Issues surrounding a research organization's IP have changed with the timessecurity and protection have become more difficult as industries have evolved from primarily manufacturing to knowledge-based economies.

Illustrated by Bill Yermal

Back in the "old days" before the information technology revolution a mere 10 to 15 years ago protecting against the loss of your intellectual property (IP) was much easier. Much of the IP in those days consisted of physical products or products that entailed large amounts of physical documentation. Electronic media changed all that. "People can collect huge amounts of information and put it onto a small CD or even email it or delete it from an electronic memory device," says Ian Ballon, co-chair of the Intellectual Property Group at Manatt, Phelps & Phillips, a Los Angeles law firm.

Alan Unikel, chair of the Intellectual Property Group in the Chicago office of Seyfarth Shaw agrees, "IP is more at risk now than in the past in the sense that so much technology now is intangible, assets can be distributed much more easily than in the past. Previous assets were much more physical." The value of those intangible assets today also far exceeds the value of the tangible assets of an organization.

Various Forms of Intellectual Property Copyrights - Protection given to authors of original literary works and motion pictures from unauthorized copying or performance. Trademarks - A word, name, or graphic symbol, such as the shape of a container or product, that identifies the sources, product, manufacturer, or distributor of goods or services. Trade Secrets - Any information, whether or not it can be copyrighted or patented, that is not generally known or accessible, thereby providing competitive advantage to its owners. Patents - An official document granted by the government that permits patent owners to stop others from exploiting their invention. Others may practice the invention only after obtaining a license from the owner. There are five types of patents: • Provisional - an application that allows early filing without a formal patent claim or prior art statement. It provides the means to establish an early effective filing date in a non-provisional application and is automatically abandoned after one year. • Non-provisional (utility) - the most common type of patent which provides protection for technological advances and innovation. The subject of a utility patent must result from some human activity. The term of a U.S. patent's protection is 20 years from the earliest priority date claimed by the inventor. • Design - this covers the design, shape, or surface treatment of a manufactured article. Its term is 14 years from its issue date. •Plant - applies to the characteristics of an organic plant that has been asexually reproduced. Its term of protection is 20 years. •International - an application filed under the Patent Cooperation Treaty (an international treaty, administered by the World Intellectual Property Organization, that facilitates foreign patent filings for residents of more than 50 member countries when obtaining patents in other member countries)

Of the four types of IP--copyrights, trademarks, patents, and trade secrets--trade secrets are considered to be the most susceptible to being compromised or lost. Very specific binding government-enforced laws for the three other IP types make them less at risk of being compromised or requiring less specific protection. The very nature of trade secretssecretsmake them susceptible to being disclosed, either accidentally or intentionally, with future competitive advantages being forever lost once they are disclosed. Protecting trade secrets requires a continuous effort that would allow legal action against a potential infringing party at some time in the future.

The first objective in protecting a trade secret is to determine the factors that define it. In this regard, there are six factors most commonly investigated: 1) how much information is known externally, 2) how much information is known internally in the organization, 3) how well does the information owner guard its secrecy, 4) what is the value of the information compared to that for competitors, 5) what is the value or expense of developing the information, and 6) what is the value, in terms of time and expense, it would take for others to acquire and duplicate the information.

"The biggest risk of losing your IP is through disclosure of the IP through someone who doesn't have a non-disclosure agreement (NDA) or an inadequate NDA," says Ballon. "Your international rights to the IP may be blown (European laws state that once a piece of IP is disclosed, you can no longer obtain legal protection for it), patents may not be issued, and you may lose a future source of revenue."

Even though trade secrets are secrets that you hold to yourself and have few federal regulations applied to them, they do have some legal protection at the state level through the Uniform Trade Secrets Act. This legal document was created to provide a more uniform set of laws from state to state, rather than if each state had its own set of laws. Despite the Uniform Trade Secrets Act, there are differences in state responses to litigation. "Texas and New York are slightly different in their response to trade secrets than the other states," says Ballon, again reinforcing the need for competent legal representation.

The Federal Government does recognize trade secret protection, but only provides relief in those situations that involve federal employees or federal liabilities. It does not create a civil remedy between two private parties.

WIPO Celebrates Global Creativity For the past four years, the World Intellectual Property Organization (WIPO) has designated April 26th as World Intellectual Property Day, an opportunity to highlight the significance of creativity and innovation in people's daily lives and in the betterment of society. WIPO, a specialized agency of the United Nations since 1974, actually has roots going back to 1883 with the Paris Convention for the Protection of Industrial Property and the 1886 Berne Convention for the Protection of Literary and Artistic Works. Both conventions created international bureaus, which merged in 1893 to become the United International Bureaux for the Protection of Intellectual Property (BIRPI). In 1960, BIRPI moved from Berne to Geneva, Switzerland and in 1974 it became WIPO. WIPO administers IP matters recognized by UN member states and manages international treaties that deal with some aspect of IP. WIPO has 175 member nations. The theme of this year's World IP Day, "Encouraging Creativity," will be highlighted by various activities in different countries, including exhibitions, workshops, lectures, seminars, radio and television programs, televised debates, and other celebratory events. WIPO is supporting the event with leaflets, posters, guidebooks, software downloads, and other promotional materials. WIPO has invited its member states and all the organizations receiving its outreach materials to inform the Organization of any activities planned at the national level. The past three year's events have been successful and well attended. April 23, 2004 also has an IP connection-this is the World Book and Copyright Day, sponsored by the United Nations Educational, Scientific, and Cultural Organization (UNESCO), which seeks to promote reading, publishing, and the protection of IP through copyright. >>More info: www.wip.intportal.unesco.org

Guarding your IP

While some might argue that it's evitable that trade secrets are disclosed, the implementation of a strong NDA is vital to maintaining that they are not disclosed. Probably the second most important thing you can do to protect your IP, after making sure that you have an NDA for your employees and contractors, is making sure that you have strong legal representation and consul. "Too often, employers pay someone to create some IP for them, only to find out that because of a weak or ineffective NDA document, the very people they commissioned to do the work now also own the IP they created," says Ballon. "You must demand good legal advice."

Most of the civil laws that allow for the protection of trade secrets are made in response to disclosure by outsiders-relatively few are made to protect trade secrets from theft by people to whom companies must disclose the IP in order to do their jobs. Even NDAs are often practically ineffective in preventing disclosure by this group. And once the disclosure is made, it cannot be taken back.

To maintain the strength of your trade secret civil protection, you have to provide a "reasonable means to protect it." This includes doing all the logical things like 1) restricting access to the area where the trade secret is kept to unauthorized parties, 2) obtaining strong NDAs from suppliers, manufacturers, subcontractors, raw material suppliers, and component manufacturers, 3) obtaining secrecy agreements from all those who had direct or indirect contact with the trade secret, and 4) restricting the use and disclosure of all documents and drawings related to the trade secret. Courts generally require "active" efforts to protect the integrity of a trade secret, "passive" efforts, such as "no tell actions" may not always be sufficient in a legal action.

In some situations where R&D is outsourced, the "reasonable protections" may have to be enhanced. At Battelle in Columbus, Ohio, for example, physical barriers may have to be erected to separate those researchers working on one specific technology from those uninvolved in the work. "Researchers may have to carry on non-confidential conversations until farther down the discovery path because of due-diligence concerns," says Barry Bissell, assistant Intellectual Property Counsel at Battelle. Single point of contact, restricted access, and frequent security checks may be needed. Due diligence is very important when selecting those who may consider licensing your IP in both trade secret and patent types of IP. "You have to pick and feel comfortable with the people that you're going to work with," says Bissell.

Mega IP One of the largest owners and developers of intellectual property is IBM, Armonk, NY. IBM's large size has allowed it to take full advantage of its IP including building what it refers to as the world's largest database on the Web-its Intellectual Property Network (IPN). IPN is an electronic patent library that IBM makes available to every IBM employee worldwide. Any U.S. patent from the past 26 years is available on the site, which can be searched, viewed, printed, faxed, or downloaded. Users also can view images of the patents from a 1.3 TB image repository of more than 3,000 CDs. The internal site has had about 7,000 users per week within IBM. IBM also owns many of the patents on the IPN, since the corporation has been the leading creator of U.S. patents for the past 11 years. Since 1993, IBM has received 25,772 U.S. patents, with 3,415 obtained in 2003 alone. IBM has a portfolio of about 23,000 active patents in the U.S. and more than 40,000 patents worldwide. The company has an active program of licensing selected technologies to third parties. IBM also negotiates licenses to IP that it wants to implement in its own products-and sometimes gets into legal situations concerning the use of that IP. Last year The SCO Group, Lindon, Utah, sued IBM for $1 billion alleging that IBM has improperly incorporated SCO UNIX-based trade secrets into IBM's open source operating system. SCO terminated IBM's license at the time of the trade secret filing. In February 2004, SCO dropped its trade secret lawsuit, but incorporated allegations that IBM violated SCO copyrights by continuing to distribute Unix and Unix-derived products, including Linux, after SCO terminated IBM's Linux license. These changes brought the total amount sought by SCO to about $5 billion-previous damages were about $3 billion. IBM has declared that SCO's claims are without merit and that it is continuing to pursue its own counterclaims. The litigation is continuing. >>More info: www.thescogroup.com www.ibm.com

Patent or trade secret?

By their very nature, patents are much more appropriate legal devices for the protection of tangible assets like machinery and mechanisms. Patents often are not as appropriate for protecting intangibles like business practices and knowledge. Which legal choice is made for a specific IP often is a matter of timing. If the IP will remain valid for a number of years, then a trade secret route might be appropriate. If the IP will become invalid in a few years, then the shorter-lived patent route might be more suitable.

Often the pricing of a patent may determine which IP avenue to travel. "It can cost up to $250,000 to obtain an international patent in the U.S., Canada, Japan, and most European countries," says Bissell. This may be an acceptable price for a large company to deal with, but totally beyond the means of a small company.

You should be aware that you cannot maintain a patent and a trade secret on the same IP; they are at odds with each other. Once you apply a patent to the IP, it is no longer a trade secret or any secret at all, the information is made available for the entire world to know about. But by doing so, you gain federal legal protection for 20 years.

The exception for this non-duality is in software, which can be protected by both copyright and by trade secret through an allowance made by the U.S. Copyright Office. The Copyright Office allows developers to obtain a copyright on a software product, without revealing the underlying code or algorithms.

International issues

The U.S. is by far the best at protecting the IP of its citizens. "The system is well organized and those involved are well experienced in the system," says Seyfarth Shaw's Unikel. "There is a very active court system, jury system, and even an active Supreme Court in taking on IP cases." This is not always true in other parts of the world. There is no such thing as a global patent, just as there is no global protection of IP. Some countries are even reluctant to enforce patent protection.

"The tremendous dissemination of international information with many companies relying of foreign suppliers also makes it more difficult to maintain your organization's IP privacy and security," says Unikel.

International copyright protection is also more inconsistent, according to Ballon. "IP can be protected fairly easily and consistently in Japan and the European Commission (EC), as it is in the U.S., but there are differences." You have to avoid disclosure in the EC or else you lose all your patent rights. And most countries are lax in enforcing copyrights, although some trade groups are trying to make improvements. "In international IP issues, you must learn to think very strategically of the value of IP protection and where you want to apply it," says Ballon.

Tim Studt

Resources Battelle, 614-424-6424, www.battelle.org Manatt, Phelps & Phillips, 310-312-4000, www.manatt.com Seyfarth Shaw, 312-346-8000, www.seyfarth.com U.S. Patent and Trade Office, 800-786-9199, www.uspto.gov World Intellectual Property Organization, 212-963-6813, www.wipo.org