United States: Why Your Company May Need An Intellectual Property Audit

In today’s age of rapidly emerging technologies I have consistently counseled clients that the entire commercial value of their company may depend upon the extent of their intellectual property rights (i.e. a company’s patents, trademarks, copyright and trade secrets) in such technology, and their relationship with employees or independent contractors who develop or use such technology

Given the huge investment in research and development by most companies, the identification, protection and preservation of intellectual property assets, merits recognition as a top management priority. Ten years of first hand experience leads me to conclude that an Intellectual Property audit is a recommended and reliable mechanism to determine the ownership, scope and status of a company’s intellectual property rights which will enable the detection of defects in intellectual property rights that may affect the value of the company’s assets so that corrective measures may be taken.

1. General Reasons Why You May Need An Intellectual Property Audit:

• To determine the origin of intangible assets and the extent of interest in technology and related intellectual property rights;
• To determine the scope of rights that third parties, including independent contractors, may have, by license, ownership, or otherwise, in company assets;
• To detect defects in existing intellectual property assets and the mechanisms and procedures for protecting and perfecting the same;
• To determine, in contemplation of intellectual property litigation, whether all filings necessary for jurisdictional requirements have been satisfied, what clouds on company title may exist, and what defenses may be asserted against the company; and
• To avoid liability for third party claims of infringement resulting from the development of new products.

2. When Should Intellectual Property Audits Be Undertaken?

1. In the beginning stages of a company – to ensure that proper procedures are established to protect and perfect intellectual property rights on a continuing basis – and periodically thereafter.
2. Whenever there is a major transfer of intellectual property rights – for example, a merger, sale or acquisition of a company possessing intellectual property; licensing or acquiring the rights to a given product or process; taking a security interest in intellectual property rights.
3. Whenever there is a significant change in applicable intellectual property law. Example: broadening availability of patent protection for software-related inventions; changes in trademark law which allow the filing of applications based merely on Intent-to-Use; and changes in copyright law affecting computer programs.

3. Scope Of Trademark Protection

Generally, trademark rights are secured upon proper use of the mark in commerce. We highly recommend, however, that a company register its marks with the United States Patent and Trademark Office. Such federal registration will provide the company with a bundle of rights that are not available for unregistered marks, including national protection against confusingly similar marks. Further, a company would be permitted to use the ® symbol, which provides notice to its competitors that its marks are registered. In addition to words and symbols, the law of trademarks can protect a product’s nonfunctional appearance, known as its trade dress. Accordingly, if a product’s design is distinctive or has acquired recognition in the marketplace based on that design, we have been successful in obtaining court action to halt the theft or infringement of that design. For example, Ferrari was able to prevent competitors from stealing the design of its Ferrari Daytona Spyder classic sports car based on its distinctive trade dress. Actions against "copycats" for infringement of a product’s trade dress can be highly effective protection.

Policing - a trademark must be protected from counterfeiters and infringers. Anyone who uses your mark or a derivation of it without a license will have to be stopped from doing so. If they are not, the mark’s legal status may be in jeopardy. Neglect in policing a mark is a form of "abandonment," and is a basis for basis for losing a federal registration of a mark, is neglect in policing a mark

A trademark owner’s effort at policing its trademarks is evidence of the strength of those marks. Third party uses, by contrast, can lead to third party trademark registrations, and in general, third-party registrations are highly probative evidence that the public considers such marks to be weak and descriptive. Thus, if a court finds that a company has failed to adequately police its trademark, a severe consequence is that the company’s trademark is greatly reduced in value or even becomes generic and unprotectable. Examples of terms which were which were once trademarks owned by companies, but which later were held by Courts to be unprotectable include Aspirin, Brassiere, Cellophane, Escalator and Yellow pages.

These are a few of the services that we can offer your company to protect its trademarks:

1. Trademark Watching Service - We have maintained for many of our clients a trademark watching service for marks that are applied for by any company on a world-wide basis. We watch for marks that are the same or similar to a company’s. If time allows, we will alert them to these publications. In any event, we insure that opposition to their ultimate registration is timely filed.
2. Trademark Searches - As a company comes up with new ideas for products and their respective trademarks, we will review them as to availability of a particular mark for a particular product. We provide a complete analysis of Trademark Office as well as state and common law records, if necessary. The best time to search is before actual usage, artwork or label printing is effected.
3. Infringements - We will work with a company to curb infringements both domestically and on an international basis. We have been very successful in tracking recurrent infringements. We frequently work with Trade Associations to obtain injunctive relief against counterfeiters. If a company obtains a "lead" or someone in your organization purchases an infringement, we will follow through.
4. Periodic Conferences - We like to have periodic conferences in which we provide a status of trademark matters, recommended courses of action and to keep our respective offices communicating "on the same wave length".
5. Trademark Applications - as necessary and as we are advised.

4. Scope Of Copyright Protection

Copyright protection applies to a work’s ornamental and artistic features. Copyright can be obtained for such works as literary, musical, dramatic, graphic, sculptural, audiovisual, sound recordings, computer software. Protection is automatic upon creating the work. However, the work should be federally registered to provide additional rights not offered by an unregistered work. Obtaining a federal registration enables the copyright owner to sue for damages for infringement - an extremely valuable right. Ownership of copyright rests with the natural author unless the work is a "work made for hire," in which case ownership rests with the employer. Recent case law has made it easier for a consultant to claim the copyright in his commissioned creation over the party who hired him to produce it. We will work with your company in establishing a procedure for preempting mishaps by regularly obtaining written agreements from consultants assigning all ownership interests before they commence work. We will also assist your company in filing applications to record their claim to copyright for packaging and/or advertising as necessary.

5. Scope Of Patent Protection

In order for the invention to be entitled to protection by a patent, it must be both novel and nonobvious. All that is required for an invention to be novel is that there must be a difference between the invention and what is already known. For an invention to be nonobvious, however, more is required. In particular, the differences between the invention and what is known must not be obvious to a person having ordinary skill in the field to which the invention relates.

Below are some of the services that we can offer a company:

1. Evaluations - We will evaluate new developments to determine their patentability. This would be a preliminary review.
2. Patentability Searches - The search is to determine patentability and sets forth an analysis, which will provide a good basis of whether to proceed with a patent application.
3. Receive And Respond To Infringement Letters - As allegations of infringement arise, we will receive and correspond with the other side, and negotiate the settlement of claims with a companies cooperation.
4. Issue Cease And Desist Letters To Third Party Infringers.

6. Marking And Labeling

We will review your company’s advertising and packaging materials prior to their being printed in final form to ensure that proper trademark, copyright and patent markings are included, as there are legal implications to improper as well as no markings at all.

7. Employer/Employee Agreements

We will review your company’s employee agreements to ensure that all intellectual property created remains your property, as well as ensure that trade secrets cannot be disclosed to third parties.

8. Trade Secrets

Trade secrets include any information that is not generally known which provides a competitive advantage to a business such as software, a customer list, production process or formulas. In order to successfully assert a trade secret, one must establish that adequate steps were taken to preserve secrecy. We have the knowledge and first hand experience to work with your company to ensure that it is taking the proper steps to protect their trade secrets.

If in-house personnel do not have the time or expertise, or if an audit needs to be performed on a confidential basis, this Firm can perform a necessary and/or periodic Intellectual Property Audit.