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I have worked with the Tracy Jong Law Firm for a number of years and filed patents with them. I am happy with the work and am planning to pursue another patent for my project EcotramTM.
Contracts & Agreements
INTELLECTUAL PROPERTY LAW INFORMATION
[CONTRACTS / AGREEMENTS]
There are other ways to protect your intellectual property besides applying for a patent, trademark or copyright. Many find that applying for these may not be financially feasible, does not fit within the timeframe for the business plan or the material does not qualify for this type of protection. Others already possess the patent, trademark or copyright rights but wish to license the rights out to others for profit. Still others need to transfer ownership of their rights to another person or entity. In any of these scenarios, there are a variety of contracts or agreements that can be used. Because of the complexity of many of the situations needing contracts, as well as the documents themselves, it is always prudent to seek the advice of an attorney who can help determine which contract is best and what language to use or review a contract presented to a client to ensure that the client’s rights are demonstrated and protected.
There are many ways technology is transferred. It may be "sold" and assigned to a purchaser. It may be gifted, bequeathed (in a will) or exchanged and assigned to the recipient. Ownership may be retained by the owner while exclusive or nonexclusive rights may be granted via a license. Technology may also be subject to transfers to secured creditors, judgment creditors or a bankruptcy estate.
Learn More About Contracts & Agreements:
IP And Business
Raising Your Revenue
By protecting trade secrets and patentable know-how, the owner of the technology obtains the exclusive right to prevent its unauthorized copying or imitation by others. This makes business sense as it improves the competitiveness of a business and often brings in additional revenue in one or more of the following ways:
Strengthen your competitive position by preventing your products and technologies from being copied and imitated by competitors.
Obtaining a fair return on investment (improving profitability) made in developing and marketing the relevant technology/product.
Technology assets can increase the commercial value of a company and is products.
A protected technology may also be licensed (or sold) to others for a additional revenue streams. By licensing it, you may be able to enter markets that you are otherwise unable to serve.
Protection encourages fair competition, honest trade practices, and production of diverse products.
Incorporating IP Into Your Business Strategy
Decisions on how, when and where to protect a company’s technology may have an important impact on other areas of management. It is crucial therefore to integrate issues of technology protection into the broader business strategy. For example, the type of protection, the costs, the effectiveness of protection and issues of ownership of technology, may be important considerations when deciding:
Whether to undertake technology development in – house or to commission an outside consultant;
The timing of the initial use of a new technology in advertising, publishing, marketing or public display in an exhibition;
Which export markets to target;
If, when and how to license or assign a technology to be commercially exploited by other companies in return for economic remuneration.
A proactive plan and its implementation will give your business the tools it needs to be competitive and succeed in today’s global marketplace.
Intellectual Property Protection Programs
Most large companies have well-defined programs for protecting technology. In the employment process, we expect to see detailed company policies, employment agreements outlining certain responsibilities and a complex security program. After all, the corporate attorneys and human resource gurus have to justify their existence, right?
Many smaller companies don’t have these fancy trappings. The perception of a friendly and casual work environment takes precedence. Perhaps they don’t have a large budget for lawyers and personnel managers. Perhaps the small one-man shop grew before anyone really noticed. The scenarios are endless.
Technology happens at an unpredictable rate and in unpredictable ways. Many times engineers stumble upon something new without realizing its utility, its value or potential. Engineers are always improving, creating, fixing problems, and designing the next state of the art widget or software. It may be months or even years before anyone realizes what they have. It may be months or even years until resources are available to develop or incorporate a technology into existing products.
Failing to protect technology at its inception may have financially and technologically detrimental consequences down the road. Technology is a proprietary asset, and a protectable property interest. For many businesses, it is their very “stock in trade.”
Protecting Intellectual Property Assets requires a three step approach:
Identify commercially sensitive information;
Determine a protection strategy; and
Establish reasonable corporate policies and procedures.
Identifying Commercially Sensitive Information
The key inquiry is to look at the consequence of the information’s release. If the information were disclosed,
Could it be commercially harmful to my business?
Could it be used by a competitor or the public to my detriment?
Would it assist a would-be competitor in duplicating sales success?
Would it short-cut a would-be competitor’s trial and error program?
How much would it cost my competitor to create or obtain the information?
Does it relate to a competitive advantage I have developed?
It is important to consider all forms of corporate information. These may include (1) technical, (2) scientific and research, (3) business and customer, (4) personnel, and/or (5) accounting and financial. This is not an exhaustive list, but you get the idea.
It is also important to consider information in all forms: (1) written, (2) oral, (3) magnetically recorded (computer readable), (4) graphic (photos, diagrams, plans, blueprints), (5) computer programs, and/or (6) reproductions/copies/ duplicates.
Determine A Protection Strategy
Some of your information requires a common – sense approach to protection. You should consult with an expert to determine the value and availability of trademark (service) mark and trade dress protection to protect your corporate names, brand names, domain names, product names and packaging designs. You should consult with an expert to determine the value and availability of copyright protection for your website, software, instruction manuals and marketing materials. You should consider the disclosure of technology in publications, conference papers and finance raising activities. This may impact trade secret or patent protection. We will look at these strategies in greater depth.
Establish Reasonable Corporate Policies And Procedures
So, how does a company go about protecting
? What are the affirmative steps it must take? The steps must be reasonable in light of the nature and value of the confidential information. Companies should identify confidential information, take reasonable steps to protect it and disseminate confidential information on a need to know basis. Company policies and practices might include, for example:
Marking sensitive documents “confidential”
Establishing written policies for maintaining confidentiality
Informing employees of trade secrets
Utilizing Employment/confidentiality/ non –compete agreements
Restricting access to trade secrets (employees and public)
Using of confidentiality agreements with non-employees
Employing physical security measures (lock gates and cabinets, entry passes, computer passwords)
Undertaking trade secret audits
Screening speeches and publications
Developing a policy and procedure for handling unsolicited invention submissions by third parties. (This will help the company avoid claims or even an appearance of misappropriation.)
Shredding and disposal of document waste
Key Points About Employee Inventions And Shop Rights
When the inventor is also an employee, certain complications may arise depending on the nature of the employee-employer relationship. These complications may make it more difficult to protect an idea during these early stages.
There is no duty for general employees to assign inventions to their employer absent an express employment agreement requiring such assignment. Great Lakes Press v. Froom, 695 F Supp 1440, 1445 (W.D.N.Y. 1987) (“New York State Law and ‘Federal Common Law’ are in agreement on the general principle.”) It is prudent for an employer to use clear, unambiguous written contracts of employment with obligation to assign inventions to the employer. In such cases, the inventor-employee holds bare legal title in constructive trust for his employer.
In some cases, an employer may include an obligation to assign even after employment is terminated in so-called “holdover clauses” for inventions made during a reasonable period following employment. The test for reasonableness of holdover clauses includes factors such as:
The obligation to assign extends beyond the apparent protection that employer reasonably requires
The obligation to assign prevents inventor from seeking other employment
Enforcing such agreement would be against the public interest
The good news if you are the employee (with no employment agreement containing an obligation to assign inventions) is that you have full unencumbered title to the invention if you were not “hired to invent.”
The good news if you are the employer who has failed to use employment agreements (with obligations to assign inventions) is that “shop rights” may be available for inventions made by employees. Shop rights provide an employer with a personal, non-exclusive, non-transferable, irrevocable, royalty-free license. Shop rights are implied-in-fact transfers of ownership rights where an employee was “hired to invent” or assigned the duty of devoting his efforts to a particular problem. However, shop rights will not be available for inventions made of the employee’s own initiative.
Corporate managers may be held to be corporate fiduciaries with judicially enforced equitable transfer of intellectual property (“IP”) rights, even in the absence of a written employment agreement with an obligation to assign for inventions made during course of employment or related to employer’s business.
Contracts & Agreements
A patent license is essentially a contractual promise (a covenant) not to bring an infringement suit. Even an exclusive patent license does not convey an interest in the patent unless it has the legal effect of an assignment. Under certain circumstances, an exclusive license may amount to a grant of the "exclusive right to make, use, and vend the invention throughout the United States, or in a specified part thereof, or of any undivided part or share of that exclusive right.”
A trademark and copyright may also be assigned or licensed. While the transaction is more complex, trade secrets may also be transferred. Unpatented technology and unregistered trademarks/copyrights may also be transferred.
An assignment is a written contract that transfers property rights from one person or entity to another. This should be done with an assignment of interests. State law, including New York, may not reliably transfer the bundle of property rights in other documents and forms. General assignment language must meet the requirements for the law of the state where the contract is to be enforced, or the laws under which it will be determined. These are often set forth in the pro forma language near the end of the contract.
When an employee or consultant creates work for which he is paid, the artist may own the rights to his original works in the absence of a work-for-hire agreement. Works for hire include work
Performed by employees in the scope of employment, or
Work by independent contractors if it is both specially commissioned and falls within one of the 8 categories listed below:
Contribution to a collective work
Part of motion picture
Test or answer to test
Nondisclosure agreements (“NDAs,” also referred to as secrecy or confidentiality agreements) create a state law contractual obligation, and thus, contractual damages for breach of contract. These fact-specific enforcement actions are often expensive and lengthy endeavors. The strength of a nondisclosure agreement is proportional to the specificity of the confidential information covered by the agreement. Since nondisclosure agreements are written fairly broadly, used alone, they may not offer the best protection to an inventor’s proprietary technology.
It is important that nondisclosure agreements be used properly to be effective. Often misunderstood, it is worth reminding that signing an NDA does NOT obligate you to reveal anything and should be signed BEFORE anything is revealed. NDAs may contain language that covers information shared prior to signing the agreement.
Nondisclosure Agreements And Provisional Patent Applications
In many cases, it is preferable to base a nondisclosure agreement on a filed patent application. At the early stages of invention development, this may be a provisional application. When used in combination, the nondisclosure agreement and provisional patent application create a firm scope of the technology being disclosed.
Nondisclosure agreements are often used when a new concept is brought to a third party for manufacturability or marketability analysis or for assistance in reducing the concept to practice. Meetings with the third party often become collaborative “think tank” sessions and it may become difficult to sort out which technology was brought in by the inventor and which technology evolved as a consequence of the collaboration. Inventorship issues arise as well as disputes over ownership of the technology. A simple nondisclosure with broadly listed subject matter may not effectively assist in resolving these fact-specific conflicts. On the other hand, a filed patent application would be extremely helpful in establishing the bounds of the concept or invention prior to any collaboration or improvement. The filed patent application also permits the applicant to claim a “patent pending” status, which may deter the third party from appropriating the subject matter disclosed in the application.
It is important to remember that “patent pending” merely indicates that an application has been made seeking a patent; it is not a guaranty of a patent being issued. Additionally, provisional patent applications have no enforceable claims and may provide only limited protection if they are not converted to utility applications within one year. Thus, if a patent never issues as a result of an unpublished application (i.e. provisional applications, design applications, utility applications with non-publication requests and applications abandoned prior to publication), the invention may still be a trade secret. Once the “cat is out of the bag” without an NDA, it may be difficult or even impossible to maintain it was a trade secret. Conservative practice would include the use of both provisional patents and confidentiality agreements.
Use Of The Term "Confidential"
Just because you stamp “confidential” on a document does not deem it confidential in all cases. There are some general exceptions under the law to what is deemed confidential:
Information already in the public domain at the time of disclosure or subsequently through no act or omission of the receiving party;
Information already in possession and not confidential;
Information supplied without restriction by a third party who is under no obligation to maintain confidence; or
Information where there has been a prior written waiver or consent by the disclosing party.
Confidentiality Clauses In Agreements
Many standard agreements require oral conversations to be summarized in writing. This can be burdensome and may create litigation issues as to whether the written summary accurately reflects the conversation content. It also creates a presumption that anything not put in the writing is not confidential. Be diligent about marking documents disclosed as confidential and memorializing written conversations. Another option might be to consider a presumption of confidentiality provision:
The parties further acknowledge and agree that all information disclosed …shall be presumed by the parties to be the disclosing party’s confidential information …
In drafting confidentiality agreements, the “Recitals” (“whereas” clauses) should set forth circumstances surrounding the disclosure, consideration (what was traded for value by each party) should be set forth and there should be broad, inclusive definitions of confidential information. However, be specific where possible, especially by referencing trade names, trademarks, service marks and patents. Consider including a provision that no license or joint venture is implied. Consider a provision discussing which employees have access and how employees of a business will be required to maintain confidentiality in handling information.
Confidentiality And Survivability Clauses
Survivability clauses in most standard agreements are ambiguous, rendering it difficult to determine how long the parties are obligated to keep things confidential. Consider expressly defining the period:
during the period of business relationship
for an additional two years after the termination of all business relationships
until the confidential information no longer qualifies as a trade secret
until the disclosing party provides written notice that the information no longer must be kept confidential
Addressing Breaches Of Confidentiality
Many standard forms do not contain language about equitable remedies for breach. This may make it difficult to obtain a restraining order to prevent the other party from improperly using your confidential information. Consider including provisions acknowledging the injunctive remedy and provisions to recover attorneys’ fees in you have to enforce the confidentiality agreement.
Key Points About Licenses And Assignments
When you are negotiating a deal to buy a certain technology from another company, make sure to do due diligence to determine if the selling company properly holds “title” to the rights. Should you learn that the selling company’s ownership was acquired via an assignment and are holding a copy of a document called an “Assignment of Patent Rights,” do not presume that they own the rights to sell it.
It is the document’s substance, not the document label, which defines the difference between an assignment and a license. A transfer of the entire ownership interest is an assignment, while transfer of less than the entire bundle of rights is a license. Issues frequently arise with respect to reservations of rights, take-back provisions, field of use restrictions and the like. You may need to consult an attorney to determine if the document you are reviewing is considered a license or an assignment.
Assignment Of Patent Applications
Patent applications may be assigned. An assignment of a patent application carries with it the rights to common subject matter in future divisional or continuation “child” applications as well. Continuation and divisional applications are patent applications filed on the same disclosure and contain no new subject matter, but contain new claims. However, the Patent Office records may not reveal such assignment if no one files a request for recordation of the assignment in the “parent” application in the file of the “child” application until issuance or post-issuance. Thus, it is prudent to assess the procedural history of a patent or pending application as well as its subject matter in determining the scope of assignment rights.
Contrarily, substitute or continuation-in-part applications are “child” applications that do not benefit from the assignment of the “parent” applications and require a new assignment to be executed and filed. Continuation in part (“CIP”) applications are patent applications that contain some or all of the disclosure of the “parent” application as well as new subject matter. (These CIP applications often draw claims to improvements or refinements of an invention during the pendency of the “parent” application.)
Provisional applications follow the same legal theory – the assignment of a provisional application carries with it ownership rights to common subject matter, but a new assignment is required for utility applications that contain subject matter that is not common to both.
Manufacturing And Supply Agreements
Beyond prices, quantities and payment terms, manufacturing agreements establish the working relationship between a purchaser (such as an inventor) and a manufacturer. Manufacturing agreements may deal with complex issues such as:
confidentiality provisions for proprietary technology
licensing of technology
product marking to preserve rights of the technology and intellectual property and comply with patent, trademark, copyright, product origin and import/export regulations
minimum purchase commitments and exclusivity
warranties and repair obligations for defective products
lead times required for long lead time supply materials
the party responsible for regulatory compliance
title and risk of loss
forecasts for better production management
substitutions and modifications
how product changes will be handled
who pays for technical expertise supplied by the manufacturer to the purchaser to develop the product for manufacturability
who supplies, pays for, owns, stores and maintains custom tooling used for manufacturing purchaser’s products
what happens if one party is bought by another entity
ability of manufacturer to outsource the manufacturing, labeling, packaging or shipping
what happens when orders cannot be fulfilled on time
who is responsible for taxes and other government fees
In our experience, creating the working architecture between the parties at the outset avoids conflict and disruption of a long-term business relationship. Parties contemplate realistic solutions to potential problems that may arise and allocate cost and risk.
Sales Representative Agreements
Inventors often engage sales representatives to promote, market and sell their products. In many cases, these are commission-based arrangements. These arrangements may be more complex than first meets the eye. For example, think about the following issues:
Are non-competition provisions appropriate to prevent the sales representative from also selling competitive merchandise?
Are confidentiality provisions appropriate to prevent the sales representative from revealing or using your proprietary information (sales lists, business plans, price structures, commission rates, customer lists, vendor list, financial information, and the like)?
If the sales representative is terminated or quits, how long will he continue to receive commissions on accounts in his sales territory? When will the new sales representative begin earning the commission on existing/established accounts?
If the company establishes an account in the territory of a sales representative, without the involvement or a lead from the sales representative, will a commission still be paid?
If the sales representative is terminated or quits, how will you recover products given to him as examples?
Should there be minimum sales quota to maintain an exclusive sales territory?
Are exclusive or non-exclusive arrangements more appropriate in a given situation?
What should the commission be based on? What precisely is included in net or gross sales figures? (shipping charges, taxes, product returns and the like)
How will commissions be handled if commission has been paid on a large volume of products that are subsequently returned?
The ability to sell on the internet also raises complex issues for business owners:
If he has a web site, will you have any say in how your products are marketed?
How will you maintain control over your proprietary rights in your trademarks, copyrights and trade dress (packaging)?
If internet sales result in foreign sales, who will be responsible for import/export compliance, government fees and taxes?
Before sales become international on the worldwide web, has there been appropriate due diligence to be sure there are no infringements of foreign trademarks, patents, product safety, product origin or other foreign laws?
This is by no means an exhaustive list of issues that should be addressed in marketing and promotion agreements. Each situation is unique. We hope to have given you some ideas that you may not have previously taken into account when formulating an agreement.
Web Designer Service Agreement
Most web designers are aware that protection for their work may be available under copyright law, provisions of the Digital Millennium Act, and even patents in some cases. However, the intellectual property issues encountered by web designers extend beyond offensive protection of their rights into defensive protection against the rights of others.
Website material provided by clients may contain photos and graphic images, or text content that has been impermissibly copied from other sources (such as the internet). People mistakenly believe that if it is on the internet, it is in the public domain and they are free to use it for their own purposes. Sometimes materials have been used at a business for years and the source of the content is long forgotten and currently unknown. Where did the former employee get the photos? Who wrote the text? Were parts extracted or copied from other sources?
Another common situation involves a website retailer who is distributing and selling the products of a third party. They mistakenly believe that they have full rights to use the trade name, product names and product images of the products they are selling.
Independent web retailers and small businesses may use product descriptions, extracts from the manufacturer’s trade dress and sales propaganda (packaging, specifications, instructions or product description) to advertise a product. They believe they are accurately giving the consumer all of the pertinent information without realizing the copyright and trademark infringement issues lurking in the background.
Although originally created, some independent web retailers and small businesses may use brand names and slogans that have not been searched for potential trademark infringement issues. It is often hard for people to believe that someone else, somewhere in the world, had the same idea as what they created.
Website designers may risk being named as a defendant in trademark and copyright infringement actions. These risks can be carefully allocated in service contracts to minimize the risks and to provide for indemnification of any losses (legal fees, settlement costs and damages). Web design providers should consider using service contracts that deal with these important issues, as well as copyright and/or patent protection of their work product.
Tracy P. Jong, Esq. |
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