THIS DOES NOT SUBSTITUTE FOR LEGAL ADVICE Just as a reminder: ●This is an Introduction to Legal Issues that commonly affect our clients ●This is not a substitute for working with a Lawyer or coming directly to us with your issues, which is always recommended
What is Intellectual Property? ▪Intellectual property refers to any creation of the human intellect. ▪It requires protection because of its potential commercial value to the creator.
Why protect it? The purpose of IP law is to: 1)Encourage artists/inventors to create and share works; 2)Enable commercialization- its use can be sold, it can be valued and protected like other business assets
Types of IP Intellectual Property law is comprised of 5 separate areas of law that are enforced under state or federal law : ▪Trade Secrets ▪Copyright ▪Patents ▪Trademarks ▪Contractual IP Each type of IP protection differs as to what is protected and how you can obtain protection.
What is a copyright? ●Protects original works of authorship. ●The work should be fixed in a tangible medium of expression. ●Covers a broad range of works- books, works of art, musical recordings, plays, movies, software, advertisements, architectural drawings, etc.
A copyright gives to the owner of the work the exclusive right to: ▪reproduce copies of the work; ▪develop derivative works based on the copyrighted work; ▪distribute copies of the work; ▪perform the work publicly; ▪display the work publicly.
What cannot be protected by copyright? ▪Copyright does not protect facts or ideas. ▪The protection afforded by copyright extends only to original expression. ▪EXAMPLE: I have an idea to throw a masquerade party with a specific type of mask. Can not be copyrighted.
Fair Use Doctrine The use of a copyrighted work, other than by the owner of the work, is allowed for: ▪criticism, ▪comment, ▪news reporting, ▪scholarship, ▪and research. Use which is transformative of the original work is ‘Fair Use’. For instance: ▪ a commentary on the copyrighted work ▪ a criticism of the work ▪ a parody.
Duration of protection: ▪From the minute your create it ▪Individual Creators- life of the creator + 70 years. ▪Work Made for Hire-95 years from the year of publication of the work, or 120 years from the year of creation, whichever occurs first.
Additional Information Pertaining to Copyrights: Employee Employer is the owner of the work. Independent Contractor Independent Contractor is the owner of the work. These presumptions can be changed by a contract to the contrary.
Meaning ▪Trade Secret refers to any information that provides competitive advantage to the business, so long as it remains secret. ▪If a Trade Secret is disclosed, then the value that the business would have gained from it is lost.
What can be a Trade Secret? Almost anything that is commercially valuable to the business can be a trade secret. For instance: ●business and marketing plans; ●customer lists; ●financial statements; ●supplier terms; ●product formulas; ●custom software, etc.
Requirements for Protection ▪The company should have taken reasonable steps to guard the secret. ▪ ‘Reasonable Efforts’ is generally judged by industry standards.
Reasonable Efforts 1.Storing trade secrets in safes or locked cabinets 2.Restricting access by key/combination 3.Using password protection to restrict access to computer files 4.Using non-disclosure agreements with employees 5.Using non-compete agreements with employees 6.Disclosing confidential information on a need to know basis 7.Avoid discussing confidential information when visitors are present 8.Marking as “Confidential” important documents
Forms of Protection: There are two ways in which trade secrets are commonly guarded with workers: ▪Nondisclosure Agreement between the company and the employee. ▪Noncompetition Agreement between the company and former employee. Non-Compete agreements are rarely enforced. If confidential information is used unfairly by a former employee, then they are certainly enforced.
Trademarks A trademark distinguishes the goods/services of one company from those of another. A good trademark can signify a company using: a word or set of words, a symbol, a sound.
Choosing a Trademark: ▪Distinctiveness: The trademark must have a distinct flavor. Distinctive marks allow consumers to identify the products with the owner. There are certain marks which are considered to be inherently distinctive. For instance: ▪ Fanciful marks such as “KODAK” for cameras; ▪Arbitrary marks such as “APPLE” for computers; ▪Suggestive marks like “GLEEM” for toothpaste.
Descriptive Marks ▪Descriptive marks which directly describe the product cannot be strong trademarks. ▪Descriptive marks can only be protected when a significant number of consumers start to associate the product with the producer. ▪Marks that are lifted from the common usage to describe a product can never be protected.
Trade Dress ▪Trade Dress: Trade Dress refers to the packaging, design of a product. ▪A trade dress should not be functional, such as a shape which is necessary for the performance of the product.
Trademark Search ▪ It is important to perform a preliminary search, to ensure that the trademark has not already been adopted by another company. You can perform such a search yourself, or with the help of an attorney. ▪The cost is about 325$ to file a name and a logo. http://www.uspto.gov/trademarks/process/inde x.jsp http://www.uspto.gov/trademarks/process/inde x.jsp
Creating Rights in the Trademark ▪Use the mark in commerce. ▪Register the mark though it is not mandatory. Registration allows the trademark to become incontestable after five years of continuous use.
Patents ▪A patent is a right granted to an inventor for an invention. ▪It gives the inventor the exclusive right to make, use and sell the invention. ▪Inventors must file for a patent within 1 year of public disclosure or use
Types of Patents ▪Utility Patents: Covers a machine, a process, articles of manufacture, new compositions of matter. ▪Design Patents: Covers ornamental designs, shape of items. ▪Non-Patentable Subject Matter: Natural Phenomena, abstract ideas, and laws of nature.
How to Obtain a Patent ▪An invention must belong to subject matter that is patentable, be useful, and novel. ▪Novelty means that the invention must not already have been invented, or described in a publication. ▪The patent application must describe the invention in detail. ▪Some inventors file patents on their own, though most usually work through an attorney. Also, the legal fees for filing a patent can be substantial- recent figures quoted by veteran Bay Area attorneys noted the cost at about 10K. ▪The patent Lasts for 20 years from the date the patent application is filed.
Issues for Entrepreneurs... ▪The IRS and CA put workers into 3 distinct BUCKETS – even if you don’t ▪Employee ▪Independent Contractor ▪Unpaid Intern/Volunteer ▪We recognize that traditional reasons that workers stay with a business may not apply (i.e., wages) – people pitch in for a variety of reasons (friendship, future expectations, altruism, personal development, etc.) ▪We urge you to observe the “BUCKETS” as best you can because there are some distinct risks associated with these relationships...
Potential risks... ▪Maintaining “fluid,” undefined relationships with workers can lead to: ▪Gov. audit ▪Misunderstandings with your workers ▪CA Dept. of Employment Development/Dept. of Industrial Relations hearing with a disgruntled worker ▪Contact lawsuit by ex-worker trying to enforce a promise (even if there was no written agreement) ▪If a court or other review board ever has to review your activities, they will identify which “bucket” a worker falls into if there was a “mis-filing” ▪The preference here will always be to find that the person was an Employee – the relationship with the strictest requirements ▪The following presentation gives you a sense of these “buckets” and what will be expected for each category.
Employees... ▪Overlay of Federal, State, and Local Laws, and Sound Business Practices ▪How to Set Up ▪Government Requirements: 17-pt Employer Checklist ▪Minimally Necessary: Application, Interview, Check References, Offer Letter, Supervision ▪Optimal: Personnel Policies - See CA Chamber resources – HR California – note, subscription requiredHR California ▪Practical Points: ▪Recommend using a Payroll Service to keep track of everything
Additional Risks with Using Employees... Hiring employees exponentially increases the company’s risk of liability ▪More people working for you = more possible screw-ups ▪Public will treat employees as your AGENTS – have to watch what they say/how they act ▪Respondeat Superior Doctrine: if employee is acting within scope of employment, then employer will be responsible Additional measures needed to manage risk: ▪Check References ▪Interview ▪Train & Supervise ▪Provide Guidance (e.g., Personnel Policies Manual) ▪Cover with General Liability Insurance ▪Keep Records of All Incidents/Issues Involving Employees
What Makes an Independent Contractor Different? ▪Make sure you treat your independent contractor as such. The key aspect to attend to is CONTROL. ▪Factors to consider: o Compensation and benefits o Use of company resources o Skills and type of work ▪Also see HR California forHR California more guidance
Weigh the Pros and Cons… Employee Pros ●Increased Loyalty ●Performs Multiple Roles ●Smooth Work Flow (no need to juggle contractors/work) Cons ●Added Moral Responsibility ● Extra Overhead for Workspace ●Management / HR Issues ●More Paperwork Contractor Pros ▪Specialized Knowledge ▪No Health Benefits, Workman’s Comp ▪Work on Demand and Only When Needed ▪May Shield Company From Liability Cons ▪Lack of Control ▪Vague contracts = potential for dispute
>>There’s always some amount of risk in taking on an unpaid worker: ▪Potential misunderstandings about lack of compensation and potential for later hire ▪Potential liability if unpaid worker is injured or injures someone else ▪Lack of clarity about who owns the work ▪For Non-profits: Unpaid workers(“Volunteers”) are common, but not very regulated ▪Should spell out above terms in a contract ▪For For-profits: Unpaid workers (“Interns”) are common and VERY regulated… ▪Spell out in a contract the following terms
Criteria for Unpaid Internship... ▪Training is similar to training that would be given at vocational school ▪Training is for benefit of interns ▪Interns do not displace regular employees, but work under close supervision ▪Employer does NOT derive immediate advantage from activities of interns- Employer may actually be harmed occasionally ▪Interns are not necessarily entitled to a job at conclusion of training ▪Interns understand that not entitled to wages for time training
Recommendation... ▪To be safe – only set up short term internships, and make them part of a formal school program. ▪BUT, know that generally, the government expects interns to be more trouble than they are worth.
Overall Recommendations... ▪Try to utilize Independent Contractors when workers can meet the IRS test (i.e., lack of full control) ▪Try to formalize fuzzy relationships into Independent Contractors if possible: ▪Identify specific projects for the Contractor ▪Allow as much autonomy as possible for Contractor ▪Create written agreements identifying the Worker as anIndependent Contractors ▪Pay the Contractor on a per project, or hourly basis (does not have to meet CA minimum wage if “per project”) ▪Hire workers as employees when you can’t meet the IRS test ▪Use a payroll service, if needed, to keep track of the full checklist of employer requirements