PREVENTING UNAUTHORIZED DISTRIBUTION OF INTELLECTUAL PROPERTY OVER THE INTERNET:
A CASE STUDY ON INTELLECTUAL
PROPERTY PROTECTION STRATEGIES FOR WEBSITES
PRESENTED TO A JOINT PROGRAM OF THE ANTITRUST LAW,
COMPUTER LAW, CORPORATE AND BANKING (BUSINESS) LAW, AND INTELLECTUAL PROPERTY
LAW SECTIONS OF THE
PRESENTED BY
BERNSTEIN & ASSOCIATES, PC.
770-671-1755 TEL
770-671-1161 FAX
1. Introduction
A. This presentation is designed for attorneys and those professionals who advise or are involved with websites as well as the use of websites and the Internet to distribute products and/or services. This presentation will present a case study of a hypothetical company and its business model. We will use it to explore the various intellectual property issues that commonly arise. Suggested questions to ask the company are included to discover any problems, and typical actions are suggested that will lead to enhanced protection of the intellectual property in the website. A number of links to websites of interest are provided in the hope that this paper may be used as a reference as well as a roadmap toward a better understanding of the journey from inception to success of your client’s website.
B. Much of the discussion and strategies apply to your firm’s or company’s own website, regardless of whether you offer products or services for sale on the site.
2. Hypothetical client: Your client calls/walks in and says they have a new Internet website, www.reptilewarehouse.com. The site is designed for selling and distributing over the web a new product line to herpaphiles (reptile lovers) of live food (rats, mice, rabbits, crickets, etc.) for reptiles. Their question to you is how can they protect it and make millions of dollars.
3. What exists to date:
A. One domain name reserved
B. Logo and word trademark developed
C. Website (graphics, content, layout and code) developed by an outside website developer acting as an independent contractor.
D. The company believes it has a new and proprietary ecommerce method of processing orders and distributing product cheaply, reliably and quickly by using independent rodent breeders in the geographic locale of customer and matching up the breeder and customer for timely shipment.
4. What does the client want?
A. Develop a market advantage by being first
B. Great looking website
C. Protect against others stealing the business method “idea”
D. Sell product
E. Get advertising revenue by using banners and other advertising
F. Create value in the company
G. Exclude others from competing as long as possible
H. Cash out by selling company or going public
I. Franchise
5. How to create value in a website business model
A. Develop a market by understanding what customers want, create a perceived need for it, and fulfill the need (market research)
B. Develop a novel concept (innovation)
C. Protect the intellectual property in the website (legal)
D. Develop strong branding/identity (trademark)
E. Get a patent or patent pending which can add to the value of the company and create a perceived obstacle to potential competitors entering the same business(legal).
F. Develop strategic partnerships and alliances to raise additional money, acquire other resources, improve marketing/technology clout, cache, or to fill a gap in the business model (business).
6. Ways to protect a website
A. Patents
i. You can protect the software and the method of doing business that is the core of the website technology. See State Street Bank and Trust Co. v. Signature Financial Group, Inc.,149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 119 S.Ct. 851 (1999), which held:
The transformation of data by a machine applying a series of mathematical calculations, formulas, or algorithms into numbers is a practical and thus patentable application only where it produces “a useful, concrete and tangible result.” An example of a useful concrete and tangible result is a “a final share price momentarily fixed for recording and reporting purposes and even accepted and relied upon by regulatory authorities and in subsequent trades.” Mere “inputting numbers, calculating numbers, outputting numbers, and storing numbers” or using a “mathematical formula, computer program or digital computer” does not make something unpatentable subject matter. [Emphasis added]
ii.
See patents recently issued to amazon.com,
priceline.com and ebay.com. See also the recent lawsuit filed by Amazon against
iii.
When to file: You must file a patent application prior
to any public disclosure, e.g., the website becoming active, or offer for sale
of the “invention.” This will preserve foreign patenting possibilities. If only
iv.
Cost to prepare and file a
B. Trademarks
i. Trademarks serve as a designation of the source of a product or service and serve as an indication of the quality of that product or service.
ii. Types: Word (The Home Depot), slogan (It’s the Real Thing), logo (the UPS logo), artwork (the Wise potato chip owl), sound (the NBC chimes, Harley-Davidson’s motorcycle sound [registration attempted]), color (pink for fiberglass insulation), product configuration (the Coca-Cola bottle), and trade dress (IHOP’s rooftop design and color). Note: Just having a domain name (“URL”—universal resource locator) and using it as the company’s Internet “address,” is not likely to be valid trademark use. To establish valid use which would support a trademark registration, use the URL in the body of the website or in advertising as a trademark. See, for example, amazon.com., priceline.com, etc.
iii. Benefits of federal trademark registration
a) Marks registered on the Principal Register provide constructive notice in all fifty states of the existence of the mark, regardless of whether the product is actually sold in a particular area. Registered marks provide the owner with the exclusive right to use the registered mark on or in connection with the named products and service and the ability to exclude those marks which would be “likely to cause confusion” with the registered mark.
b)
Lanham Act protection is available, which provides
access to the federal court system for relief. See http://fedlaw.gsa.gov/fedfra23.htm
for the Lanham Act online. Injunction and damages are the main remedies. As an
example, see Trovan Ltd. v. Pfizer, Inc., CV:98-0094 LGB (MCX) (
c) Registrations are issued for ten years, and are renewable for additional ten year periods indefinitely, as long as the trademark is still in use by the owner. E.g., Coca-Cola has been a registered mark for over one hundred years.
d) Always have a trademark search done prior to adopting and using the mark commercially. With so many registrations and trademarks being used, the likelihood of another mark existing which is likely to be confused by your client’s mark is increasing. Encourage your client to avoid the pain of changing a trademark after it has been launched on the product by having an opinion provided on both the use and registrability of the desired trademark. A recent case awarded a drug company over $100 million in damages for trademark infringement. You can do a search at the Trademark Office website (http://trademarks.uspto.gov/access/search-mark.html), but, a warning: the search engine does miss marks that exist. If you do not find the mark, do not assume that it is not registered. A full search should be done to make sure.
iv. Trademarks are proper adjectives and are always capitalized. Trademarks always modify a noun: e.g., Macintosh™ computers. Never say: “We sell Macintoshes.”
v. Trademarks refer to products, service marks refer to services. The protection is the same, the names are an artifact of history.
vi. Use the proper trademark notice (™ for products, sm for services) if the mark is not yet registered with the U.S. Trademark Office; use the “®” symbol if it is registered. If there is a state registration only, use ™ or sm.
vii. Trademark Notice
a) The trademark notice of ownership should be on the website. E.g., “Reptile Warehouse, Reptile Warehouse.com, the RW logo are trademarks of Reptile Warehouse, Inc.”
b) If the site uses the trademarks of others, give proper attribution. Often, this kind of notice is in a separate web page shown by a hyperlink on the website home page so as not to clutter up the main web page. E.g., “Microsoft® PowerPoint® and the PowerPoint logo are registered trademarks of Microsoft Corporation.”
c)
Disclaimer of affiliation: Use a disclaimer when you
want to positively disassociate the company and the website from that of
another company and you are concerned about the possibility of the owner coming
after your client. See, Playboy
Enterprises, Inc. v.
C. Copyrights
i. Copyright protects the expression of an idea, not the idea itself. Copyrights exist from the moment the expression of someone’s idea is fixed in a tangible medium (www.loc.gov/copyright/title17 or www4.law.cornell.edu/uscode/17 are websites for 17 U.S.C.).
ii. Registering the copyright provides benefits:
a) Access to the federal courts predicated on obtaining a registration certificate. Registrations can be obtained on an expedited basis for an additional filing fee of $500.
b) Statutory damages for infringement of up to $20,000 per work infringed (there is pending legislation to increase this to $30,000). 17 U.S.C. §504. Statutory damages are available only if the work created is timely registered (see below).
c) Enhanced statutory damages of up to $100,000 (there is pending legislation to increase this to $300,000) if the infringement is willful, and attorney fees. 17 U.S.C. §505.
iii. When to register:
a) Initially: Prior to the website becoming active, or prior to the first publication or distribution of the work created, or within 3 months of first publication or distribution. If the work is registered within this time frame, statutory damages may be available. If registration is later than this time, statutory damages may be unavailable, and you would have to prove actual damages. An injunction is still an available remedy, in either case.
b) Subsequent versions: Reregister protectable aspects when there are substantial changes or when significant content or graphics are added. Register the software when it has undergone significant upgrades, modifications, or additional functionality has been created.
iv. What to register: Artwork, graphics, photographs, text, animation and source code.
See Circular 66 at http://lcweb.loc.gov/copyright/circs/circ66.pdf.
v. The registration forms are downloadable in .pdf format at http://www.loc.gov/copyright/forms.
vi. Copyright assignment: Must be in writing to be effective. Works made-for-hire are a narrow statutory definition. Do not assume anything is a work “made-for-hire” under 17 U.S.C. §101 just because the creator was not a conventional W-2 type employee, because there is a reverse presumption in copyright law: if the creator is not definable as an “employee,” but, is determined to be an independent contractor, the work is owned by the independent contractor (the customer may have a nonexclusive license in the work). This is true even if there was money paid for the creation. The only way to transfer ownership of the copyright is do have a written assignment. This assignment can be recorded with the Copyright Office.
D. Trade secrets
i. Defined by Georgia statute as: “information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information: (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” See O.C.G.A. 10-1-760 et seq.
ii. There may be trade secret protection for the software, algorithms, method of doing business, data or other aspect of the website or the methods and mechanics behind the website.
E. Agreements
i. Secrecy (nondisclosure) (between company and website developer to protect any sensitive information that the company might share).
ii.
Employment—with the assignment of the employee’s rights
in any inventions, trademarks, copyrightable works, trade secrets, and
confidential information. Be aware of the limitation that you can have the
employee assign inventions made during the course of and in the scope of the
employee’s employment. You cannot overreach to non-work related or created
inventions created on the employee’s personal time. Be aware of
iii. Website development
iv. Assignment of rights
v. Independent contractor
vi. Content license
vii. Software license
viii. Permission to use
ix. Domain name transfer
x. Terms of use: An agreement defining and restricting the website user’s ability to use the site and the information in it. Often used for sites where there is informational or reference content, third party content, chat or user discussion areas, sale/license of software, database information, etc.
7. What aspects of a website are protectable
A. Domain name
i. Have a qualified trademark attorney do a trademark search first before registering the name, not just a domain name search. Network Solutions, Inc. (or other domain name registering company) will register a domain name that is even only slightly different than a previously registered domain name. Also, be aware of possible dilution claims to famous marks.
ii. Register the domain name as soon as possible. See www.networksolutions.com to see if a domain name is available and to register it.
iii. Recommend that similar names be registered to protect around the main name, as well as registering .net and .org variations. E.g., also register www.reptilewherehouse.com, and www.reptilewearhouse.com.
iv. If there is any likelihood of getting criticism about the company’s product or service, consider registering http://www.reptilewaresucks.com, www.reptilewarehousesux.com and www.reptilewarehousestinks.com. By registering the negative names, you can block someone from using them. Not always advisable, but a growing number of complaint websites are popping up. See the sites set up for complaints against Wal-Mart case for www.walmartsucks.com, and www.ballysucks.com, the latter of which was the subject of a case that held that such websites were protected by the First Amendment free speech and by fair use of the trademark.
v. Your client usually cannot use someone else’s trademark in their domain name (but, see above for fair use cases). Your client can be sued for trademark infringement.
vi. Internic has a dispute resolution policy. See: www.networksolutions.com/legal/dispute-policy.html. But, be careful in trying to navitate through their red tape, there are may pitfalls.
B. Graphics
i. If original artwork
a) Copyrightable
b) Trademarkable if it acts as a “designation of source or origin” and is used on or in connection with the product or service when sold.
c) The .gif file which defines the artwork in computer code terms may be protectable even if the artwork itself may not be protectable.
ii. Questions to ask your client
a) Where did the artwork come from?
(1) Created by
(a) Website designer, or
(b) Website designer’s artist/subcontractor
(c) Company (your client)
(2) Copied from another website or source
b) Was an assignment, license, permission, or release obtained in writing?
iii. Actions
a) Get assignment from designer and the subcontractor artist directly, if you are not positive that the designer got proper assignment from the artist, who is likely an independent contractor.
b) If by company employee, then it is a “work made-for-hire,” but, the company nevertheless should have an employee agreement with an assignment of rights.
c) If copied, get permission, or it may be copyright infringement.
d) Make sure that the website designer has written obligations in their subcontractor agreement to obtain from the subcontractor the rights on the company’s behalf.
e) Make sure that the assignment will permit the company to use the material in any medium, so that the company can use the material in print or other media.
C. Photographs
i. Questions to ask your client
a) Who took the picture?—assignment, release or license needed
b) Who is in the picture?—may need release or permission; right of privacy or publicity issues
c) Who created the .gif file?—get assignment
ii. Actions: Get assignment, permission, license or release, as appropriate
D. Website source code
i. Copyrightable
iii. Questions to ask your client
a) Who developed the source code?
b) Are there any written obligations, e.g., secrecy, assignment, noncompetition?
iv. Actions
a) Get assignment in writing
b) Register copyright
E. Metatags
i. Advise client about using someone else’s trademarks or protectable names as metatags.
ii. See, for example, the metatags at www.foodtv.com.
iii. See Oppedahl & Larson v. Advanced Concepts et al. and Brookfield v. West Coast cases. You can’t use someone else’s trademark to divert traffic to your website. You may get sued for trademark infringement and possibly unfair competition.
i. You can have certain keyword text in the website be invisible to most viewers by making the text color the same as the color of the background. This text will be picked up by the search engines and will be used to “rank” your client’s website in search engines (e.g., Yahoo®, Lycos®, etc.). Same prohibition as with metatags re: trademark infringement.
b) You cannot assign an intent-to-use trademark application until an Amendment to Allege Use or a Statement of Use is filed. If you assign in violation of this rule, the trademark application may be voided.
c) Whenever you assign a trademark always assign the good will associated with the mark. This is true even if the assignment is part of a security interest document.
d) Record the assignment promptly with the U.S. Trademark Office ($40 recordation fee, plus the PTO form cover sheet required).
e)
In your assignment document, specify that what is being assigned is the mark and good will, as well as any
i. Advantages
a) The patentee gets the exclusive rights, effective upon issuance of the patent, for 20 years from the date of filing to exclude others from making, using, selling or offering for sale the patented invention.
b) A patent can be much broader protection than a copyright registration.
c) The patent statutes permit recovery of damages (no less than a reasonable royalty; lost profits are possible), and, if an infringer’s acts of infringement are willful, the damage award can be trebled. Recovery of attorneys fees is also possible.
35 U.S.C. can be found at www4.law.cornell.edu/uscode/unframed/35/index.html.
ii. Disadvantages
a) Cost—not inexpensive (can be in the range of ~$10,000 – 20,000 from application to issuance if no significant obstacles encountered, for a method of doing business or software invention)
b) Time—averaging 1˝-2 years to obtain a patent, if one issues. In fast paced technology environments, the invented technology may be obsolete within 2 years.
c) Issued patents in the business methods and software areas are more susceptible to validity challenges because patentability searches are difficult to perform accurately and comprehensively in this new area. Also, the technology may have existed in the marketplace previously.
iii. Points to be aware of
a) You must file a patent application prior to the website becoming active or any other disclosure of the method to others outside of a secrecy agreement, if you want to preserve the foreign rights
b)
You must file a patent application within one year of
the website becoming active or any nonconfidential disclosure if you want to
only protect it in the
c) Need to have a patent attorney question the inventors to determine whether the method is patentable
d) Get assignments from everyone who had anything to do with the development of the method or software. Have the assignments executed (and notarized) as early as possible to avoid the headache of having to find an itinerant programmer who has left the company.
e) If there is a planned disclosure or bar date approaching rapidly, consider having a provisional patent application filed, which can be converted to a regular patent application (and foreign filings done) within one year after filing.
8. Agreements
g) Scripting tools/toolboxes that the website developer created prior to contracting with the company and that she will take with her (i.e., the company does not get copyright ownership of the developers toolbox).