Intellectual Property
American Style
Mark D. Simpson
Saul Ewing LLP
Philadelphia, Pennsylvania
USA
© Copyright 2010 Saul Ewing LLP
Saul Ewing
• Philadelphia based business law firm with 9
offices from Washington DC to Boston
• Focus is on the needs of business clients: all
aspects of IP, corporate issues, M&A and
associated due diligence, employment,
environmental, insurance, litigation
© Copyright 2010 Saul Ewing LLP
Who am I?
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IP Attorney since 1988
US Patent Examiner (one year)
Practiced as an Engineer prior to law school
Represent clients of all sizes, worldwide, with
present focus on European clients
• msimpson@saul.com
© Copyright 2010 Saul Ewing LLP
Overview
• Different types of IP and how to protect
them
• Exploiting your IP
• Freedom to operate
• Enforcing your IP
• Business issues
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Creativity
• Creative projects create intellectual
property
– Property rights
• Creative projects use intellectual
property
– Liability!
• Must be aware of and consider both
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Types of IP
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Copyright
Trademark
Patent
Trade Secrets
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Copyright Basics
• Copyright protects “original works of
authorship”
• Many different types of works protected
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Literary works
Musical works (including lyrics)
Dramatic works (including accompanying music)
Pantomimes & choreography
Pictorial, graphic, and sculptural works
Motion pictures and other audiovisual works
Sound recordings
Architectural works
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Copyright Basics
• “Works” should be viewed broadly
• Example – a “literary work”:
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Copyright Basics
• How is copyright in a work secured?
– Automatically, as soon as it is fixed in a
tangible form of expression
• Translation from legalese to English: the first
time it is in a form you can hold in your hands
or can be visually perceived by something you
can hold in your hands (e.g., a computer)
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Copyright Basics
• Who owns the copyright?
– Initially, the “author”
• A company can be the “author” if it is created
as a “work for hire”
– Within scope of employment
– If created by a contractor, can be work for hire under
certain circumstances
– Author can assign to another
© Copyright 2010 Saul Ewing LLP
Copyright Basics
• Copyright does NOT protect:
– Works not fixed in a tangible form
– Titles, names, short phrases, slogans
– Ideas, methods, concepts
– Work that is essentially common property
and containing no original authorship
• Example – a standard calendar
© Copyright 2010 Saul Ewing LLP
Copyright Basics
• Copyright Notice
– Not required but highly recommended
– © 2011 Partnership of ABC
– © 2011 ABC Inc.
– (C) 2011 ABC Inc.
– Copyright 2011 ABC Inc.
© Copyright 2010 Saul Ewing LLP
Copyright Basics
• Copyright Registration
– Legal formality making a public record of a
copyrighted work
– Not required, but beneficial:
• Must be registered to file suit
• Certain damages unavailable if infringement
occurs before registration
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Trademark Basics
• Trademark vs. Service Mark
• Word, phrase, symbol design, that identifies and distinguishes
the source of goods/services of one party from those of others
• Trademark rights are established by USE of the mark in
connection with goods/services.
• Like copyright, registration is not required, but gives certain
benefits:
– Public notice
– Essentially “reserves” rights in the mark nationwide
– Access to Federal Courts
© Copyright 2010 Saul Ewing LLP
© Copyright 2010 Saul Ewing LLP
Trademark Basics
• Who owns the mark?
• Trademark rights created by use of mark with
goods/services
• Creator of the mark can contract to be paid for
creativity involved in creating the mark, but
trademark rights belong to user
• Logo design could be copyrightable artwork
– Initial ownership goes to “author”
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Trademark Basics
• Can use “TM” or “SM” designation with
mark to indicate common law rights
(optional)
• Can use ® ONLY if mark is federally
registered
• Don’t confuse trademark registration
with registration of business name with
state
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Trademark Basics
• Basic test for gauging infringement is
likelihood of confusion by consuming
public
© Copyright 2010 Saul Ewing LLP
Trademark Basics
• Basic test for gauging infringement is
likelihood of confusion by consuming
public
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Trademark Basics
• Searches (Clearance)
– Screening or “quick and dirty” search
• Web-based search engines
• U.S. Patent & Trademark Office website
– Comprehensive search
• Various companies perform searches of
publications, trade journals, advertising, phone
books, multiple databases
© Copyright 2010 Saul Ewing LLP
Design Patents
• Protect the aesthetic look of an article
of manufacture
– Ornamental features
– Should be considered for articles that
have a “trendy” look to them (those
likely to be “knocked off”)
© Copyright 2010 Saul Ewing LLP
© Copyright 2010 Saul Ewing LLP
Utility Patents
• Protects how something works and/or
how it is made
• Contrasted with Design Patent, which
protects how something looks.
• Most common form of patent sought in
the U.S.
© Copyright 2010 Saul Ewing LLP
© Copyright 2010 Saul Ewing LLP
© Copyright 2010 Saul Ewing LLP
Patent ownership
• Initially the inventors own the patent
rights
• May be assigned to an entity or individual(s)
• If no agreement as to ownership, common law
may determine
– Employed/contracted to invent specific thing?
– Employed to invent generally?
– Employed for other non-inventive services?
© Copyright 2010 Saul Ewing LLP
Trade Secret Basics
• A trade secret, as defined under 18 U.S.C. §
1839(3) (A), (B) (1996), has three parts:
– (1) information;
– (2) reasonable measures taken to protect the information;
– (3) which derives independent economic value from not
being publicly known
• Generally protected by contracts
– Non-disclosure agreements
– Non-compete agreements
• Must establish procedures/protocols to maintain
secrecy
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Trade Secret Basics
• Benefits
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Long-lasting; no fixed duration, just must be kept secret
No “examination” to determine if it is protectable
No registration costs (per se)
Effective immediately
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Can be reverse engineered
Once known, anyone can use it
Harder to enforce
Potential exists for it to be patented by another who
independently invents it
© Copyright 2010 Saul Ewing LLP
Exploiting Your IP
• Barrier to entry by others
– “Corner the market”
• Licensing
• Assignment/Sale
© Copyright 2010 Saul Ewing LLP
WHAT IS A LICENSE?
• Grant of a right to use something the
licensor controls.
• Control generally comes from law that
gave the licensor exclusive rights:
– Copyright law (works of authorship)
– Patent law (inventions, methods, processes)
– Trademark law (names & marks)
– Trade secret law (trade secrets)
© Copyright 2010 Saul Ewing LLP
WHAT IS A LICENSE?
• Licensing allows the owner to retain
control while allowing use.
• Licenses can be
– Exclusive or non-exclusive
– Temporary or perpetual
– For limited or unlimited locations or uses
– For a one-time charge, ongoing fees, or free
– With or without a right to sublicense
– Subject to few or many conditions
© Copyright 2010 Saul Ewing LLP
SOME VARIETIES OF IP
LICENSING
• Software licensing
• Other copyright-centered licensing
– Audio, video, music, graphics, multimedia
• Patent licensing
• Trade secret licensing
• Trademark licensing
© Copyright 2010 Saul Ewing LLP
Basis For Copyright License
– Exclusive statutory rights of copyright
owner under Copyright Act §106 as basis
for license grants:
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Reproduce
Prepare derivative works
Distribute copies or recordings
Perform publicly
Display publicly
Transmit by digital audio
© Copyright 2010 Saul Ewing LLP
Basis For Copyright License
• A bundle of severable rights that can be
licensed separately
• License slices more thinly:
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Use
Make
Install
Operate
Compile
Execute
Reproduce
Distribute
Transmit
Display
Perform
© Copyright 2010 Saul Ewing LLP
Basis for Patent License
– Exclusive statutory rights of patent owner
as basis for license grants
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Make
Have made
Use
Sell (Offer for sale)
Import
– Bundle of rights is again severable
© Copyright 2010 Saul Ewing LLP
LICENSING NEGOTIATION IS
ALWAYS ABOUT...
• Scope
• Control
• Accountability
– Both ways
• Payment
© Copyright 2010 Saul Ewing LLP
Licensing Generally
• Licenses can be
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Exclusive or non-exclusive
Temporary or perpetual
For limited or unlimited locations or uses
For a one-time charge, ongoing fees, or free
With or without a right to sublicense
Subject to few or many conditions
© Copyright 2010 Saul Ewing LLP
THE LICENSOR WANTS TO...
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Get paid early and often
Minimize its own duties
Control licensee’s use & sublicensing
Keep licensee paying and paying
© Copyright 2010 Saul Ewing LLP
THE LICENSEE WANTS TO...
• Act & sell freely, so long as it pays &
accounts to Licensor.
• Minimize its own duties
© Copyright 2010 Saul Ewing LLP
SCOPE
• To do a deal you need to unravel, as to
both technology and data :
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Who is creating/supplying/using?
What is being created/supplied/used?
Why is it being created/supplied/used?
When and Where will it be created/supplied/used?
How will it be created/supplied/used?
What If something goes wrong?
© Copyright 2010 Saul Ewing LLP
CONTROL
• Who can use the licensed product?
– When?
– Where?
– For what?
– How much?
– How long?
© Copyright 2010 Saul Ewing LLP
CONTROL
• What’s prohibited or limited?
– Excess use (if fee is based on usage)
– Copying
– Reverse engineering
– Sublicensing
– Assigning or transferring
© Copyright 2010 Saul Ewing LLP
LICENSOR
ACCOUNTABILITY
• What warranties? How long?
• Express warranties
– Conformity to specifications &
documentation
– Defects
– Infringement
• Implied warranties
– Usually disclaimed
© Copyright 2010 Saul Ewing LLP
LICENSOR
ACCOUNTABILITY
• Maintenance and support
– Often a separate agreement
• Service levels
– Response time
– Availability
– Performance
• Service credits for failure to meet
standards
© Copyright 2010 Saul Ewing LLP
LICENSEE
ACCOUNTABILITY
• Can the Licensor audit?
– Usage (or whatever measurement matters)
– Resales & sublicenses
– Units produced
© Copyright 2010 Saul Ewing LLP
PAYMENT
• What entitles the Licensor to payment?
– Contract signing?
– Delivery?
– Milestone acceptance?
– Resale/sublicense?
• One-time license fee or ongoing
“subscription” or royalties?
• How are payments calculated?
© Copyright 2010 Saul Ewing LLP
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CONFIDENTIALITY
• Technology licenses have
always presented trade
secret issues.
– NDAs
• More recent focus on
security, privacy, data
protection
© Copyright 2010 Saul Ewing LLP
Trademark and Trade Secret
Licenses
– Like other forms of license, they focus on a
contractual arrangement that clearly sets
out the terms
• Trademark licenses must give trademark owner
the right and ability to inspect use of the mark
on a regular basis (and that inspection should
be done!)
• Trade secret licenses must protect against
disclosure of the trade secrets
© Copyright 2010 Saul Ewing LLP
Freedom to Operate
• Basically, can I make/use/sell a product
or use a method without infringing the
rights of another?
– Variable in scope (and thus cost!)
• Broad scope (the sky is the limit)
• Mid-level scope (limited to competitors)
• Narrow scope (limited to one or a couple of
known patents
© Copyright 2010 Saul Ewing LLP
Freedom to Operate
• What it involves:
– Identify body of patents
– Determine what the claims mean
• Must look at arguments made during patent
process to see if patentee made arguments that
now limit the meaning of the claim language
• Look to litigation involving patents
– Identify what the product/method is
– Conduct element-by-element comparison of
product/method with claims
© Copyright 2010 Saul Ewing LLP
Freedom to Operate
• What it gets you:
– Can protect against finding of willful infringement
– Can be used to give some level of reassurance to
customers that what you are selling them will not be
infringement of the identified patents
• But consider potential for waiver of attorney/client privilege
– Possibly help you sleep at night
© Copyright 2010 Saul Ewing LLP
Enforcement
• Infringement analysis
– Freedom to operate in reverse
– Evaluate strength of position
– Consider what are acceptable outcomes
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License?
Sale/Assignment?
Injunction
Damages
© Copyright 2010 Saul Ewing LLP
Enforcement
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Informal discussions
Cease & Desist
Arbitration/Mediation
Litigation
© Copyright 2010 Saul Ewing LLP
Business Issues
• Ray Agran – ragran@saul.com
• Elizabeth Mullen – emullen@saul.com
© Copyright 2010 Saul Ewing LLP
Business Issues
• Much revolves around tax issues
– The US inbound tax system is designed to tax a
non-US person on income it earns from its activities
or investments in the US
– At the same time, the system offers certain
incentives to attract foreign investments into the US
– It is important to understand the types of income that
a non-US person will earn from US activities in order
to quantify potential tax exposure and identify
available offsets
© Copyright 2010 Saul Ewing LLP
Business Issues
• Much revolves around tax issues
– The US inbound tax system is designed to
tax a non-US person on income it earns from
its activities or investments in the US
– At the same time, the system offers certain
incentives to attract foreign investments into
the US.
© Copyright 2010 Saul Ewing LLP
Business Issues
• Federal laws
– US taxation of a non-US person is based in large
part on the extent of the person’s presence in the US
and the nexus of any income earned through the US
– A non-US person who is “engaged in a trade or
business within the US” will pay tax on any income
that is “effectively connected” to that trade or
business (these are terms of art that find their
meaning in judicial precedent)
© Copyright 2010 Saul Ewing LLP
Business Issues
• State Laws
– States have the authority to tax non-US persons on
income earned within the state and these taxes are
often overlooked in the planning process
– The taxes themselves and the methods by which
they are levied will differ from one jurisdiction to the
next:
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Franchise tax
Net Income
Net worth
Sales
Real Property
© Copyright 2010 Saul Ewing LLP
Business Issues
• Choice of entity
– The appropriate form of entity will depend in large part of the
type of activities a non-US person expects to conduct in the
US, the tax implications of those activities, and the non-US
person’s exit strategy
– A tax attorney will want to understand your proposed business
in order to advise on the preferable forms of entity
© Copyright 2010 Saul Ewing LLP
Business Issues
• Choice of entity
– If a separate entity is favored, the foreign business will need to
decide whether to use an entity that is a corporation or a flowthrough (such as a partnership or limited liability company)
– All of the income of a US corporation is taxed in the US and
must be reported on a US tax return.
© Copyright 2010 Saul Ewing LLP
Business Issues
• Choice of entity
– If a flow-through entity (where the income and associated tax
liability literally flow through to the owners) is chosen, the
foreign owners may be treated (and taxed) as if they are
engaged in the entity’s US trade or business and must comply
with certain personal filing requirements, in addition to the
filings required of the flow-through entity itself
– In addition, payments made by a US entity to a foreign person
(e.g., an owner) are usually subject to US withholding tax, even
if the foreign person is not engaged in a US trade or business.
The rules regarding withholding are complicated and have
various exceptions that a non-US person should be aware of
when considering formation of a US entity
© Copyright 2010 Saul Ewing LLP
Business Issues
• Miscellany
– There are treaties between the UK and US that provide
incentives for conducting business in each country
– There are governmental agencies and offices that assist with
the conducting of business by non-US entities in the US.
– BEST PRACTICE IS TO CONSULT TAX AND CORPORATE
EXPERTS BEFORE JUMPING IN
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Questions?
© Copyright 2010 Saul Ewing LLP
DISCLAIMER
The content of this seminar/webinar and the presentation
materials have been prepared by Saul Ewing for information
purposes only. The provision and receipt of the information in
this seminar/webinar and the presentation materials should
not be considered legal advice, does not create a lawyer-client
relationship, and should not be acted on without seeking
professional counsel who have been informed of the specific
facts. Should you wish to contact a presenter to obtain more
information regarding your company's particular
circumstances, it may be necessary to enter into an
attorney/client relationship.
© Copyright 2010 Saul Ewing LLP
CONTACT INFORMATION
Mark D. Simpson
Saul Ewing LLP
Centre Square West
1500 Market St., 38th Floor
Philadelphia PA 19102
Phone: 215.972.7880
Fax: 215.972.4169
Email: MSimpson@Saul.com
© Copyright 2010 Saul Ewing LLP
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