Business Law for the Entrepreneur and Manager Chapter

Business Law for the Entrepreneur and Manager Chapter 11 – Intellectual Property Law Frank Cavico and Bahaudin G. Mujtaba © Cavico & Mujtaba, 2008

Chapter Topics • Intellectual Property Protection In The United Stat – – – – – Patent Law Copyright Law Trademark Law Trade Secret Law Covenants-Not-To-Compete Anti-Piracy and Non-Solicitation Agreements Confidentiality and Non-Disclosure Agreements Employee Inventions Summary © Cavico & Mujtaba, 2008

Intellectual Property Protection in the United States • The term “intellectual property law” has come to designate in the United States a very broad field of law encompassing several forms of law – international treaty, federal and state statutes, criminal and civil, and state common law – as well a variety of legal doctrines from federal patent and copyright law to state trade secret law and contract law • An important rationale animating intellectual property law in the Untied States is the desire to motivate the creation, production, use, and proper disclosure of such creative endeavors by granting to the creators of such information specific legal protection against the infringement and misappropriation of such intellectual property • The law in the U. S. also attempts to strike a balance by encouraging the disclosure and use of intellectual property as well as seeking to further creative and entrepreneurial activity, and also attempting to protect legitimate competitive advantage and to help instill ethical behavior in the marketplace © Cavico & Mujtaba, 2008

Patent Law • A patent is an exclusive legal right granted by the federal government to the inventors of new and useful inventions, processes, improvements • The owner of the patent has the right to exclude others from making, using, or selling the patented invention for up to seventeen years • A person can take the basic idea and function of an invention, and accomplish the same result through a different series of steps, and then legally resell the “new” device © Cavico & Mujtaba, 2008

Copyright Law • A copyright is another exclusive legal right granted by the federal government to the creators of original works of authorship, such as writings, recordings, works of art, and movies • Copyrights can be registered at the United States Copyright Office in Washington, D. C. ; and although registration is permissive and voluntary, it is strongly recommended • Modern copyright law is based principally on the federal Copyright Reform Act of 1976. This statute makes it illegal for a person to duplicate the exact expression, or a substantially similar expression, of a copyrighted work, and then use it or resell it without the permission of the copyright holder • In 1998, the U. S. Congress enacted the Copyright Term Extension Act which lengthened the time periods for the protection of copyrighted works © Cavico & Mujtaba, 2008

Trademark Law • Trademark law at the federal level in the United States is governed by the Lanham Act of 1946 as amended by the Federal Trademark Dilution Act of 1995 • A trademark is obtained by registering the mark with the appropriate federal or state government agency • Trademark law protects the owner of the trademark from others who might use the same trademark or a similar one on their products and services, and thereby mislead and confuse the public © Cavico & Mujtaba, 2008

Trade Secret Law • • • Trade secret law is considered to be complementary to federal patent, copyright, and trademark law, and thus is not preempted by these federal laws. Trade secret law is predominantly based on state law, with one very important exception – a federal statute which criminalizes theft of a trade secret The primary state statute on point is the Uniform Trade Secret Act, which many states in the United States have adopted The remedies for a misappropriation of a trade secret can be both criminal and civil The predicate for any type of legal trade secret protection is “information, ” which obviously is a broad term, but one that is very liberally construed by the courts The final factor in achieving trade secret status to information is the secrecy element. The person or business attempting to convince a court that his or her valuable information is in fact a legal trade secret must demonstrate that reasonable security measures were adopted and continued in order to maintain the secrecy of the information On the federal level, misappropriating a trade secret can be a very serious legal wrong because the U. S. Congress has converted the misappropriation of a trade secret into a federal crime by means of the federal Economic Espionage Act of 1996 © Cavico & Mujtaba, 2008

Covenants-Not-To-Compete • A covenant-not-to-compete can be found in a contract for the sale of a business or in an employment contract. The covenant clause must be ancillary, or part of a larger contract, and also must be supported by the common law contract requirement of “consideration. ” • Based on the common law, a non-competition clause will be upheld if it is reasonable as to time, that is, duration, and also place, that is, trade territory. Both requirements are necessary; and if one or both are not present, the covenant is unreasonable, overbroad, invalid, illegal, and stricken from the contract, though ordinarily the remainder of the contract will not be adversely affected • The party seeking to enforce the covenant, that is, the employer, must show that it is not only reasonable in time and place, but also that it is necessary to support a legitimate business interest of the employer • The burden of proof as well as persuasion is on the employer to demonstrate not only the reasonableness elements but also an adequate interest to support the covenant © Cavico & Mujtaba, 2008

Anti-Piracy and Non-Solicitation Agreements • Anti-piracy and non-solicitation agreements are clauses in contracts which bar a departing employee from soliciting or serving the former employer’s customers, clients, and employees • There are clauses in contracts which require the departing employee to repay the company’s training and education costs if the employee does not stay with the employer for a reasonable period of time after completion of the training or education © Cavico & Mujtaba, 2008

Confidentiality and Non-Disclosure Agreements • These type of agreements forbid employees from using confidential, proprietary, and trade secret information that became cognizant of at their former employer • A single employment contract can of course include non-competition, non-solicitation, and non-disclosure provisions • it is possible for the non-disclosure agreement to state that one party is prohibited from even revealing that he or she has any information • one typically finds such agreements a clause dealing with the length of the agreement, which usually limits the time the agreement is in effect • When the agreement ends there should be some type of provision as to what happens to the information © Cavico & Mujtaba, 2008

Employee Inventions • The best way to describe the law governing employee inventions is to categorize employee inventions into three main groups: 1) “service” inventions, 2) “shop right” inventions, and 3) “free” inventions • First, a “service” invention occurs as a product of one’s employment • Second, a “shop right” invention materializes when the employee is neither obligated by contract to invent or create nor is there any understanding, explicit or implicit, that the employee is hired in whole or in part to invent or create • the “free” invention, arises when there is no contract or understanding of any type between the employer and employee, and the employee does not use or materially use the employer’s resources © Cavico & Mujtaba, 2008

Summary • All these intellectual property legal protections must be of heightened concern to the global business person and entrepreneur. Creating and developing intellectual property is characteristically an expensive and time-consuming process. Moreover, the advent of the Internet and the relative ease of transmission and duplication of information on a truly global basis mean that the gain the creator expects to accrue from his or her creative efforts may be imperiled unless actions are taken to legally safeguard the intellectual property © Cavico & Mujtaba, 2008

Reference 1. 2. Cavico, F. & Mujtaba, B. G. , (2008). Business Law for the Entrepreneur and Manager. ILEAD Academy Publications; Davie, Florida, USA. ISBN: 978 -0 -9774 -2115 -2. Cavico, F. and Mujtaba, B. G. (2008). Legal Challenges for the Global Manager and Entrepreneur. Kendal Hunt Publishing; United States. © Cavico & Mujtaba, 2008