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Intellectual Property (“IP”) is a broad concept that goes beyond patents and the technical sciences. IP rights and the legal remedies that protect them are of great value to the IP owner. With U.S intellectual property currently valued at an estimated $5 – $5.5 trillion, IP theft is the modern age crime of opportunity since so much of a company’s value is intangible. While patents are often the first thing that comes to mind when thinking about IP, laws that insure fair competition in the marketplace also create value. Common law trademarks and trade secrets are two other forms of IP available to every company conducting business. They differ from patents because they derive from common law principles and rights in them may be acquired without formal registration. The use of a mark in commerce or the preservation of a trade secret can automatically give rise to protection under the law. Further, these two forms of IP protection have the potential to last indefinitely.
Common Law Trademarks
Trademarks have been used for thousands of years by businesses to identify and differentiate the origin of their products and services. Trademark protection derives from tort principles prohibiting deception and unfair competition. Trademarks act as shorthand advertisements that prevent consumer confusion and preserve the connection in the minds of consumers between a good or service and its source. They allow a consumer to rely on the reputation of a product or service before making a purchase. A mark can be almost anything, and many readers will be familiar with marks such as the sound of NBC’s 3 tones, the pink color of Owens Corning’s insulation, and the shape of Coca-Cola’s famous soda bottle. Companies invest large sums in the marketing of trademarks and quality-control of their products and the law protects these investments from competitors unfairly taking a free ride on their reputation.
Trademark protection can provide enormous value for mark owners. As an example, manufacturers of luxury goods rely on their marks to charge a premium on otherwise ordinary products. Such marks may represent not only an indicator of quality, but also a status that the owner invests significant capital in marketing. Consumers may come to associate luxury marks with a certain lifestyle and level of prestige to which they aspire by consuming luxury products. This reputation may take years to develop and may require a significant investment in a mark. The mark's value is evidenced by the financial success that luxury goods manufacturers enjoy as well as the vast number of knockoffs and imitations.
Common law trademark protection is automatically afforded to the first user of a mark in commerce. The protection extends to the geographic area and class of goods or services in which the mark is used. In this geographical area of use, the owner of the mark may exclude others from using deceptively similar marks in order to prevent consumer confusion. Many states have a provision in their trademark laws that explicitly provide the same rights and relief for holders of common law trademarks as for registered marks. The language may look something like: "Nothing in this chapter shall adversely affect the rights or the enforcement of the rights in marks acquired in good faith at any time in common law." Consequently, common law trademarks may enjoy the same protection that registered marks do, including injunctive relief and monetary damages. And with continued use, the ability to prohibit others from using deceptively similar marks may last into perpetuity. But because the use of a trademark without registration encompasses a degree of risk, it is prudent to seek legal advice before investing in mark-related activities.
Trade secrets are another form of IP protection that can be realized without formal registration. Trade secret law protects against the misappropriation of valuable business information. The protection of know-how is crucial to small companies who depend on innovation and technical skills. Trade secret laws encourage investment in employee skills and training by protecting a company’s valuable proprietary information.
“Valuable business information” includes, among other things, client lists, technical specifications, algorithms, manufacturing processes, business and marketing strategies, and negative know-how from failed experimentation. Courts have held that a trade secret can even be readily accessible public information which is in a generally unused combination; only some copying and an economic harm to the owner is necessary. A recent case held that business information recalled purely from memory by a former employee constituted a trade secret. One of the most famous (and valuable) examples of a trade secret is the recipe for Coca-Cola’s soft drink. If the owners had chosen patent protection over trade secret protection, the limited monopoly of the patent term would have expired many years ago and the recipe would now be public knowledge for the world to copy. Instead, by relying on trade secret protection, the owners of the secret recipe may continue to profit from it into perpetuity.
The rights and remedies of common law trade secret protection have for the most part been codified under the Uniform Trade Secret Act ("UTSA"). The UTSA has now been adopted by 46 states, providing much-needed consistency to employers. Widespread adoption of the UTSA avoids forum shopping and protects employers in times of fast technological change. The UTSA provides effective remedies, including reasonable royalty, exemplary damages, and even attorney’s fees if bad faith is determined. Like trademarks, trade secret rights can extend indefinitely, or at least until the secret is publicly disclosed.
Common law trademarks and trade secrets are two forms of IP that affect every business and can provide broad rights without formal registration. In many instances trademark registration is preferable to relying on common law protection and an IP attorney can help evaluate the strength of a mark and identify the pros and cons of state and federal registration.
An IP attorney can also establish a comprehensive trade secret program to reduce the risk of trade secret exposure. It is important to develop a strategy to protect, defend and exploit the entire IP portfolio, which can include trademarks, trade secrets, patents, and copyrights, in order to take advantage of the array of IP rights available. Successful businesses seek IP protection in all forms in order to weave a web of protection, with each piece providing value for the company and adding a deterrent against competitors.
Steve Ball practices Intellectual Property law in the Boston office of Burns & Levinson LLP. He can be reached at email@example.com.