SHARING YOUR IP: THE SIMPLICITY AND BEAUTY OF THE NONDISCLOSURE AGREEMENT.

            One of the most exciting things about developing a new idea or business model is sharing your inspiration with others.  Sharing your idea and the way it is implemented, will probably be necessary to turn your idea into a profitable business.  After all, you will have to contract with employees, contractors, and vendors to develop and produce your idea; and, you will have to market your idea to consumers in order to get paid!  While these disclosures can feel like a moment of triumph, particularly when others validate the importance and uniqueness of your ingenuity, but it is fraught with same danger and fear felt by every entrepreneur:  How do I prevent the party with whom I share my idea from stealing it!?

            This is a real and serious concern.  Unfortunately, the risk of someone stealing your idea cannot be completely eliminated.  What you can do, however, is take steps to impose legal penalties for those who steal your ideas, and to preserve your ability to file a patent application or claim trade secret protection.  All of these goals can be accomplished in large part thanks to the nondisclosure agreement.  A nondisclosure agreement is intended to contractually bind the recipient of your information to keep such information secret.  If the recipient feels plucky enough to steal your secrets anyway, you have legal remedies available to you because of the agreement.  You can sue the purloiner for liquidated damages (a pre-agreed amount of money) or possibly enjoin him or her from disclosing the idea further.

            The other function a nondisclosure agreement performs is that it preserves your intellectual property rights.  For instance, if you wish to apply for patent, one of the elements you must show is that the invention is “new.”  If you disclosed the invention more than a year prior to filing the application and did not protect that disclosure with a nondisclosure agreement, you are in danger of losing your ability to patent the invention.  The reason is because your year-old disclosure has made the invention not “new”.  If you used a nondisclosure agreement, however, you should be able to preserve the newness element.  Similarly, for trade secrets, the nondisclosure agreement preserves your ability to enforce trade secret rights.  The law will not assist you to protect your trade secret if you do not care enough to keep it secret yourself. 

            The nondisclosure agreement does come with some limitations, however.  It cannot protect you if your idea is already something that is commonly known and/or available to the public.  It also may not protect you against the unscrupulous person who believes in the “efficient breach” theory.  In other words, if the recipient of your information decides that the amount they will profit from stealing your idea will outweigh all the costs of breaching the agreement, you have yourself a very serious problem.  The best advice I can give is that while you should always use a nondisclosure agreement in these situations, you should do your best to share your profitable information with people you trust.  If you have any more questions, please contact the Law Offices of Aaron Stewart in Chico, California.

Stolen and Infringing Domain Names: The Law of Cybersquatting

As most business owners know, it takes consistent effort to protect the trademark from being infringed by other individuals and businesses.  While trademark law can afford you a set of rules and a mechanism through which to enforce your rights, the impetus is always on you, as the trademark owner, to defend what is yours.  This can be especially difficult in an online word considering (1) the relative anonymity the Internet can afford, and (2) the ease with which domain names can be purchased and registered.

Cybersquatting and cyberpiracy are buzzwords that are becoming more well-known in our day to day lives as business people.  The term cybersquatting originated from the situation where a person or business who knowingly and in bad faith reserves a domain name consisting of the trademark or name of a company with the intent of selling the right to that domain name back to the legitimate owner.”  

The Anticybersquatting Consumer Protection Act, now embodied in 15 USC §1125, is a federal law that took effect in 1999.  This domain name protection law is intended to give trademark and service mark owners a new way to fight cybersquatters.

For example, Nintendo of America Inc. was awarded $560,000 and a recovered 48 Internet domain names in a domain infringement suit in October of 2000.  It was one of the first massive domain name lawsuits that resulted from the 1999 Act.  The Court awarded the company statutory damages ranging from $2,000 to $30,000 per name for 48 names—for a total award of $560,000.  

The major drawback to using the ACPA to enforce your rights, is that you must sue in federal court to do so.  Even with a successful outcome, the process to get there can cost you a lot of time and money.  Fortunately, the Internet Corporation of Assigned Names and Numbers (ICANN) has established a cheaper, faster, and more user-friendly way to enforce your rights in a domain name.  ICANN is a not for profit public benefit corporation that is responsible for administering and overseeing all Internet domain name registrars and their underlying policies.

If someone has taken a domain name similar to your domain name, trademark, or trade name, you may be able to use ICANN’s Uniform Domain-Name Dispute-Resolution Policy (UDRP) to request a binding Administrative Proceeding.  Such a proceeding is initiated by filing a complaint online, and following through with the administrative procedures provided by the UDRP.  If you prevail, the only remedy is transfer of the infringing domain name to you; monetary damages are not allowed under the UDRP’s Administrative Proceeding.

If you think that someone has registered a domain name that may infringe on your trademark or service mark, please contact our law offices to determine if you would be able to file an ACPA or UDRP action to acquire the domain name or avert the domain name registrant from future use of the domain name.

Trademark Law Rights: What Does the Circled “R” Get You?

The basic legal right you have in your trademark is to prevent others from using the same or a confusingly similar mark to identify the source of their goods or services where this would cause confusion in the mind of consumers.  Acquiring trademark rights is relatively simple: all you must do is begin using your mark in commerce.  This makes sense because trademark law protects those marks that identify the source of the goods or services in the mind of consumers.  The mark must be used in commerce in order for consumers to be aware of it and to make the connection between the mark and your goods or services.

The first user of a mark is usually given priority of rights.  For instance, if you federally register your mark and your competitor did not, your competitor might still be able to sue you for trademark infringement if your competitor began using the mark first.  If, however, a foreign company is the first to use a mark exclusively outside the U.S., our trademark law will generally not give that company trademark rights over a later user of a similar mark in the U.S.

A) State Law

Trademark law consists of both state law (often comprised of “common law”) and federal law.  Under state law, use of a mark confers trademark rights.  These rights extend to the geographic area where the mark is used and where the reputation of the mark extends.  Some states extend the geographic reach of trademark protection under the “Zone of Expansion” doctrine, which recognizes that a business will likely enter into broader geographic areas in the future, and thereby presently extends trademark protection to such areas.

You can enforce your trademark rights using your state’s unfair competition laws.  These laws give you the right to sue for infringement (or “passing off”) or dilution.  Infringement occurs when a competitor uses a mark that will likely cause confusion in the mind of the consumers as to the source of the goods or services.  For example, if you began selling “Crestor” brand toothpaste, this would infringe on the trademark for “Crest” brand toothpaste because such a similar name would cause confusion in the minds of the consumers.

Dilution, on the other hand, takes on two forms: blurring and tarnishment.  For either form, a dilution action is only available for those marks that have become sufficiently “famous.”

Blurring occurs when a competitor’s mark weakens the association in the mind of the consumers between your mark and the source of your goods or services.  For example, if someone began selling “Viagra” brand tennis rackets, the association between “Viagra” and the little, blue pill would become weakened in the minds of the consumers.

Tarnishment occurs when a competitor’s mark creates a negative association in the minds of the consumers between your mark and the source of your goods or services.  For example, if someone began selling “Sony” brand personal enemas, a negative association would form in the minds of consumers regarding the mark “Sony.”

Based on the examples above, you can see that dilution usually occurs when the two products in question are very different.  The crucial thing to remember is that with dilution, consumers are not confused about the source of the goods or services, like with infringement.  For instance, consumers would not be confused into thinking that Pfizer started making “Viagra” brand tennis shoes.  Instead, the quick association of a famous mark with its product is attenuated.  Another difference between dilution and infringement is that a dilution claim usually requires proof of the actual impact on the mind of consumers; whereas, an infringement claim usually requires proof of mere likelihood of confusion.

B) Federal Law

Federal trademark law is codified in the Lanham Act at 15 USC §§ 1051–1128.  Much like state law, federal law gives you the right to prevent competitors from using your mark or a similar mark, so long as you can prove that their mark is likely to cause confusion in the mind of the consumers.  Because these cases turn on “likelihood of confusion,” federal case law has established several areas of inquiry that will aid a court’s analysis of this issue:

1) The similarity of marks;

2) The respective “channels of trade” of the parties;

3) The similarity of the goods or services;

4) The sophistication of the relevant consumers;

5) Evidence of actual confusion;

6) The alleged infringer’s intent; and

7) The strength of the plaintiff’s mark.

See AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979).

Like state law, federal law also gives trademark holders the right to pursue a dilution action.  See the Federal Trademark Dilution Revision Act at 15 USC § 1125(c).  A plaintiff in a federal dilution action must prove that 1) the plaintiff’s mark is “famous,” 2) the defendant used its mark in commerce after the plaintiff’s mark became famous, and 3) the defendant’s use of its mark has caused dilution by blurring or tarnishment.  Federal dilution protection extends only to “famous” marks, which makes sense because only well-known marks have the potential to be diluted in the mind of the consumers.  Federal law also provides an injunction remedy.

For more information on your state and federal trademark rights, please contact my law offices at info@ajstewartlaw.com!

Trademark Law – How Strong is Your Mark?

A mark’s strength—which means its ability to attain and retain trademark protection—depends on the nature and content of the mark, and the relationship between the mark and the goods or services it markets.

In trademark law, marks fall somewhere along a “spectrum of distinctiveness.” The general rule of thumb is that the more distinctive a mark, the more likely it will merit trademark protection. This is because the more distinctive a mark, the more likely it will identify the source of your goods or services in the minds of your consumers. A general sketch of the spectrum follows:

1) Generic Marks:

A generic mark is one that is synonymous with what the product is. A mark that is generic cannot be trademarked. This is because generic terms identify the product itself, and not the source of the product. For instance, “Desk” brand desks would be generic.

2) Descriptive Marks:

A descriptive mark is one that describes an attribute of the product or services. A descriptive mark can be trademarked only if it has gained secondary meaning. The reason for this rule is that competitors are allowed to market similar products using similar terms because those terms describe what the product is. For instance, “Wooden” brand desks would be descriptive.

3) Suggestive Marks:

Suggestive marks are those marks that exist somewhere between descriptive marks and arbitrary and fanciful marks (described below). A suggestive mark alludes to some characteristic of the product or service, but does not specifically describe that characteristic. The contours of this category are usually somewhat hazy. For instance, “Hardwork” brand desk could be considered suggestive.

4) Arbitrary and Fanciful Marks:

Arbitrary and Fanciful marks are the strongest marks, and generally merit trademark protection. A mark is arbitrary and fanciful if it neither describes nor suggests anything about the product or service. Often times these are called “coined” marks because they are made only in reference to the source of the goods or services identified, and have no other meaning. “Kodak” is a classic example.

For continued research about marks that can be registered federally, you can review 15 USC § 1052. If you need a legal opinion as to the strength of your mark and whether it can be federally registered, please contact the Law Offices of Aaron J. Stewart at info@ajstewartlaw.com!