If you are the founder of a tech company it goes without saying that IP is something you think about often. But, even if you are an employer, employee, or small business owner, IP issues will eventually keep you up at night.
The law around intellectual property (IP) is incredibly dense and complex - ahem patent law. BUT that doesn’t mean you can't distinguish between the four types of IP protection (copyright, trademark, trade secret, and patent) . It also doesn’t mean that you can’t quickly grasp what your rights are. Or identify which type of IP is implicated in your situation, no matter what your situation is.
What are the areas of IP?
Without a doubt you have heard this term thrown around. But what exactly is a copyright and what does it protect?
A copyright protects “original works of authorship.”
This includes literary, dramatic, musical, architectural, cartographic, choreographic, pantomimic, pictorial, graphic, sculptural, and audiovisual creations.
As the media on which artistic and intellectual works are recorded have changed with time, copyright protection has been extended from the printing of text to many other means of recording original expressions like motion pictures and audiovisual works.
A copyright grants a bundle of rights to a creator, whereby, for a limited period, the exclusive privilege is given to that person to make copies of the same for publication and sale. Copyright owners have the right to control the reproduction of their work, including the right to receive payment for that reproduction. An author may grant or sell those rights to others, including publishers or recording companies.
Violation of a copyright is called infringement. To prove infringement there are three factors (1) ownership (2) copying in fact and (3) wrongful copying.
Everyone loves a good secret, But how does this apply in a business context.
A trade secret is any valuable commercial information that provides a business with an advantage over competitors who do not have that information.
In general terms trade secrets include inventions or ideas that are used by a business to make itself more successful. It is information that is not generally known or readily ascertainable by the public. Whatever type of information is represented by a trade secret, a business must take reasonable steps to keep the secret a secret.
Below for a deeper dive into protecting your Trade Secrets when employees LEAVE.
Think McDonalds or Burger King . . .
Trademarks are simply words or combination of words, or symbol that indicates the source or ownership of a product or service.
They are distinctive symbols of authenticity through which the products of particular manufacturers can be distinguished from those of others.
People rely on trademarks to make informed decisions. A trademark acts as a guarantee of the quality and origin. A competing manufacturer may not use another company's trademark. The owner of a trademark may challenge any use of the mark that infringes upon the owner's rights.
As you can see in the chart above these offer some Serious Protection, but are VERY expensive for startups and founders.
A patent grants the patent holder the exclusive right to exclude others from making, using, importing, and selling the patented innovation for a limited period of time.
The reasons for this limited monopoly is to encourage people to spend their time, money, and energy to develop something we may all benefit from.
But the deal is a stiff one. In exchange for this limited monopoly you have to disclosure the patented information (i.e. your idea). Once the term of protection has ended, the patented innovation enters the public domain (goodbye trade secret).
To patent something there are five requirements:
Patentable subject matter,
Where do your IP rights come from
The US Constitution - Article I, Section 8, Clause 8 authorizes Congress “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”
Patent Act (1952)
Copyright Act of 1976
Trademark Act of 1946 (the “Lanham Act”)
IP are largely statutory doctrines
Limited copyright protection
Extensive state protection for trademarks and trade secrets
As stated above, a trade secret is any valuable commercial information that provides a business with an advantage over competitors who do not have that information.
In general terms trade secrets include inventions or ideas that are used by a business to make itself more successful. It is information that is not generally known.
While employee is employed, the employer needs them to know enough to allow them to be efficient at their job, but not so much that if they leave they will are dangerous.
Ways to Limit employee post-departure activity
NDA/Confidentiality Agreement – An NDA in this contexts is a contractual agreement by employee to employer contractually agreeing not to disclose company secrets. Usually, if there is a chance there is a trade secret, courts will enforce the NDA.
Assign IP Rights During Employment – Ownership of the idea turns on the employee’s employment status. Below are a couple of hypothetical situations:
If employee was hired to invent – employer owns invention, e.g. consultant.
If employee invents on employer's time or using its resources, IP rights belong to the employee, but employer has nonexclusive right to use it w/out licensing it.
Employee invents on his own time – employee has full rights to invention.
Invention Assignment Agreements - Agreements between employee and employer getting around the default common-law rules. However watch out for Freedom to Create Statutes. These can eliminate employer’s ability to make invention assignment agreements.
Trailer clause - Are contractual agreement stipulating that for a period after employment ends, any invention by former employee belongs to employer. Usually are for a very short period of time i.e. months.
Non-Competition Agreements – Restricts former employees ability to work for a competing company. Unenforceable in some state i.e. California, even if signed in another state with a choice of law provision
Non-solicitation Clause – employee promises not to steal employees and or clients. This is not about competing with the business, rather about stealing other employees.
What do you get if you win
Injunctions - Ends when info becomes public or would have become public.
Royalties - Instead of inunction, courts can require royalties for use of the trade secret.
Damages - Actual damages plus unjust enrichment. There is the potential for treble damages for willful appropriation.
This article was written by Curtis Roberts, an attorney at The Founder's Attorney.
If you have any questions or suggestions please send them to firstname.lastname@example.org.
This article is for general information and entertainment purposes only. The views of the author are their own and do not represent the views of The Founder's Attorney. The information presented should not be construed to be formal legal or financial advice nor the formation of a lawyer/client relationship or any fiduciary duty.