1. Intellectual Property American Style
Mark D. Simpson
Saul Ewing LLP
Philadelphia, Pennsylvania USA

2. Saul Ewing
Philadelphia based business law firm with 9 offices from Washington DC to Boston
Focus is on the needs of business clients: all aspects of IP, corporate issues, M&A and associated due diligence, employment, environmental, insurance, litigation

3. Who am I? msimpson@saul.com IP Attorney since 1988
US Patent Examiner (one year)
Practiced as an Engineer prior to law school
Represent clients of all sizes, worldwide, with present focus on European clients

4. Overview Different types of IP and how to protect them
Exploiting your IP
Freedom to operate
Enforcing your IP
Business issues

5. Creativity Creative projects create intellectual property
Property rights
Creative projects use intellectual property
Liability!
Must be aware of and consider both

6. Types of IP
Copyright
Trademark
Patent
Trade Secrets

7. Copyright Basics Copyright protects “original works of authorship”
Many different types of works protected
Literary works
Musical works (including lyrics)
Dramatic works (including accompanying music)
Pantomimes & choreography
Pictorial, graphic, and sculptural works
Motion pictures and other audiovisual works
Sound recordings
Architectural works

8. Copyright Basics “Works” should be viewed broadly
Example – a “literary work”:

9. Copyright Basics How is copyright in a work secured?
Automatically, as soon as it is fixed in a tangible form of expression
Translation from legalese to English: the first time it is in a form you can hold in your hands or can be visually perceived by something you can hold in your hands (e.g., a computer)

10. Copyright Basics Who owns the copyright? Initially, the “author”
A company can be the “author” if it is created as a “work for hire”
Within scope of employment
If created by a contractor, can be work for hire under certain circumstances
Author can assign to another

11. Copyright Basics Copyright does NOT protect:
Works not fixed in a tangible form
Titles, names, short phrases, slogans
Ideas, methods, concepts
Work that is essentially common property and containing no original authorship
Example – a standard calendar

12. Copyright Basics Copyright Notice Not required but highly recommended
© 2011 Partnership of ABC
© 2011 ABC Inc.
(C) 2011 ABC Inc.
Copyright 2011 ABC Inc.

13. Copyright Basics Copyright Registration
Legal formality making a public record of a copyrighted work
Not required, but beneficial:
Must be registered to file suit
Certain damages unavailable if infringement occurs before registration

14. Trademark Basics Trademark vs. Service Mark
Word, phrase, symbol design, that identifies and distinguishes the source of goods/services of one party from those of others
Trademark rights are established by USE of the mark in connection with goods/services.
Like copyright, registration is not required, but gives certain benefits:
Public notice
Essentially “reserves” rights in the mark nationwide
Access to Federal Courts

16. Trademark Basics Who owns the mark?
Trademark rights created by use of mark with goods/services
Creator of the mark can contract to be paid for creativity involved in creating the mark, but trademark rights belong to user
Logo design could be copyrightable artwork
Initial ownership goes to “author”

17. Trademark Basics
Can use “TM” or “SM” designation with mark to indicate common law rights (optional)
Can use ® ONLY if mark is federally registered
Don’t confuse trademark registration with registration of business name with state

18. Trademark Basics
Basic test for gauging infringement is likelihood of confusion by consuming public

19. Trademark Basics
Basic test for gauging infringement is likelihood of confusion by consuming public

20. Trademark Basics Searches (Clearance)
Screening or “quick and dirty” search
Web-based search engines
U.S. Patent & Trademark Office website
Comprehensive search
Various companies perform searches of publications, trade journals, advertising, phone books, multiple databases

21. Design Patents Protect the aesthetic look of an article of manufacture
Ornamental features
Should be considered for articles that have a “trendy” look to them (those likely to be “knocked off”)

23. Utility Patents Protects how something works and/or how it is made
Contrasted with Design Patent, which protects how something looks.
Most common form of patent sought in the U.S.

26. Patent ownership Initially the inventors own the patent rights
May be assigned to an entity or individual(s)
If no agreement as to ownership, common law may determine
Employed/contracted to invent specific thing?
Employed to invent generally?
Employed for other non-inventive services?

27. Trade Secret Basics
A trade secret, as defined under 18 U.S.C. § 1839(3) (A), (B) (1996), has three parts:
(1) information;
(2) reasonable measures taken to protect the information;
(3) which derives independent economic value from not being publicly known
Generally protected by contracts
Non-disclosure agreements
Non-compete agreements
Must establish procedures/protocols to maintain secrecy

28. Trade Secret Basics Benefits Downsides
Long-lasting; no fixed duration, just must be kept secret
No “examination” to determine if it is protectable
No registration costs (per se)
Effective immediately
Downsides
Can be reverse engineered
Once known, anyone can use it
Harder to enforce
Potential exists for it to be patented by another who independently invents it

29. Exploiting Your IP Barrier to entry by others Licensing
“Corner the market”
Licensing
Assignment/Sale

30. WHAT IS A LICENSE?
Grant of a right to use something the licensor controls.
Control generally comes from law that gave the licensor exclusive rights:
Copyright law (works of authorship)
Patent law (inventions, methods, processes)
Trademark law (names & marks)
Trade secret law (trade secrets)

31. WHAT IS A LICENSE?
Licensing allows the owner to retain control while allowing use.
Licenses can be
Exclusive or non-exclusive
Temporary or perpetual
For limited or unlimited locations or uses
For a one-time charge, ongoing fees, or free
With or without a right to sublicense
Subject to few or many conditions

32. SOME VARIETIES OF IP LICENSING
Software licensing
Other copyright-centered licensing
Audio, video, music, graphics, multimedia
Patent licensing
Trade secret licensing
Trademark licensing

33. Basis For Copyright License
Exclusive statutory rights of copyright owner under Copyright Act §106 as basis for license grants:
Reproduce
Prepare derivative works
Distribute copies or recordings
Perform publicly
Display publicly
Transmit by digital audio

34. Basis For Copyright License
A bundle of severable rights that can be licensed separately
License slices more thinly:
Use
Make
Install
Operate
Compile
Execute
Reproduce
Distribute
Transmit
Display
Perform

35. Basis for Patent License
Exclusive statutory rights of patent owner as basis for license grants
Make
Have made
Use
Sell (Offer for sale)
Import
Bundle of rights is again severable 35

36. LICENSING NEGOTIATION IS ALWAYS ABOUT...
Scope
Control
Accountability
Both ways
Payment

37. Licenses can be Licensing Generally Exclusive or non-exclusive
Temporary or perpetual
For limited or unlimited locations or uses
For a one-time charge, ongoing fees, or free
With or without a right to sublicense
Subject to few or many conditions

38. THE LICENSOR WANTS TO... Get paid early and often
Minimize its own duties
Control licensee’s use & sublicensing
Keep licensee paying and paying

39. THE LICENSEE WANTS TO...
Act & sell freely, so long as it pays & accounts to Licensor.
Minimize its own duties

40. SCOPE
To do a deal you need to unravel, as to both technology and data :
Who is creating/supplying/using?
What is being created/supplied/used?
Why is it being created/supplied/used?
When and Where will it be created/supplied/used?
How will it be created/supplied/used?
What If something goes wrong?

41. CONTROL Who can use the licensed product? When? Where? For what?
How much?
How long?

42. CONTROL What’s prohibited or limited?
Excess use (if fee is based on usage)
Copying
Reverse engineering
Sublicensing
Assigning or transferring

43. LICENSOR ACCOUNTABILITY
What warranties? How long?
Express warranties
Conformity to specifications & documentation
Defects
Infringement
Implied warranties
Usually disclaimed

44. LICENSOR ACCOUNTABILITY
Maintenance and support
Often a separate agreement
Service levels
Response time
Availability
Performance
Service credits for failure to meet standards

45. LICENSEE ACCOUNTABILITY
Can the Licensor audit?
Usage (or whatever measurement matters)
Resales & sublicenses
Units produced

46. PAYMENT What entitles the Licensor to payment?
Contract signing?
Delivery?
Milestone acceptance? .
Resale/sublicense?
One-time license fee or ongoing “subscription” or royalties?
How are payments calculated?

47. CONFIDENTIALITY
Technology licenses have always presented trade secret issues.
NDAs
More recent focus on security, privacy, data protection

48. Trademark and Trade Secret Licenses
Like other forms of license, they focus on a contractual arrangement that clearly sets out the terms
Trademark licenses must give trademark owner the right and ability to inspect use of the mark on a regular basis (and that inspection should be done!)
Trade secret licenses must protect against disclosure of the trade secrets

49. Freedom to Operate
Basically, can I make/use/sell a product or use a method without infringing the rights of another?
Variable in scope (and thus cost!)
Broad scope (the sky is the limit)
Mid-level scope (limited to competitors)
Narrow scope (limited to one or a couple of known patents

50. Freedom to Operate What it involves: Identify body of patents
Determine what the claims mean
Must look at arguments made during patent process to see if patentee made arguments that now limit the meaning of the claim language
Look to litigation involving patents
Identify what the product/method is
Conduct element-by-element comparison of product/method with claims

51. Freedom to Operate What it gets you:
Can protect against finding of willful infringement
Can be used to give some level of reassurance to customers that what you are selling them will not be infringement of the identified patents
But consider potential for waiver of attorney/client privilege
Possibly help you sleep at night

52. Enforcement Infringement analysis Freedom to operate in reverse
Evaluate strength of position
Consider what are acceptable outcomes
License?
Sale/Assignment?
Injunction
Damages

53. Enforcement Informal discussions Cease & Desist Arbitration/Mediation
Litigation

54. Business Issues Ray Agran – ragran@saul.com
Elizabeth Mullen –

55. Business Issues Much revolves around tax issues
The US inbound tax system is designed to tax a non-US person on income it earns from its activities or investments in the US
At the same time, the system offers certain incentives to attract foreign investments into the US
It is important to understand the types of income that a non-US person will earn from US activities in order to quantify potential tax exposure and identify available offsets

56. Business Issues Much revolves around tax issues
The US inbound tax system is designed to tax a non-US person on income it earns from its activities or investments in the US
At the same time, the system offers certain incentives to attract foreign investments into the US.

57. Business Issues Federal laws
US taxation of a non-US person is based in large part on the extent of the person’s presence in the US and the nexus of any income earned through the US
A non-US person who is “engaged in a trade or business within the US” will pay tax on any income that is “effectively connected” to that trade or business (these are terms of art that find their meaning in judicial precedent)

58. Business Issues State Laws
States have the authority to tax non-US persons on income earned within the state and these taxes are often overlooked in the planning process
The taxes themselves and the methods by which they are levied will differ from one jurisdiction to the next:
Franchise tax
Net Income
Net worth
Sales
Real Property

59. Business Issues Choice of entity
The appropriate form of entity will depend in large part of the type of activities a non-US person expects to conduct in the US, the tax implications of those activities, and the non-US person’s exit strategy
A tax attorney will want to understand your proposed business in order to advise on the preferable forms of entity

60. Business Issues Choice of entity
If a separate entity is favored, the foreign business will need to decide whether to use an entity that is a corporation or a flow-through (such as a partnership or limited liability company)
All of the income of a US corporation is taxed in the US and must be reported on a US tax return.

61. Business Issues Choice of entity
If a flow-through entity (where the income and associated tax liability literally flow through to the owners) is chosen, the foreign owners may be treated (and taxed) as if they are engaged in the entity’s US trade or business and must comply with certain personal filing requirements, in addition to the filings required of the flow-through entity itself
In addition, payments made by a US entity to a foreign person (e.g., an owner) are usually subject to US withholding tax, even if the foreign person is not engaged in a US trade or business. The rules regarding withholding are complicated and have various exceptions that a non-US person should be aware of when considering formation of a US entity

62. Business Issues Miscellany
There are treaties between the UK and US that provide incentives for conducting business in each country
There are governmental agencies and offices that assist with the conducting of business by non-US entities in the US.
BEST PRACTICE IS TO CONSULT TAX AND CORPORATE EXPERTS BEFORE JUMPING IN

63. Questions?

64. DISCLAIMER
The content of this seminar/webinar and the presentation materials have been prepared by Saul Ewing for information purposes only. The provision and receipt of the information in this seminar/webinar and the presentation materials should not be considered legal advice, does not create a lawyer-client relationship, and should not be acted on without seeking professional counsel who have been informed of the specific facts. Should you wish to contact a presenter to obtain more information regarding your company's particular circumstances, it may be necessary to enter into an attorney/client relationship.

65. CONTACT INFORMATION
Mark D. Simpson
Saul Ewing LLP
Centre Square West
1500 Market St., 38th Floor
Philadelphia PA 19102
Phone:
Fax:

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