


Trademark Basics

• Can use “TM” or “SM” designation with mark to indicate common law rights (optional)

• Can use ® ONLY if mark is federally registered

• Don’t confuse trademark registration with registration of business name with state


Trademark Basics

• Basic test for gauging infringement is likelihood of confusion by consuming public


Trademark Basics

• Basic test for gauging infringement is likelihood of confusion by consuming public


Trademark Basics

• Searches (Clearance)– Screening or “quick and dirty” search

• Web-based search engines• U.S. Patent & Trademark Office website

– Comprehensive search• Various companies perform searches of

publications, trade journals, advertising, phone books, multiple databases


Design Patents

• Protect the aesthetic look of an article of manufacture– Ornamental features– Should be considered for articles that

have a “trendy” look to them (those likely to be “knocked off”)



Utility Patents

• Protects how something works and/or how it is made

• Contrasted with Design Patent, which protects how something looks.

• Most common form of patent sought in the U.S.




Patent ownership• Initially the inventors own the patent

rights• May be assigned to an entity or individual(s)• If no agreement as to ownership, common law

may determine– Employed/contracted to invent specific thing?– Employed to invent generally?– Employed for other non-inventive services?


Trade Secret Basics• A trade secret, as defined under 18 U.S.C.

§ 1839(3) (A), (B) (1996), has three parts:– (1) information;– (2) reasonable measures taken to protect the information;– (3) which derives independent economic value from not

being publicly known

• Generally protected by contracts– Non-disclosure agreements– Non-compete agreements

• Must establish procedures/protocols to maintain secrecy


Trade Secret Basics• Benefits

– Long-lasting; no fixed duration, just must be kept secret– No “examination” to determine if it is protectable– No registration costs (per se)– Effective immediately

• Downsides– Can be reverse engineered– Once known, anyone can use it– Harder to enforce– Potential exists for it to be patented by another who

independently invents it


Exploiting Your IP

• Barrier to entry by others– “Corner the market”

• Licensing

• Assignment/Sale


WHAT IS A LICENSE?

• Grant of a right to use something the licensor controls.

• Control generally comes from law that gave the licensor exclusive rights:– Copyright law (works of authorship)– Patent law (inventions, methods, processes)– Trademark law (names & marks)– Trade secret law (trade secrets)


WHAT IS A LICENSE?• Licensing allows the owner to retain

control while allowing use.

• Licenses can be– Exclusive or non-exclusive– Temporary or perpetual– For limited or unlimited locations or uses– For a one-time charge, ongoing fees, or free– With or without a right to sublicense– Subject to few or many conditions


SOME VARIETIES OF IP LICENSING

• Software licensing

• Other copyright-centered licensing– Audio, video, music, graphics, multimedia

• Patent licensing

• Trade secret licensing

• Trademark licensing


Basis For Copyright License

– Exclusive statutory rights of copyright owner under Copyright Act §106 as basis for license grants:

• Reproduce• Prepare derivative works• Distribute copies or recordings• Perform publicly• Display publicly• Transmit by digital audio


Basis For Copyright License

• A bundle of severable rights that can be licensed separately

• License slices more thinly:– Use– Make– Install– Operate– Compile– Execute– Reproduce– Distribute– Transmit– Display– Perform


Basis for Patent License

– Exclusive statutory rights of patent owner as basis for license grants

• Make• Have made• Use• Sell (Offer for sale)• Import

– Bundle of rights is again severable


LICENSING NEGOTIATION IS ALWAYS ABOUT...

• Scope

• Control

• Accountability – Both ways

• Payment


Licensing Generally

• Licenses can be– Exclusive or non-exclusive– Temporary or perpetual– For limited or unlimited locations or uses– For a one-time charge, ongoing fees, or free– With or without a right to sublicense– Subject to few or many conditions


THE LICENSOR WANTS TO...

• Get paid early and often• Minimize its own duties• Control licensee’s use & sublicensing• Keep licensee paying and paying


THE LICENSEE WANTS TO...

• Act & sell freely, so long as it pays & accounts to Licensor.

• Minimize its own duties


SCOPE

• To do a deal you need to unravel, as to both technology and data :– Who is creating/supplying/using?– What is being created/supplied/used?– Why is it being created/supplied/used?– When and Where will it be created/supplied/used? – How will it be created/supplied/used?– What If something goes wrong?


CONTROL

• Who can use the licensed product?– When?– Where?– For what?– How much?– How long?


CONTROL

• What’s prohibited or limited?– Excess use (if fee is based on usage)– Copying– Reverse engineering– Sublicensing– Assigning or transferring


LICENSOR ACCOUNTABILITY

• What warranties? How long?

• Express warranties– Conformity to specifications &

documentation– Defects– Infringement

• Implied warranties– Usually disclaimed


LICENSOR ACCOUNTABILITY

• Maintenance and support– Often a separate agreement

• Service levels– Response time– Availability– Performance

• Service credits for failure to meet standards


LICENSEE ACCOUNTABILITY

• Can the Licensor audit?– Usage (or whatever measurement matters)– Resales & sublicenses– Units produced


PAYMENT

• What entitles the Licensor to payment?– Contract signing? . – Delivery? .– Milestone acceptance? .– Resale/sublicense? .

• One-time license fee or ongoing “subscription” or royalties?

• How are payments calculated?


CONFIDENTIALITY• Technology licenses have

always presented trade secret issues.– NDAs

• More recent focus on security, privacy, data protection


Trademark and Trade Secret Licenses

– Like other forms of license, they focus on a contractual arrangement that clearly sets out the terms

• Trademark licenses must give trademark owner the right and ability to inspect use of the mark on a regular basis (and that inspection should be done!)

• Trade secret licenses must protect against disclosure of the trade secrets


Freedom to Operate• Basically, can I make/use/sell a product

or use a method without infringing the rights of another?– Variable in scope (and thus cost!)

• Broad scope (the sky is the limit)• Mid-level scope (limited to competitors)• Narrow scope (limited to one or a couple of

known patents


Freedom to Operate• What it involves:

– Identify body of patents– Determine what the claims mean

• Must look at arguments made during patent process to see if patentee made arguments that now limit the meaning of the claim language

• Look to litigation involving patents

– Identify what the product/method is– Conduct element-by-element comparison of

product/method with claims


Freedom to Operate• What it gets you:

– Can protect against finding of willful infringement– Can be used to give some level of reassurance to

customers that what you are selling them will not be infringement of the identified patents

• But consider potential for waiver of attorney/client privilege

– Possibly help you sleep at night


Enforcement• Infringement analysis

– Freedom to operate in reverse– Evaluate strength of position– Consider what are acceptable outcomes

• License?• Sale/Assignment?• Injunction• Damages


Enforcement• Informal discussions

• Cease & Desist

• Arbitration/Mediation

• Litigation


Business Issues

• Ray Agran – [email protected]

• Elizabeth Mullen – [email protected]


Business Issues• Much revolves around tax issues

– The US inbound tax system is designed to tax a non-US person on income it earns from its activities or investments in the US

– At the same time, the system offers certain incentives to attract foreign investments into the US

– It is important to understand the types of income that a non-US person will earn from US activities in order to quantify potential tax exposure and identify available offsets


Business Issues• Much revolves around tax issues

– The US inbound tax system is designed to tax a non-US person on income it earns from its activities or investments in the US

– At the same time, the system offers certain incentives to attract foreign investments into the US.


Business Issues• Federal laws

– US taxation of a non-US person is based in large part on the extent of the person’s presence in the US and the nexus of any income earned through the US

– A non-US person who is “engaged in a trade or business within the US” will pay tax on any income that is “effectively connected” to that trade or business (these are terms of art that find their meaning in judicial precedent)


Business Issues• State Laws

– States have the authority to tax non-US persons on income earned within the state and these taxes are often overlooked in the planning process

– The taxes themselves and the methods by which they are levied will differ from one jurisdiction to the next:

• Franchise tax

• Net Income

• Net worth

• Sales

• Real Property


Business Issues• Choice of entity

– The appropriate form of entity will depend in large part of the type of activities a non-US person expects to conduct in the US, the tax implications of those activities, and the non-US person’s exit strategy

– A tax attorney will want to understand your proposed business in order to advise on the preferable forms of entity



– If a separate entity is favored, the foreign business will need to decide whether to use an entity that is a corporation or a flow-through (such as a partnership or limited liability company)

– All of the income of a US corporation is taxed in the US and must be reported on a US tax return.



– If a flow-through entity (where the income and associated tax liability literally flow through to the owners) is chosen, the foreign owners may be treated (and taxed) as if they are engaged in the entity’s US trade or business and must comply with certain personal filing requirements, in addition to the filings required of the flow-through entity itself

– In addition, payments made by a US entity to a foreign person (e.g., an owner) are usually subject to US withholding tax, even if the foreign person is not engaged in a US trade or business. The rules regarding withholding are complicated and have various exceptions that a non-US person should be aware of when considering formation of a US entity


Business Issues• Miscellany

– There are treaties between the UK and US that provide incentives for conducting business in each country

– There are governmental agencies and offices that assist with the conducting of business by non-US entities in the US.

– BEST PRACTICE IS TO CONSULT TAX AND CORPORATE EXPERTS BEFORE JUMPING IN


Questions?


DISCLAIMERThe content of this seminar/webinar and the presentation materials have been prepared by Saul Ewing for information purposes only. The provision and receipt of the information in this seminar/webinar and the presentation materials should not be considered legal advice, does not create a lawyer-client relationship, and should not be acted on without seeking professional counsel who have been informed of the specific facts. Should you wish to contact a presenter to obtain more information regarding your company's particular circumstances, it may be necessary to enter into an attorney/client relationship.


CONTACT INFORMATION

Mark D. Simpson

Saul Ewing LLP

Centre Square West

1500 Market St., 38th Floor

Philadelphia PA 19102

Phone: 215.972.7880

Fax: 215.972.4169

Email: [email protected]


BaltimoreLockwood Place

500 East Pratt Street, Suite 900 Baltimore, MD 21202-3171

(tel) 410.332.8600(fax) 410.332.8862

Chesterbrook1200 Liberty Ridge Drive, Suite 200

Wayne, PA 19087-5569(tel) 610.251.5050(fax) 610.651.5930

HarrisburgPenn National Insurance Plaza

2 North Second Street, 7th FloorHarrisburg, PA 17101-1619

(tel) 717.257.7500(fax) 717.238.4622

New York245 Park Avenue, 24th Floor

New York, NY 10167(tel) 212.672.1995(fax) 212.372.8798

NewarkOne Riverfront PlazaNewark, NJ 07102(tel) 973.286.6700(fax) 973.286.6800

PhiladelphiaCentre Square West

1500 Market Street, 38th FloorPhiladelphia, PA 19102-2186

(tel) 215.972.7777(fax) 215.972.7725

Princeton750 College Road East, Suite 100

Princeton, NJ 08540-6617(tel) 609.452.3100(fax) 609.452.3122

Washington2600 Virginia Avenue, N.W.Suite 1000 – The WatergateWashington, DC 20037-1922

(tel) 202.333.8800(fax) 202.337.6065

Wilmington222 Delaware Avenue, Suite 1200

P.O. Box 1266Wilmington, DE 19899

(tel) 302.421.6800(fax) 302.421.6813

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