United States: Intellectual Property - An Introductory Primer

Last Updated: November 1 2012
Article by Robert A. McTarmaney


A product of the mind with commercial value

  • Patents
  • Trade Secrets
  • Trademarks
  • Copyrights


"The Congress shall have Power . . .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." U.S. Const., Art. 1. § 8. cl. 8.

Patents protect the concept of an invention and give the owner the right to exclude others from practicing the invention for a specified time within the jurisdiction of the issuing government. Patents are "a license to sue to exclude."

Patentability requires (1) Approved Subject Matter; (2) Utility; (3) Novelty; and (4) Nonobviousness.

The Patent Application

  • Abstract– Brief Description on front page.
  • Specification– Manner and process of making and using the invention. (Disclosed when patent issues).
  • Claims– Statements that distinctly and particularly point out the subject matter of the invention, legally defining the boundaries of the patent rights. Claims are protected by the patent, not any physical model.
  • Drawings– which illustrate the invention.
  • "Provisional" Application can set Priority Date, but prepare with care, and be careful if abandoning.

"Patent Pending"

  • Used when Utility or Provisional Patent is filed with USPTO.
  • A "heads up" to potential infringers.
  • No assurance that Patent will issue.

Examination Process

  • Assigned to "Art Unit" and Examiner.
  • Patentability Search; Office Action Rejection.
  • 2-3 Years at least, but USPTO is trying to improve.
  • Often several Office Action rejections, often minor, sometimes fatal.
  • Then Notice of Allowance and Fees.

Approved Subject Matter

  • "Original" processes, machines, products, compositions, or new and useful improvements.
  • Software, Plants, Biotech, Some Business Methods.
  • But not theories, abstract ideas, laws of nature or science, or pure mathematical equations or algorithms.

Utility Requirement

  • The machine must actually operate to perform its intended purpose.
  • Classic example = perpetual motion machines do not satisfy Utility, since they cannot possibly work.

Novelty Requirement

  • Invention must be new.
  • Not in "Prior Art."
  • Not previously publicly used, sold, or described in printed form.
  • Subject to Grace Period = one year.
  • But foreign countries = no grace period.

Nonobviousness Requirement

  • A "flash of genius"? Or obvious to a "person of ordinary skill in the art"?
  • If A and B are known, then combining them to make C might be "novel," but could not be patented since "obvious."
  • U.S. Federal Circuit Court 1982.
  • Uniformity and stop forum-shopping.

Types of Patents

  • Design Ornamental aspects
  • Utility Processes, Machines, Compilations. Most patents are Utility.
  • Plant New Varieties of Asexually reproduced plants.

Design Patents

  • 14-Year Term. Increasing popularity. Low rejection rate vs. Utility Patents.
  • "Hidden Lines" not part of Design, and irrelevant to infringement.
  • Is an "ordinary observer" confused?
  • "Egyptian Goddess" case – focus on Design, not written claims.
  • Infringement easier to prove.

Design Infringement Defenses

  • Anticipation (Prior Art)
  • Obviousness
  • Functionality*
  • Lack of Written Description
  • Indefiniteness
  • Article of Manufacture*

* = not defenses for Utility Patents

Functionality and Drawings

  • Functionality = Utility Patent
  • Ornamental = Design Patent; Invalid if more "functional" than "design."
  • Design must be sufficient to enable one to make it, and know what not to do.
  • Reasonably definite, but not blueprints.
  • Written design claims were not useful in court.
  • Sliding scale – Prior – Patented -- Accused

Term of Patents and Challenges

  • Extended to 20 years from 17 years in 1995.
  • Design Patents 14 years.
  • Universities and Inventors given rights to inventions developed with Federal funds 1980.
  • Generic drug manufacturers testing time 1984.
  • Remedies import/export patent products 1988.
  • "First use" defense to infringement, inter partes reexamination, and publication of pending patents 1999.
  • "Derivation" versus "Interference" post-AIA.

Leahy-Smith America Invents Act

  • "AIA" 2011 – "First to File" versus "First to Invent" effective in 2013. Prior Art = >1 year < to Filing Date.
  • Venue U.S. Court for Eastern District of Virginia.
  • "Patent Trial and Appeal Board" replaces BPAI.
  • Reduces Fees for filings by small and micro entities.
  • USPTO must adjust fees. Expedited Fees available.
  • Tax "strategies" now deemed within prior art.
  • "Best Mode" Requirement no longer invalidates patent.
  • Virtual Marking now permitted. E-Filing encouraged.
  • False marking cases now require competitive injury.
  • New Procedures to challenge and correct patents.

Patent Bars

  • One-Year in U.S.
  • No Grace Period Elsewhere.
  • Pre-Patent Commercial Marketing.
  • Public Disclosures.
  • Public Use.

Licensee Estoppel to Sue

  • Public Policy encourages identifying invalid patents. No "Licensee Estoppel." Licensees can still sue to invalidate Licensed Patent. Lear v. Adkins
  • Can Pre-Litigation Settlement Agreements have Covenants Not to Sue and No Challenge Clauses?
  • Now in legal limbo until Supreme Court resolves.
  • In the meantime, sue first and then settle only after discovery, and secure judgment or court decree.
  • That should have res judicata effect. No more suits by that party.

Patent Infringement Damages

  • Injunction.
  • "Damages ...in no event less than a reasonable royalty, together with interest and costs." 35 USC § 284. Legal fees in "exceptional" cases.
  • Stricter "Entire Market Value Rule;" apportionment where appropriate.
  • Eliminating 25% Rule of Thumb.
  • Lost profits more difficult to prove than reasonable royalty. Punitive Damages as well.

Royalty Damages

  • Test: Demand, Absence of substitute, Manufacturing/marketing capacity, Profit patentee would have made.
  • If patentee cannot prove entitled to lost profits, then reasonable royalties.
  • If no established royalty rate, then "hypothetical negotiation" at the time infringement began.
  • 15-Factor Georgia-Pacific approach.

Willful Patent Infringement

  • 35 USC §284, up to 3X actual damages + 35 USC §285 attorney fees in "exceptional cases."
  • Seagate tests: (1) clear and convincing evidence infringer acted despite objectively high likelihood of infringement of valid patent, and (2) risk known or should have been known.
  • 2012 Federal Circuit Bard Peripheral test: high likelihood is matter of law for the judge.
  • Follows Supreme Court's 1996 decision in Markman interpretation of patent claim is for judge not jury.

Inventor's Notebook

  • Establish Earliest Invention Date. (But NB pending change to "First to File")
  • Document Possible Disclosure Bars.
  • Help Establish Nonobviousness.
  • Formal. Bound. Dated. Numbered.
  • Objective; Past Attempts; New Solution.
  • Other Contributors; Prior Art; Possible Bars; When "Reduced to Practice."
  • Possible Third-Party Rights.

Patents and Antitrust

  • Tension between Patent Law granting monopoly vs. Antitrust Law barring it.
  • 1995, DOJ/FTC "Antitrust Guidelines"
  • 2007, DOJ/FTC "Antitrust Enforcement and Intellectual Property Rights"
  • Hot topics: Patent Portfolio Acquisitions; Pooling Agreements; Reverse Payments to Delay Generics
  • Generally reasonable Agency approach

Software Patents

  • Mostly code, with some physical result.
  • Apple patented "slide to unlock"
  • US more lenient than Europe.
  • The implementationof something via software is the subject of the patent.
  • "1-click" patent combines code + user data + user control to equal easy order.
  • Essentially it's a business method patent.
  • In Europe, the software has to cause some physical manifestation.
  • So "1-click" is not patentable there.
  • But "slide to unlock" is.
  • Distinction? "slide" has physical effect of allowing user interaction with rest of screen.
  • Yes, that is not clear!

Software Patent Litigation

  • If you implement something using patented software, then is when you get sued by software patent owner.
  • Apple sued HTC and Motorola,for implementing Apple's patented concept, but not Google, since they only wrote it.
  • The "infringing" is the duplicated concept, "slide to unlock," not the specific code.
  • "Pull the lock" (Android) does not infringe.

Standards Essential Patents

  • E.g., the WiFi "Standard" relies on hundreds of software elements. Frequencies, Data Codes, Frame Rates, etc. etc. etc.
  • If you comply, your WiFi works.
  • So patent owners must license their "SEP" patents on FRAND (RAND) terms, to anyone.
  • Otherwise they would block that standard, and multiple standards would cause chaos.
  • Overcharging for a SEP = Antitrust.


  • Protects any secret information used for commercial advantage.
  • For only so long as kept secret. Label it.
  • Which can be forever.
  • The Coca-Cola Formula.
  • Theft of trade secrets often alleged in Covenant Not to Compete Cases.
  • Does not protect against reverse engineering absent contract.

Protecting Trade Secrets

  • Keep them secret. Protect yours and do not misappropriate others. "Need to Know."
  • Principal risk = the faithless employee.
  • Protect what is really confidential.
  • CDA at entrance interview. Restrict Access.
  • Electronic data needs unique passwords and clear policies on personal files.
  • Computer Fraud & Abuse Act.

Trade Secret Damages

  • Trade secrets have lacked nationwide protection awarded other IP -- Patents by 35 U.S.C. §§ 101-05, Copyrights by 17 U.S.C. §§ 101-22, and Trademarks under the Lanham Act.
  • UTSA and state-by-state adaptations -- overcome lack of federal protection and limit forum shopping.
  • 46 States have adopted some form of UTSA.

National Stolen Property Act

  • National Stolen Property Act, 18 U.S.C. 30 § 2314 -- crime to "transfer in interstate or foreign commerce any goods . . . of the value of $5,000 or more, knowing the same to have been stolen, converted or taken by fraud."
  • 2012 Goldman Sachs Case – source code not "property."

Economic Espionage Act

  • "Whoever, with intent to convert a trade secret . . . downloads, uploads, . . . transmits, . . . or conveys such information" is guilty of a federal offense, and may be imprisoned for up 6 to 10 years.
  • Goldman's internal trading system neither "produced for" nor "placed in" interstate or foreign commerce. Enormous profits the system yielded for Goldman depended on no one else having it. Because system was not designed to enter or pass in commerce, theft of source code relating to that system was also not an offense under the EEA. A very doubtful case.


  • Protect names, symbols, colors, sounds, or other identifier for source of goods
  • Trademark " or Service Mark SM Symbol.
  • "Trade Dress" – color (Tiffany Blue), or shape (old Coca Cola Bottle).
  • Common law rights merely by using. When registered, ® symbol = statutory rights that permit suit, treble damages, attorneys fees.
  • Filing = priority; protects mark throughout U.S.

Types of Trademarks

  • Fanciful or Arbitrary. PEPSI, APPLE, Swoosh design. Highly distinctive.
  • Suggestive. JAGUAR, Distinctive.
  • Descriptive. APPLE PIE for potpourri. Lacks distinctiveness. Needs evidence of "secondary meaning" to establish acquired distinctiveness.
  • Generic. COMPUTER, LAWYERS.COM, LINOLEUM. No protection.
  • Distinctive domain names are registrable.

Registration of Trademarks

  • Federal and State Systems. www.uspto.gov
  • Actual use, or intent, then use in 6 mos or option to extend.
  • No scandalous names, no mere surnames, no generics, no confusingly similars.
  • Section 15 Affidavit (5 yrs. Without challenge = "incontestable.") Rights can be lost if abandoned (3 years) or become generic. BROOKLYN DODGERS brought back from dead by LA Dodgers organization.
  • Registration takes 9-18 months.

Protecting Trademarks

  • Always use " if unregistered or ® if registered.
  • Use a brand plus a generic word to help prevent abandonment: "Buy Xerox® copiers"
  • Use different font, color, size or logo.
  • Use "look for" Advertising. "Look for the Kleenex® brand of tissues."
  • Sue violators to prevent dilution or waiver.
  • Enforce marking and quality in licenses.

Counterfeits and Pirates

  • From drugs to movies to iPads. $250 billion per year.
  • Lost jobs, lost good will, awful quality.
  • Survey the Market to search for pirates.
  • Customs and Border Protection (CBP).
  • Immigration and Customs Enforcement (ICE).
  • National IPR Center.
  • Trademark Counterfeiting Act of 1984.
  • Copyright Act.
  • Civil and Criminal Penalties.
  • Lanham Act statutory damages.

Trademark Infringement

  • Counterfeit -- spurious mark identical with, or substantially indistinguishable from, registered mark.
  • Direct or Secondary – infringing or encouraging or enabling infringement.
  • Issues are strength of mark, proximity of goods, fame, similarity, actual evidence of confusion, marketing, caution exercised, and defendant's intent.
  • Contributory (induces or facilitates) or Vicarious liability (respondeat superior).
  • Dilution: "Adults-R-Us," "Xerox" Cigarettes.

Trademark Infringement Damages

  • Injunctions against further infringing or diluting. Lanham Act, 15 U.S.C. 1116(a).
  • (1) defendant's profits, (2) damages sustained by plaintiff, and (3) costs. 15 U.S.C. 1117(a).
  • Damages trebled if bad faith.
  • In dilution, damages only if defendant willfully traded on plaintiff's goodwill. Otherwise, only injunctive relief. 15 U.S.C. 1125(c).
  • Legal fees in "exceptional" cases.

Trademark "Fair Use"

  • "Nominative" Use – "The Beatles."
  • Parodies – First Amendment rights and no real confusion.
  • "Spa'am" in Muppet Movie OK
  • "Gucchie Goo" Diapers not OK


  • Protects "Original works of authorship."
  • Literary, Music, Drama, Pantomimes, Pictures and Sculptures, Movies, Recordings, Architecture.
  • ©2012 John Doe. All Rights Reserved.
  • "Works-made-for-hire" owned by employer.
  • Cannot enforce without registration.
  • The tangible expression is protected, not the idea or secret disclosed.

Not Copyrightable

  • No tangible form.
  • Titles, names, slogans, familiar symbols, listings of ingredients, ideas, systems, processes, anything not an original authorship. "Idea" vs. "Expression."
  • But perhaps patent or TM protection.
  • Copyrights can lapse into public domain for various reasons.
  • Domain Names, but look to Trademark protection. Internet Corporation for Assigned Names (ICANN).

Notice/Registration of Copyright

  • Recommended but not required >1989.
  • Avoids innocent infringement claims.
  • Must be registered before lawsuit.
  • Statutory damages if registered prior to infringement or within 3 mos of publication.
  • Presumed validity if registered within 5 yrs of publication of work.
  • Deposit (2 copies) becomes property of Library of Congress.

Copyright "Fair Use"

  • 17 USC § 107. Use of limited portions of copyrighted work without written authorization for commentary, criticism, news, scholarly reports, parody, etc.
  • Whether fair or too much depends on facts and circumstances. "Transformative"? New value?
  • Purpose and character; nature of the work, amount and substantiality; and effect of use on the market.
  • No right to change another's work and re-copyright it. Only owner can make a new version.
  • "Surfin' USA" vs. "Sweet Little Sixteen."
  • When in doubt, get written permission.

Fair Use and Digitization

  • October 10, 2012 Judge Harold Baer Jr. -- Authors Guild v. HathiTrust.
  • Massive digitization project -- Google and 60 university libraries.
  • Defendants' reproduction of millions of works provides "invaluable contribution to the progress of science" shielded from authors' copyright claims. Only 31% in public domain.
  • 10 million volumes with 3.7 billion pages.

Copyright Infringement Damages

  • Actual Damages + Infringer's Profits, or
  • Statutory damages up to $150,000, and potentially attorneys' fee award.
  • Since 1978, copyright lasts for 70 years plus life of author (last to die for joint authors), or for works-made-for-hire, 95 years from date of publication or 120 years from creation, whichever comes first.


  • Online Copyright Infringement Liability Limitation Act; Digital Millennium Copyright Act of 1998
  • Safe harbor from copyright infringement liability for posting unauthorized content on websites.
  • Mere "data conduits," "system catchers," connectors and uploaders such as blogs and YouTube, if all conditions strictly met. Viacom v. YouTube ("willful blindness"); A&M v. Napster (no financial benefit)
  • Conditions including takedown notices to registered Designated Agent and counter-notices.

First Sale Doctrine

  • "First Sale" or "Patent Exhaustion" -- first unrestricted sale by patent owner of patented product exhausts owner's control over that particular item. Resales are then all OK, subject to contract limits, but not multiple copies.
  • Compare Droit de suite – artists resale fees.
  • Doctrine also analyzed as implied license to purchaser of a particular product of rights to use and resell that product. Offshore sales now on appeal.
  • Initial authorized sale of a patented item terminates the patent owner's rights with respect to that item.

First Sale and Licenses

  • First Sale Doctrine also applies to patent owner's authorized licensees.
  • Sale by authorized licensee who manufactures a product within the scope of the license gives purchaser an implied license of the rights to use and resell the product.
  • Therefore, resale of the patented product is not an infringement of the patent.
  • Modifications, copies, OEMs raise other issues.

Mask Works

  • Three-dimensional computer chip, integrated circuit designs. Exclusive rights to reproduce and import or distribute chip product in which embodied.
  • Registered with U.S. Copyright Office.
  • Trade Secret protection available.
  • File within 2 years of first commercial use. Terminates 10th year following.
  • "Mask Work," Symbol *M* John Smith
  • Semiconductor Chip Protection Act of 1984 and TRIPS Agreement.


  • Often part of infringement suits
  • False Advertising
  • Unfair Competition & Covenants
  • Rights of Publicity
  • Rights of Privacy
  • Commercial Misappropriation
  • Computer Fraud & Abuse Act (Nosal)

Releases and Assignments

  • Should be secured from all Presenters
  • Confirm that they actually have all required rights
  • And assign all such rights for your use
  • Copyright Notices then are applied to all formats


  1. Do Due Diligence. List Your Goals. Acquire All Rights Required (Patents; Trade Secrets; Know-How; Trademarks; Copyrights) and adequate Breadth of License and Existence of Other or Conflicting Right.
  2. Are the Rights Adequately Protected? If Not, Who is Liable? Inventor Assignments; Works for Hire; Non- Competes; Naked Licenses.
  3. Consider Alternatives Constantly if you can't make this deal.
  4. Core Provisions: License Grant; Field of Use; Exclusivity; Rights Retained; Sublicense/Assignment Rights; Ownership; Confidentiality; Reps and Warranties; Indemnification; Limitations of Liability; Termination and Cancellation; Assignment/Change of Control; Governing Law; Venue. Plain, Simple English.
  5. Definitions. "Net Sales" means net net net. Expenses, Returns, Rebates, Marketing, Double Counting. Definitions are Key.
  6. Milestones –Exploitation Should be Reasonable and Attainable, with Fair Cure Periods.
  7. Who has Control Over and Who Pays Cost Of Patent Prosecution and Regulatory Approvals.
  8. What Happens Next? Rights to Future Developments and "Improvements" (as defined). Automatic or Negotiated? Effect on Future Royalties? Technology will not stop here.
  9. Payments -- Royalties Based on Projected Uses and Deduct for Other Required Royalties ("Stacking"); Combination of Products Issue -- Allocations?; Do Pro Forma Royalty Calculations Based on Various Assumptions. Royalty Ranges should be based on this Asset, not on possibly relevant comps. And don't pay more than your subcontractor can or will pay.
  10. Distrust Sample Contracts; Every Deal is Unique. Resolve Differences Now.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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