Intellectual Property Infringement: Avoiding Lawsuits and Liability
Intellectual Property Infringement
In our last blog article, we provided a high-level overview of Intellectual Property (or IP) and how it can help protect valuable assets of a business. Today we are going to look at the most common forms of intellectual property infringement.
Are you headed for an IP disaster?
Unfortunately IP isn’t something a business owner can simply ignore. Even if you feel like you have no assets worthy of IP protection, almost all business leaders and entrepreneurs unintentionally do things that can get them in serious trouble with intellectual property infringement. We talk about some these possibilities in this blog article including Infringing Patents, Infringing Trademarks, Infringing Copyrights and Infringing Trade Secrets.
Are you creating, selling or promotion a new/unique product? If so, you owe it to your business to conduct a “Patent Search,” to verify that no patents exist that contain claims that could apply to your product.
This is especially important if you are creating some software or app with the intent of commercializing that software or app.
On a slightly different note, if you’re a software developer, consultant, web developer, or other engineer, scientist, architect or other specialist building something on behalf of another, you need to be careful. Make sure you do not sign a services agreement that has you or your company representing or warranting that your deliverables will be “free from infringing the rights of third-parties” (especially patents), unless your client or customer is willing to conduct the appropriate patent search before giving you the specifications. Never sign an agreement with an indemnity clause indicating you’ll hold your customer or client harmless for any third-party cause of action for a patent infringement dispute.
If you are unsure what a trademark is, read our previous article entitled
What “TM” or “®” Mean on a Trademark or Logo. We also have a blog article that discussed trademarks in more depth, entitled Standard Character Marks vs Stylized Logos!
Are you worried that your business name could get you in trouble for intellectual property infringement? You should do a trademark search when coming up with a name for your business, products and services. Don’t just look for “exact matches.” The key test is “likelihood of confusion,” which in general looks at:
- How similar (or not similar) are the trademarks in terms of appearance, sound, connotation and commercial impression?
- How similar (or not similar) are the goods or services as described in an application or in connection with a prior mark?
- How similar (or not similar) are the trade channels? (How is your business going to be selling its products?)
- The conditions under which and buyers to whom sales are made, i.e. “impulse” vs. careful, sophisticated purchasing.
- The number and nature of similar marks in use on similar goods.
- A valid consent agreement between the applicant and the owner of the previously registered mark.
- Evidence of actual confusion
This is not an exact science. If you are aware of any “competitors” that you feel your name could be “confused with,” you owe it to yourself to consult with a trademark attorney. You also owe it to yourself to conduct a “trademark search” before naming your company, products or services to save yourself the cost and expense of defending against a trademark infringement lawsuit, or at least having to change your signs, business cards, marketing collateral and more.
Beware when hiring third-parties, including artists, consultants and especially online logo companies, to come up with your logo and/or graphics used to identify your products or services. While it’s more expensive, you want to pay for uniqueness, so that you don’t run the risk of inadvertently choosing or selecting an image, icon or artwork that may be “confusingly similar” to someone else.
Copyright infringement represents the single greatest risk to a small business. It can happen easily and quickly even if you think you’re taking reasonable and prudent measures to help ensure you do not use the copyrighted works of another.
Beware when creating any marketing materials, company website, or imagery for your packaging, product or service. If you have employees, make sure the illustrations and photographs are made by that employee or your company, otherwise make sure your employee only uses material that is properly licensed. Do not take your employees’ word at this — you must verify the license, that your company properly acquired and paid for the license, and that your company (and not the employee’s) name is associated with that license.
If your product or service utilizes any form of audiovisual or musical work, make absolutely certain you have the proper license to use such an audiovisual or musical work. This gets tricky. Suppose your employee has a band, and that band creates a specific song for your business? Is that song unique or does some song writer somewhere own it? Did the band use background tracks or melodies in the composition? Does the song borrow phrases or lines from a poem, book or other composition that isn’t owned by your company? If you answered yes to any of these questions, you don’t own the copyrights to the underlying material comprising the song, and therefore you can run afoul of a third-party’s copyrighted material.
If you hire an independent contractor or company to produce some sort of copyrightable work product for your business, that independent contractor or company actually owns the copyrights to that work product, unless you have a strong contract in place that assigns the copyright to your company and specifically states that the work product is a “Work Made for Hire” under US Copyright Law. See our blog article entitled, Don’t Get Screwed – Managing Website Vendors to learn how to avoid copyright infringement lawsuits brought about by your independent contractor and Images or photos on your website? Avoid a lawsuit! if you’re considering hiring a third-party to do your website.
Copyright infringement offers no wiggle room.
The important thing to recognize with Copyright Law, is that even your best intentions can get you into trouble. Copyright infringement is a “strict liability offense,” which means you are guilty no matter what. Period. Even if you think you were told that something was properly licensed, you could still be in trouble. This fact alone makes it very important you know you who you are doing business with, and that you just don’t allow the cheapest vendor to provide potentially copyrighted works to your business. Read our blog article, What is Strict Liability, and Should You Care?, to learn more about this potential pitfall to your business.
Infringing Trade Secrets
Trade secrets are secrets. Duh. And many companies like to make sure their secrets stay that way. So, how can you know whether you’re going to violate someones trade secrets? Carefully.
If someone is offering you something that seems a bit shady, you need to tread very carefully. Do not attempt to buy your competitor’s customer list! That is shady and will probably see you fighting off a trade secret violation by your competitor. In New Mexico and many states, a trade secret violation can carry stiff penalties: damages, injunctions, treble damages and attorneys fees.
Deals that look to good to be true are just that.
Similarly, beware of hiring employees or independent contractors with significant experience in your industry. Especially if they’ve come from a competitor and that employee or independent contractor is offering to help your business in some key area that is not generally known or disclosed in your business. Obvious examples include an offer to share customer lists, employee lists, vendor lists, pricing or inventory information, recipes, and know-how. A less obvious example, but still just as dangerous, include processes and procedures for some element of your business. Make sure to prohibit employees, independent contractors and vendors from disclosing the trade secrets and confidential information of any third-party. Make it clear that you do not want any such information disclosed to you or your business.
Law 4 Small Business. A little law now can save a lot later.