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    Patents, copyrights and trademarks, as well as know-how or trade

    secrets, are often collectively referred to as intellectual

    property. Many firms have such property without even being aware

    of it or of the need to take measures to protect it.

    Many people's notions of intellectual property are unrealistic.

    Some believe, for example, that having a patent on a product will

    enable one to succeed in the marketplace. Consequently, they may

    spend thousands of dollars to obtain the exclusive rights to

    market something that no one wants or can afford to buy. Others

    may conclude that intellectual property protection is not worth

    the expense and bother.

    People who may not be interested in protecting their own rights

    still must take precautions to avoid infringing on the rights of

    others. This calls for more than the avoidance of copying.

    Copying is unavoidable; it is a way of life and one way in which

    we learn. But, one can easily infringe on the rights of others

    without deliberately imitating specific features of goods or


    This publication addresses the steps newcomers to a market should

    take to avoid infringement and when they should take them.


    Most people have heard variations on a remark attributed to Ralph

    Waldo Emerson: If a man can make a better mousetrap than his

    neighbor, though he builds his house in the woods the world will

    beat a path to his door. To keep the discussion concrete, let's

    imagine a present day inventor of a new mousetrap who not only

    invents a better mousetrap but is also successful in marketing

    it. The higher the inventor's profit margin, the more others will

    want to copy his invention. Let's assume that the inventor

    selects Figaro as the brand name and actively promotes the

    product. However, he does not legally protect his invention, but

    relies on the consumers' loyalty, goodwill and brand

    identification to ensure future sales.

    Taking measures to develop loyalty and goodwill may be sufficient

    until a larger and better known competitor turns up. For example,

    what if economies of scale and lack of development costs mean

    that the competitor can sell the same mousetrap for 20 percent

    less? Goodwill may not be enough to ensure customer loyalty at a

    higher price. A patent would be much more helpful, because it

    would prevent the competitor from selling the new trap until well

    after the original firm had a chance to get on its feet. This

    situation illustrates that it is the smaller firm that often has

    the most to gain from protecting intellectual property.

    As bad as the situation is without patent protection, it could be

    worse. Let's assume that customers are so taken by the Figaro

    promotion that they are willing to pay the 25 percent premium the

    firm charges in order to stay in business. Imagine what would

    happen if the company had to stop using that name or had to face

    an expensive lawsuit. Imagine what would happen if it turns out

    that someone else actually has a current patent on one or more

    features of the better mousetrap. By failing to consider the

    intellectual property of others, the new firm would not only be

    forced to stop selling under the name Figaro, but might be forced

    to stop selling the mousetrap altogether.


    Utility patents - what people usually mean when they use the term

    patents - provide 17 years of exclusive rights for inventions that

    deal with the way things work. Design patents afford 14 years of

    protection for significant improvement in the appearance of

    useful items, such as car bodies or furniture. Both of these

    patents do more than prevent copying; they forbid the making,

    using or selling of an invention similar to or the same as the

    protected invention, even though the second invention was

    independently created. (Plant patents, which will not be covered

    in this discussion, may not give the same protection.)

    Copying may actually be a way to avoid infringement. The inventor

    of the mousetrap might have avoided potential problems by using

    technology that was described in a printed publication, publicly

    used or on sale. Products that are on sale and give no notice of

    patent coverage are relatively free from the risk of


    Any person trying to market fairly new technology that doesn't

    appear to be patented should keep in mind that an inventor has

    one year from public sale or disclosure within which to file a

    patent application. In addition, because patents often take two or

    more years to obtain, there is still a chance that a patent could

    be issued at a later time. Although there is no liability for

    infringement prior to issuance of a patent, a competitor would

    have to cease making, using or selling the technology once the

    patent was issued, thus risking the loss of both start-up costs

    and inventory.

    Of course, if our inventor was determined to make a better

    mousetrap, there would be no interest in copying something else in

    the market. Still, before spending too much time and money on

    research, the inventor should ensure that others do not have

    exclusive rights in the area being explored. The inventor

    certainly should not assume that, because a product is not on the

    market, it is unpatented. As many independent inventors have

    learned to their chagrin, it is usually easier to patent something

    than to market it profitably.


    The inventor should hire a patent attorney or agent to conduct an

    infringement search. A patent agent is a technically trained

    person who has passed a special examination given by the U.S.

    Patent and Trademark Office; a patent lawyer is one permitted to

    draft contracts and provide other general legal services. Patent

    searches can be expensive if one must consult foreign records; it

    is much less costly to determine whether technology is currently

    patented in the United States. Yet, as we will see, there is value

    in going somewhat beyond that point.

    A search might reveal that (1) someone else had a patent that has

    since expired, i.e., the information patented is now in the public

    domain; (2) no current or expired patents cover the area of

    proposed research or (3) someone else has a current patent

    covering all or part of the proposed design. Let's consider these

    potential results in order.


    If the mousetrap (or an obvious variation) was disclosed in an

    expired patent, the inventor is free to manufacture and market it

    without concern for the patent laws. Also, even if the inventor

    didn't find exactly what he or she originally had in mind, a host

    of good and freely used ideas that are even better might have

    been discovered. These alone could be worth several times the

    price of the search in saving research and development time.


    If, after a thorough search, our inventor's proposed improvements

    to the mousetrap seem not only to be novel but also to offer

    significant advantages over the prior design, the inventor may

    seek a patent and/or begin selling the mousetrap without further

    ado. If, however, the inventor begins selling without first filing

    a patent application, he immediately forfeits possible protection

    in many other countries and also forfeits any possibility of

    patent rights in the United States after one year.


    If an unexpired patent is found to cover any part of the proposed

    mousetrap design, the inventor knows that he is not free to use it

    without a license. Infringing on a current patent exposes one to

    a suit for damages as well as an injunction against future use.

    Even an injunction might mean substantial costs, including the

    loss of current inventory, and a patent covering even a small

    feature of the new mousetrap might give rise to the need to

    retool. Although deliberate infringement is more serious,

    ignorance of others' patents is no defense.


    Trademarks (or brand names) indicate commercial source.

    Trademarks may be words, logos or other symbols indicating that

    goods come from a particular company. They may even be sounds,

    three-dimensional symbols (such as the well-known McDonald's

    golden arches) or colors. There are also service marks, which

    indicate the source of services, and other kinds of marks that

    will not be considered here.

    As with patents, one can infringe on another's marks without

    copying them or even being in direct competition with their

    owner. All that is necessary is to use the same or a similar mark

    under circumstances in which consumers may be confused as to the

    source or sponsorship of the goods or services.


    A trademark search is the only way to find out whether Figaro or

    something confusingly similar is being used by others as a mark

    for a mousetrap (or perhaps such things as rodenticides) in the

    proposed market area. It is also necessary to determine whether

    the mark has been registered in the U.S. Patent and Trademark

    Office, which could give the registrant rights well beyond the

    market areas currently occupied.

    There are two reasons why a search may not be sufficient. First,

    in the United States, it is unnecessary for a firm to do more than

    use a good mark to have trademark rights in its market area.

    Consequently, a search may not locate all such prior users. Second,

    people may be able to prevent the use of a potential mark without

    having used it as a mark themselves; for example, when a trademark

    can be associated with others in such a way that consumers might

    presume that some kind of relationship might exist. This is where

    the mark Figaro would run into trouble.

    As you may recall, Figaro is the name of the cat in the Disney

    film Pinocchio. Although the Walt Disney Company does not have

    a monopoly on the use of the name, it might nevertheless be able

    to prevent it from being used on a mousetrap. If that seems too

    farfetched, consider the company's concern if "Mickey" had somehow

    been part of the mousetrap name!


    A copyright provides an owner with the exclusive rights to

    reproduce a certain work for a specified period, subject to some

    basic limits. The term of a copyright is the lifetime of the

    author plus 50 years in the case of identifiable, living authors.

    Copyrights arise automatically and are inexpensive to register.

    Searching for a prior copyright is probably unnecessary.

    Copyright infringement can be avoided by establishing that a work

    was independently created. Therefore, records showing independent

    creation are helpful to avoid liability. Even with such records,

    establishing independent creation may be difficult if the

    original work was widely disseminated or otherwise available to

    the alleged infringer. In one such case, the court held that,

    although copying may have been unconscious, the original was

    nevertheless infringed.

    One of the limits to copyright protection is that ideas (compared

    to expressions) and technology (computer software aside) are

    generally not protected. This means that our inventor is free, at

    least as far as copyright laws are concerned, to use any

    information that can be found in books on mousetrap designs and

    to make and sell working copies of anything shown or described.

    Copyright gives the owner only the right to prevent reproduction

    of the text or drawings themselves.

    What if the inventor wants to use some of that text, for example,

    in an advertisement? There is a remote possibility that such use

    might be protected under the "fair use" defense, but it would be

    very unwise to proceed without getting permission from the

    copyright holder or seeking expert advice.


    Trade secrets overlap the subject matter of copyrights and

    patents. As long as efforts have been made to preserve secrecy, a

    suit may be brought to redress the misappropriation (or wrongful

    taking) of almost any kind of information of competitive value.

    Misappropriation includes industrial espionage and breaches of

    confidential relationships (for example, by former employees), but

    it does not include reverse engineering. Thus, a trade secret suit

    will not succeed if an aspect of a product's design or

    construction was obtained by examining an item purchased in the

    marketplace. Nor will a suit be useful against those who

    independently discover a secret process or recompile commercially

    valuable information.

    The risk of being accused of misappropriating a trade secret is

    never very high, particularly if one seeks competent legal advice

    before using unlicensed information that has not been obtained

    through reverse engineering.


    Any attorney admitted to practice in any state in the country is

    technically qualified to register trademarks with the U.S. Patent

    and Trademark Office or copyrights with the U.S. Copyright Office

    in Washington D.C. Unlike the situation with patents, no special

    examination is given to determine whether the attorney is

    familiar with the copyright or trademark law or registration

    procedures, for example. Clients are advised to seek an attorney

    who specializes in such matters.


    Whether or not our mousetrap inventor takes measures to preserve

    the intellectual property, he or she certainly should avoid

    infringing on the rights of others. Although this is not

    difficult in the case of copyrights and trade secrets, patents and

    trademarks are another matter altogether.

    Unquestionably, it costs precious start-up capital to have patent

    and trademark searches performed; however, proceeding in a new

    venture without doing so is equivalent to erecting a building or

    signing a long-term lease without checking the real estate title.

    Searches will not make the product appeal to the public, but they

    will ensure enjoyment of any hard-won market success. A patent

    search is comparatively cheap insurance against the possible need

    to retool or to absorb inventory losses. Moreover, a close look

    before adopting a trademark is cheaper in the long run than the

    cost of advertising and new promotions designed to advise

    customers to seek the mousetrap under a new name.


    Patent and Trademark Office, Washington, DC 20231, or the United

    States Trademark Association, 6 E. 45th Street, New York, NY 10017.

    Both publish free or inexpensive booklets.

    A booklet for independent inventors, "So You Have An Idea", is

    available from the Innovation Clinic, 2 White Street, Concord, NH

    03301. To order it send $2.00 and a self-addressed mailing label.

    The Innovation Clinic also has a set of HyperCard stacks

    (for Macintosh computers) covering several topics of interest to

    inventors and small business owners. These are available for

    $5.00 and a self-addressed mailing label.

    Write to the Copyright Office, Washington, DC 20559, indicating the

    subject matter in which you are particularly interested, for

    example, music or arts.

    "Patents Trademarks and Copyrights", Lawrence E. Evans, Jr., 1986,

    Gunn, Lee and Jackson, Eleven Greenway Plaza, Suite 1616, Houston, TX


    You may want to consult one or more of the many inventors'

    handbooks available at public libraries. One example is "How to

    Profit From Your Ideas", Flemming Bank, 1985 ($12.95). Bank and

    Associates, P.O. Box 20365, Portland, OR 97220. This is a

    step-by-step guide that shows how you can make money by turning

    your creative ideas into marketable products.


    U.S. Small Business Administration (SBA)

    The SBA offers an extensive selection of information on most

    business management topics, from how to start a business to

    exporting your products.

    This information is listed in "The Small Business Directory". For a

    free copy contact your nearest SBA office.

    SBA has offices throughout the country. Consult the U.S.

    Government section in your telephone directory for the office

    nearest you. SBA offers a number of programs and services,

    including training and educational programs, counseling services,

    financial programs and contract assistance. Ask about

     - Service Corps of Retired Executives (SCORE), a national

       organization sponsored by SBA of over 13,000 volunteer business

       executives who provide free counseling, workshops and seminars to

       prospective and existing small business people.

     - Small Business Development Centers (SBDCs), sponsored by the SBA

       in partnership with state and local governments, the educational

       community and the private sector. They provide assistance,

       counseling and training to prospective and existing business


     - Small Business Institutes (SBIs), organized through SBA on more

       than 500 college campuses nationwide. The institutes provide

       counseling by students and faculty to small business clients.

    For more information about SBA business development programs and

    services call the SBA Small Business Answer Desk at 1-800-8-ASK-SBA


    Other U.S. Government Resources

    Many publications on business management and other related topics

    are available from the Government Printing Office (GPO). GPO

    bookstores are located in 24 major cities and are listed in the

    Yellow Pages under the "bookstore" heading. You can request a

    "Subject Bibliography" by writing to Government Printing Office,

    Superintendent of Documents, Washington, DC 20402-9328.

    Many federal agencies offer publications of interest to small

    businesses. There is a nominal fee for some, but most are free.

    Below is a selected list of government agencies that provide

    publications and other services targeted to small businesses. To

    get their publications, contact the regional offices listed in

    the telephone directory or write to the addresses below:

     - Consumer Information Center (CIC), P.O. Box 100 Pueblo, CO 81002

       The CIC offers a consumer information catalog of federal


     - Library of Congress Copyright Office, Register of Copyrights,

       Washington, DC 20559

     - Patent and Trademark Office (PTO), Washington, DC 20231

       Public Service Center: (703) 557-INFO

     - U.S. Department of Commerce (DOC), Office of Business Liaison,

       14th Street and Constitution Avenue, NW, Room 5898C, Washington,

       DC 20230  DOC's Business Assistance Center provides listings of

       business opportunities available in the federal government. This

       service also will refer businesses to different programs and

       services in the DOC and other federal agencies.

    Nongovernment Organizations

     - Software Publishers Association, 1101 Connecticut Avenue, NW

       Suite 901, Washington, DC 20036

     - United States Trademark Association, 6 E. 45th Street, New York,

       NY 10017

    For More Information

    A librarian can help you locate the specific information you need

    in reference books. Most libraries have a variety of directories,

    indexes and encyclopedias that cover many business topics. They

    also have other resources, such as

     - Trade association information - Ask the librarian to show you a

       directory of trade associations. Associations provide a valuable

       network of resources to their members through publications and

       services such as newsletters, conferences and seminars.

     - Books - Many guidebooks, textbooks and manuals on small business

       are published annually. To find the names of books not in your

       local library check "Books In Print", a directory of books

       currently available from publishers.

     - Magazine and newspaper articles - Business and professional

       magazines provide information that is more current than that

       found in books and textbooks. There are a number of indexes to

       help you find specific articles in periodicals.

    In addition to books and magazines, many libraries offer free

    workshops, lend skill-building tapes and have catalogues and

    brochures describing continuing education opportunities.


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