Oregon State Bar Bulletin — NOVEMBER 2004

Legal Practice Tips
QUIET CAUTION
What you don’t say can hurt you
By Leonard D. DuBoff

It has been said that silence is golden, but, unfortunately, that is not always the case when attorneys are dealing with their clients. It is prudent to provide cautionary advice whenever possible.

Intellectual property has emerged as one of the most dynamic areas of modern law. Despite the specialized nature of this field, it is essential for every lawyer, regardless of the discipline in which she or he practices, to have some familiarity with general intellectual property principles and the potential traps for the unwary.

Trademark
Names, symbols, logos and combinations of these, when used to identify the sources of products or services, are within the purview of trademark law. In order to determine whether a trademark may legally be adopted by a business, it is essential to determine whether the name, symbol or logo is potentially protectable and whether the proposed trademark sounds like, looks like or is confusingly similar to a protected mark.

In ISCYRA v. Tommy Hilfiger, 80 F.3d 749 (2d Cir. 1996), the world-renowned clothing designer desired to use the words "Star Class" and a solid red, five-point star to adorn a line of nautical clothing products. The clothing designer’s attorney recommended that a full trademark search be conducted, but the client felt that it was not necessary and examined only marks in Class 25, a clothing classification. A full search would have revealed the International Star Class Yacht Racing Association’s use of the mark in the yachting context. The court said, "Willful ignorance should not provide a means by which [the defendant] can evade its obligations under trademark law." The case was remanded for additional findings on whether defendants acted in bad faith because of a failure to conduct an adequate search. Commentators have suggested that the Hilfiger case provides a clear message that intentional ignorance will not be tolerated.

It is not uncommon for clients to adopt a trademark or trade name without conducting an appropriate search. In these situations, stationery is purchased, signs are installed, advertising is commenced — and then a prior user of the trademark or one confusingly similar to it complains. At a time like this, it is obvious that the cost of an appropriate search, the loss of goodwill resulting from the change aside, would have been far less than the cost that will be incurred in changing the mark.

Therefore, it is clear that a prudent business lawyer should advise clients to conduct trademark searches before using any names, symbols or logos to identify products or services. There are a number of professional search firms listed in the Yellow Pages that can conduct the search for your client, and many law firms conduct preliminary searches in-house as well. A review of the Patent and Trademark Office’s website (www.uspto.gov) will aid in determining whether a trademark is registered, though it will not provide information on common law uses which may have priority.

Copyright
Virtually everybody deals with some form of copyrightable material. These include, among other things, art, literature, music, software, or, using the words of the statute, any "original work of authorship." All that the law requires is that the work be original, that it have some degree of creativity and that it be fixed in a tangible form.

Since Jan. 1, 1978, any copyrightable item is automatically protected by the federal statute once it is "fixed" and in a tangible form. Initially, the revised copyright statute required the work, when published, to have a copyright notice affixed to it, or the protection would be lost. In 1988, the law was amended when the United States became a party to the Berne Copyright Treaty. Section 401 of the Copyright Act was revised to make the notice provisions optional, and since March 1, 1989, when the Berne Convention Implementation Act took effect, the notice is no longer required.

Unfortunately, this is not the entire story. A prudent lawyer will advise clients that relying on Section 401 is dangerous for at least two reasons. First, Section 405(b) makes it clear that one who relies on the omission of notice may be deemed an "innocent infringer." Innocent infringers, according to the statute, may not be liable for damages and may even be permitted to continue their infringing activities. Section 401(d) provides copyright owners with the ability to defeat the defense of innocent infringement by having the appropriate copyright notice affixed to the work when it is published. It would, therefore, be appropriate to warn clients that the copyright notice is not required by the statute, but failure to use it on published copyrighted works can significantly undermine the protection afforded by the federal statute.

The second problem deals with registration. It is not necessary to register and deposit the copyrighted work with the Library of Congress unless the copyright has been infringed and you desire to file suit for infringement – the work is copyright-protected without registration. However, Section 411 makes it clear that a copyright owner may not file suit for infringement unless the copyrighted work has been registered. It is also prudent to register the copyrighted work when the Library of Congress, after discovering no work has been deposited with it after publication, requests that two of the best copies of the work be deposited with the Library of Congress. Failure to do so can subject the copyright owner to statutory penalties of up to $250 per work, the total retail price for this work, or the cost to the Library of Congress to acquire copies and a fine of $2,500.

One might conclude from this discussion that registration and deposit are not important unless the Copyright Office demands deposit or unless an infringement has occurred. Unfortunately, this is not the case, and a prudent lawyer should advise clients that delaying the registration of a copyright can be devastating.

Sections 502 through 505 of the statute provide copyright owners with a host of remedies when their rights have been infringed. These include the ability to recover actual damages, to obtain injunctive relief, and to obtain an order requiring that infringing works be destroyed. If and only if the work was registered before the infringement occurred, the statute provides for statutory damages in lieu of actual damages of no less than $750 and up to $30,000 per infringement, and if the infringement can be shown to be willful, up to $150,000 per infringement. With a copyright registered at the time of infringement, in addition to these remedies, the copyright owner may recover reasonable attorneys’ fees incurred in the litigation. Additionally, if the work is registered within three months of the date of first publication, the registration will be retroactive back to the date of first publication.

It is, therefore, clear that failing to promptly register one’s work may put the copyright owner in the untenable position of having to litigate a federal case without the possibility of being able to recover the attorneys fees incurred in the litigation. In addition, it is often the situation that actual damages are quite low because the infringement was discovered early on, thus, the recovery may be paltry. Without the ability to recover statutory damages in lieu of actual damages, protecting one’s copyright may be an expensive and unrewarding experience.

A prudent lawyer will, therefore, advise clients who deal with copyrightable material that use of a copyright notice, while not required, is nevertheless important and that registration of copyrighted works is important, even though it is not necessary for purposes of obtaining copyright protection.

Patents
An invention of a "new and useful process, machine, manufacture or composition of matter, or any new and useful improvement thereof" may be patented. The patent law makes it clear that a patent may only be applied for within 12 months of initial disclosure of the invention. This is referred to as the "on sale bar," and courts have clarified what "on sale" means for purposes of starting the one-year clock ticking. In Pfaff v Wells Electronics, the Supreme Court announced two conditions that, if satisfied, will start the clock running. First, the product must be offered for sale; and second, the invention must be ready for patenting. In Pfaff, an engineer showed a sketch of a concept for a new socket to Texas Instruments, and, though he made no prototype at the time, Texas Instruments placed an order. The Court considered the invention to have been "on sale" from the time of the offer.

It is, therefore, important for attorneys to advise clients who desire to obtain patent protection that an application must be filed within 12 months of the date the invention is disclosed or the right to obtain a patent will forever be lost. This situation gave rise to a new and interesting phenomenon. The www.bountyquest.com site allowed individuals or businesses wishing to obtain information about "prior art" to post that request and offer a bounty for the information. Anyone throughout the world who provided information establishing "prior art" would earn the reward, and the advertiser would be in a position to invalidate a patent. Bountyquest.com was extremely busy, and numerous offerings were posted. For some reason, this site has gone dark, but there are likely other similar posting ventures on the horizon.

In today’s world of rapid online communication, inventors desiring patent protection must be diligent. Before applying for a patent, a "prior art" search should be conducted to determine whether the invention is truly new and innovative, or whether rights have already been secured by somebody else. In addition, once a prior art search has been completed and it is determined that the invention is potentially patentable, an application must be filed within one year of initial disclosure. Prudent lawyers will alert their clients to these facts and, if the attorney is not licensed to practice before the Patent and Trademark Office, recommend that they work with a patent attorney or patent agent.

Trade Secrets
The Uniform Trade Secrets Act has been adopted in some form by virtually every state in the United States. Under that statute as adopted in Oregon, a trade secret is defined as information that derives economic value from not being generally known to the public or to other persons who can gain economic value from its disclosure and is the subject of efforts to maintain its secrecy. The law thus affords protection for anything which provides commercial advantage and which is treated by its owner as a "secret."

Prudent lawyers will advise their clients to adopt a trade secret program. This will require an experienced business lawyer to evaluate a company’s trade secrets and recommend methods whereby they can best be secured. The statute does not require that trade secret owners use written agreements, but it is wise to do so. Skilled lawyers will recommend that all employees be advised of the fact that they will be working with and exposed to the business’s trade secrets, which should be protected. Employees should also be coached on how to best protect those secrets. This employee education should begin when the individual is first hired and continue throughout employment. An admonition about the company’s trade secrets should be given when the employment is terminated as well. Similarly, written nondisclosure-nonuse agreements should be used whenever individuals other than employees are given access to the business’s trade secrets. Care should be taken to mark all trade secrets as such, as they should be secured as well as possible.

A prudent lawyer will either personally or through the use of a skilled business attorney provide clients with a recommendation regarding trade secrets. This is important to do before there are any problems with respect to misappropriation of those trade secrets. Unfortunately, failure to properly protect a business’s trade secrets may result in a loss of those valuable assets.

Conclusion
Attorneys are occasionally criticized for "over-lawyering" projects. This is sometimes the case, but it is wiser to be cautious and provide clients with well-intentioned recommendations with respect to their intellectual property than to find that a client has been deprived of protection or remedies as a result of your failure to make appropriate recommendations. This is not only essential for intellectual property lawyers — because virtually every business attorney has clients who are involved with some form of intellectual property, but even the general practitioner should have some elementary knowledge of the potential traps that clients should avoid with respect to that property. It is, after all, quite rewarding for an attorney to learn that the recommendations he or she made were followed and that the client was able to protect his or her intellectual property rights as a result of the attorney’s advice.

ABOUT THE AUTHOR
Leonard DuBoff is the author of more than 20 books on business and intellectual property law

© 2004 Leonard DuBoff


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