We hope everyone is having a great holiday season! In this issue, we address:

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Avoiding IP Litigation

In this and other issues of this newsletter, we discuss many ways of protecting your rights in what you create, pay others to create, or otherwise acquire to increase your intellectual capital. However, efficient operation of your business also involves minimizing the risk of becoming entangled in IP-related (and other) disputes with others. Such matters are expensive and time consuming and no one really ‘wins’ irrespective of the formal outcome. The following observations are based upon our experiences with clients who have been successful and unsuccessful in avoiding IP disputes:

  • Search first. When initiating new marketing or R&D projects, make sure that you do or have someone do a thorough patent and trademark search to see what others have done, and understand how your access (or your independent contractor’s access) to the creative works of others may impact your copyright rights. If someone else has gotten there first, it may pay to reorient your efforts to avoid a dispute. If you do go ahead, at least know your risk.
  • Protect your sensitive material, in both paper and in digital form. Limit access with both physical and virtual partitions and techniques to reduce temptation for disgruntled and departing employees, and enhance your position if a dispute does arise.
  • Hire carefully. Tell prospective employees in writing that you don’t want a former employer’s client list, formulae, etc. and get formal written warranties that they are not bringing same.
  • Manage your website. Particularly if you solicit or allow public submissions of verbiage, music or movie clips, make clear in your terms of use that no one is to submit material which is trademarked or copyrighted by someone else or contains obscene, defamatory, violent, racist or similar imagery, and provide the name or title of a person to receive complaints from copyright or trademark owners.
  • Protect your own IP. By filing appropriate patent applications (including provisional applications) and trademark/copyright registrations, you give pause to those who consider frivolous claims against you.
  • Be careful with your challenges to third parties. While it is desirable and sometimes necessary that you ‘police’ the use of your own IP and avoid public confusion, a bellicose approach toward those who may be seen to be acting in good faith but doing something that may create confusion with yours, may result in challenges to the validity of yours, including lawsuits brought in distant courts, not to mention a beating in the ‘court of public opinion’ if the recipient of a belligerent cease and desist letter makes it public on the internet or elsewhere.

Our IP, patent and litigation partners are pleased to provide proactive advice as to steps that you should consider in proactively managing your legal risks for your intellectual capital.

IP Ownership in Commercial Contracts

Regardless of whether you are creating IP or using it (or both in the same transaction) the question of the legal interest of each party is fundamental, and one that may trigger costly disputes if not properly addressed in pertinent contracts.

For example, when dealing with employees and contractors, it is critical to indicate what products of their efforts the employer owns. Typically, the employer will believe that for the remuneration that is paid, they will own all of such efforts that occur within the scope of employment, but employees will often have their own view, particularly if they desire to work for or establish a competitor. Clear written agreements are essential to defuse such controversy.

When a firm creates IP of any sort for another – be it a machine or formula which is the subject of a patent application, a logo, a manual or a piece of software – it needs to make clear its expectations as to the rights of both parties with respect to ongoing use and modification of such material. While economic expectations always loom large in this context, legal documentation must be properly considered so as to reflect the understanding of each. If the IP provider intends to reuse the material for other clients, it needs to ensure that the deal is documented with a non-exclusive license which reserves the provider’s ownership.

If the recipient intends that, for the money it is paying, the material be solely available to it, then the recipient (e.g., the “hiring party”) must bargain for and ensure that there is proper documentation. Depending on the facts, this might be an outright sale (or assignment), an exclusive license as opposed to a non-exclusive license, or some other nuanced agreement that reflects the parties’ intent. In many cases, a sale may be antithetical to the provider’s business model and deprive it of its stock in trade. Quite often, the concerns of both parties may be addressed with a carefully drafted non-exclusive license with some limited language restricting for some time period the ability of the provider to make it available to competitors.

Our IP partners can help you develop language that suits your specific purpose.

New Cloud Privacy Standard

Those using or providing services through a cloud model – these days, isn’t that almost everyone? – need to be aware of a new voluntary standard for privacy practices for public ‘cloud service providers’, which has recently been promulgated by the ISO (the International Organization for Standardization) and IEC (the International Electrotechnical Commission). It is numbered 27018 and is applicable globally. An abstract is available at http://www.iso.org/iso/catalogue_detail.htm?csnumber=61498

The ISO/IEC 27018 standard augments other privacy standards contained in several other ISO/IEC standards including No. 27001, 27002, and 29100. It addresses topics such as a prohibition on use of customer data for provider advertising, explicit advice to provider customers as to where data is stored and how it is handled, provisions of tools facilitating customer compliance with their data protection obligations and commitments as to handling of any data breaches that do occur.

Whether you use a cloud provider for material services or are in the business of providing services and/or software through the cloud, you need to be familiar with this standard, and other ISO/IEC standards, and their implications for you. Our IP partners can help.

Dealing with the Worst (or Inevitable?): Contractual Responsibility for Data Breaches

If you collect sensitive data (for example, Personally Identifiable Information [“PII”]) from consumers through a website or cloud application hosted by someone else, you need to ensure that your contract with third parties protects you in the event that they suffer a data breach that may compromise the PII. Among other things, you may want to consider whether your contract with the third party handling the PII should provide for full and timely sharing of information regarding a data breach so that data breach notification obligations can be met by you or the party handling the PII, and establish a framework in which you can work together to maintain customer relationships. Depending on the type of data (e.g., health data) you may have limits on how the risk for a breach of that data is allocated in your contract. With data breaches increasingly common and impacting businesses of all sizes, you should assume that one would impact you and obtain appropriate commitments from your vendors. When a breach occurs, your customers and government agencies such as the Federal Trade Commission and state attorney generals, as well as the banks providing your merchant services credit card processing, may inquire into any third party contracts you entered into for handling your customers’ information. Preparation and planning can help better manage that risk.

Our privacy partners can help you with appropriate contractual language.

Trademark a Flavor? Maybe in some form …

The flavor of pizza was recently at issue in a federal court in Texas, and not just when rival attorneys were debating where to eat lunch but also when New York Pizzeria, Inc. (“NYPI”), a franchisor of pizza parlors, claimed a trademark interest in the flavor of its pizza.

In a 2014 case known as New York Pizzeria, Inc. v. Ravinder Syal, in the federal court for the Southern District of Texas, the defendants, affiliates of NYPI rival Gina’s Italian Kitchen (“Gina’s”), are alleged to have, among other things, obtained the username and password of an existing NYPI franchisee (without such franchisee’s consent) and used it to log on to NYPI’s computer system, downloading recipes and other trade secrets. Gina’s also hired former NYPI employees, who, it is claimed, violated their confidentiality obligations by disclosing NYPI’s trade secrets.

While NYPI may still pursue other remedies, the court was unconvinced by NYPI’s flavor as trademark claim, calling it “plainly half-baked”. Trademarks distinguish sources of goods and services, and, theoretically, almost anything – words, designs, sounds, colors, fragrances, even flavors – can be distinctive.

Trademarks can be inherently distinctive or acquire distinctiveness through use. Arbitrary or fanciful words such as Xerox are inherently distinctive. In contrast, flavor is basically a descriptive characteristic of a good, so flavor can never be inherently distinctive. However, all may not be lost. Over a period of time, a product characteristic such as flavor, color, sound or fragrance may acquire distinctiveness, or “secondary meaning” when in the mind of the public, the primary significance of such characteristic is to identify the source of the product rather than describe the product itself. For example, the pink color of fiberglass insulation came to be associated with the Owens Corning company rather than simply the color of a product, thereby allowing Owens Corning to trademark the color pink. The NBC sound chimes are a registered trademark, and the USPTO has registered a floral scent “reminiscent of plumeria blossoms” as a trademark for sewing thread and embroidery yarn.

If you are interested in protection for a distinguishing flavor, color, sound or fragrance for product you are developing, beginning to market or already selling, you may wish to speak with a FisherBroyles trademark partner, to craft a strategy for maximizing protection of your mark.

Returning to the world of spicy pepperoni, melting mozzarella and piping hot tomato sauce (but, no anchovies, please), for a pizza parlor to trademark the flavor of its pies, secondary meaning would need to be shown as the consuming public would have to associate such flavor with its purveyor rather than as a characteristic of the pizza itself.

However, even if secondary meaning can be attributed to a flavor, protection may still not be available in the case of food because functional elements may not be trademarked. Citing an earlier case, the court wrote that a product feature is functional “if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.” The court hypothesized that in the case of food, flavor might be impossible to trademark since the flavor of food undoubtedly affects its quality, making it a functional element. In fact, NYPI failed to cite a single case of a food flavor receiving trademark protection. Nonetheless, the court left open the possibility that in other, unspecified non-food situations flavor may acquire secondary meaning without being functional and, thus, qualify for trademark protection.

While NYPI may have lost on its trademark claim, the court found that it may still be able to seek redress based on misappropriation of trade secrets as well as the defendants’ violation of federal statutes designed to protect electronic data such as the Computer Fraud and Abuse Act and the Stored Communications Act.

Rather than pursuing inventive trademark claims, businesses can try to avoid suffering a fate similar to NYPI’s by limiting access to proprietary recipes and formulas, requiring all employees to sign confidentiality and non-disclosure agreements and enhancing data security requiring authorized system users to answer security questions (e.g., name of high school mascot, mother’s maiden name) prior to being granted access.

Our IP partners will work with you to develop a customized, cost-effective solution that suits your needs.

Contributors:


Founded in 2002, FisherBroyles, LLP is a full-service, cloud-based national law firm with attorneys across the country. Conceived as the “Next Generation Law Firm®”, FisherBroyles eliminates unnecessary overhead that does not add value to clients and instead offers a more cost-effective solution to clients across all industries. Visit our website at www.fisherbroyles.legal to learn more about our firm’s unique approach and how we can best meet your needs.

This newsletter has been prepared for the general information of clients and friends of FisherBroyles. It is not intended to provide legal advice for a specific situation or create an attorney-client relationship. Under rules applicable to the professional conduct of attorneys in various jurisdictions, it may be considered advertising material. The choice of a lawyer is an important decision and should not be based solely upon advertisements.