The JoomlaChicago Software Community Group asked me to speak about intellectual property (“IP”) law.  The organization of my presentation aims to hone an understanding of the fundamental categories of IP, and move into licensing aspects.  The materials may be helpful to you for shining light around corners.

Trade Secret

Economically advantageous and self-preserved secret.  Protection is against breach of confidence for wrongful disclosure or misappropriation.  Potentially unlimited duration countered with possible instantaneous termination.  Competitors may proceed upon honestly and lawfully discovering or developing the same information, spelling the end of that trade secret information.  In the event of violation of a duty of confidence, recourse would be available against the individual or entity that disseminated the information in violation of the duty, although the cat would be out of the bag as far as the previous secrecy with respect to law-abiding others.

Balcony View

A trade secret protects valuable and secret information that provides an economic advantage.  The trade secret owner self-administers the trade secret protection.  There is no government agency to which you apply to obtain a trade secret.  Instead, the trade secret owner takes reasonable measures to keep the information secret.  A famous example of a trade secret is the formula for Coca-Cola®.

Mezzanine Level

Trade secrets fall under state law or common law.  The Uniform Trade Secrets Act (“UTSA”) has been adopted in nearly all the US.  Trade secrets may include formulas, patterns, compilations, programs, devices, methods, techniques, or processes.  A trade secret is information that derives independent economic value from not being generally known by other persons, and from not being readily and properly ascertainable by them.  Were others to have disclosure or use of the trade secret information, they could obtain actual or potential economic value.  The owner needs to take efforts that are reasonable under the circumstances to maintain the secrecy.

Patent

35 U.S.C. § 101 defines patentable utility inventions.  Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor upon meeting conditions and requirements.  An invention needs to be new, useful, and nonobvious.  Infringement occurs if an accused device or process meets each limitation of a patent claim, literally or under the doctrine of equivalents, where available. For more, see my posts on claim construction, the doctrine of equivalents, and prosecution history estoppel.

Lightning Rod/Bug – Friendly Confines

A patent mouthful:  a national government issued right on an idea usually obtained through fees to a patent lawyer translated into individualized sculpting of rights within a layered process and context capable of economic and political polarization.  For more, see my posts on claim amendments, patent prosecution techniques and coordination, and US and international priority dates for provisional applications and public accessibility.  Upon successful issuance, the utility patent term is generally twenty years from its priority filing date, with payment of maintenance fees.

Better Mousetrap

A utility patent grants the right to exclude others from making, using, offering for sale, selling, or importing an invention as defined by the patent claims. The word “exclude” is significant. To illustrate the meaning of “exclude” let’s walk through a simple example. For the moment, we will put aside the technical requirements for patentability of utility inventions.

Say your competitor patents a drinking container. Next, your business patents the improvement of adding a handle to the drinking container. Your patent would not give you absolute clearance to make the handle added to the drinking container. You may need permission from your competitor because your competitor has patented the broad concept of the drinking container. If your competitor wanted to make the improvement of the handle added to the drinking container, your competitor may need permission from you.

A third party who wants to make the improvement of the handle added to the drinking container may need permission from you, and may need permission from your competitor. You and your competitor could independently decide whether to seek enforcement of each of your patents, including whether to grant or refuse permission. If either you or your competitor seeks enforcement and refuses permission, the third party may be forced to design around the patent. When your competitor’s patent expires, you would no longer need permission from your competitor to make the handle added to the drinking container.

Business Tool

The introduction of patents above speaks to opportunities, permissions, and conditions all around.  The tone highlights the patent owner can decide which if any fights to pick when going on offense.  The patent owner in general has its hand on the flow control valve whether to fund or otherwise invest in litigation attorney fees and costs for a particular occasion and target.   A potential exists to assert a technological advantage over competitors and/or exact an inflow of funds as licensing fees.

On defense, whether as a passive or aggressive patent holder, your patent can provide a deterrent against a competitor seeking to enforce its patent against you.  For example, cross-licensing provides a less-costly dispute resolution mechanism.  Even better, your competitor’s ship and dry powder may simply pass in the night whilst seeking a weaker opponent.  For more, see my posts on patent portfolios and competitive advantage.

Copyright

A copyright protects an original work of authorship.  The copyright protects against a copy that amounts to an unauthorized, substantially similar work.  Copyright protects the form of expression.  Copyright does not protect the subject matter that is expressed, 17 U.S.C. § 102(b).

For example, say you copyright a description of a machine.  You could describe the shape of the machine.  You could describe the inner workings of the machine.  Your copyright would not prevent someone from using your description to make the machine.  Your copyright would not prevent someone from writing their own description of the machine.  If you wanted protection for the technology of the machine, you could look to patents.

Rights for You and over Others

Under US law, copyrights cover original literary, dramatic, musical, artistic, software, and other intellectual works of authorship.  Copyright protects both published and unpublished works.  The copyright owner generally has exclusive rights and abilities to authorize others to exercise the rights of reproduction, distribution, public performance, and display.

The principle that copyrights protect only expressions, and not ideas, is often referred to as the idea-expression dichotomy.  Under the merger doctrine in the US, copyright protection is unavailable for the expression of an idea where the expression is so intimately tied to the idea that little possible variation remains for expression of the same idea.

The first fixation of the work in a tangible medium automatically secures the copyright, though registration may be desirable for additional reasons including enforcement.  Using the symbol © or word “copyright” with the year of publication and name of the copyright owner helps provide affirmative notice that the author intends the work to have copyright protection.  You may be interested that 17 U.S.C. § 105 eliminates copyright protection for any work of the US Government, though it can receive and hold copyrights transferred to it.

Under 17 U.S.C. § 302, copyright generally endures for the life of the author plus 70 years after the author’s death.  In the case of an anonymous work, a pseudonymous work, or a work made for hire, the copyright endures for a term of 95 years from the year of its first publication, or a term of 120 years from the year of its creation, whichever expires first.

Under the first-sale doctrine or exhaustion rule of 17 U.S.C. § 109(a), the purchaser as owner of a particular copy of a copyrighted work can resell that copy.  As you may sense, copyright enforcement for software can be complex.  Continuing our intended topics, we can move on, as I list the following sample links for more: scenes à faire, permissible reverse engineering, enforcement, abstraction-filtration-comparison analysis and approach.

Fair Use

Fair Use provides an exception to copyright infringement, 17 U.S.C. § 107.  Purposes such as criticism, comment, news reporting, teaching, scholarship, or research may be allowed.  The Fair Use factors consider:

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

Derivative Works – Wild Card

With the potential magnitude of an exception that swallows the rule, the copyright owner’s rights extend to the preparation of derivative works, 17 U.S.C. § 101.  Really eye-popping is no consensus exists on the full spectrum of what constitutes, and perhaps more importantly what does not constitute, a derivative work.

Larry Rosen has offered insights on derivative works, copyrighted 2004.  Larry argues a new program that lacks use of the original program’s source code by modification, translation, or other changing thereof, would not constitute a derivative work.  Larry states derivative works would not encompass linking to library programs designed as such.  Larry also calls non-derivative the plugins and device drivers that are designed to be linked from off-the-shelf programs, even if looking at the source code helped accomplish the design.

Trademark

A trademark is a source identifier.  The trademark lets the public know the source of goods or services offered under the trademark.  Trademark protection may be pursued based on actual or intended use of the mark in commerce.

Likelihood of Confusion

The trademark prevents others from using confusingly similar trademarks to offer the same goods or services.  The trademark protects against others using a mark that is likely to cause consumer confusion as to the source, sponsorship, or approval of goods. For more on likelihood of confusion and identification of goods, see my post on trademark prosecution.

Registration and Use

The circle-R symbol signifies federal registration under US trademark law.  Irrespective of federal trademark prosecution, if any, the designations TM and SM are available for trademarks and service marks.  Such unregistered marks may have protection limited to the geographical area of use, or reasonably expected geographical areas of expansion.

Keep in mind that approval of a corporate name by the Secretary of State does not equate to trademark clearance.  Far from it:  state authorities prohibit identical use of corporate names.  That state agency’s comparison stops well short of the review for likelihood of consumer confusion considered under trademark law.

Looking internationally, the Madrid Protocol provides an overall, possible cost savings on filings such as where trademark protection is pursued and quickly approved in multiple countries.

Portfolios

As an example, McDonald’s trademark portfolio includes the word mark McDonald’s® and the design mark “the golden arches” for selling hamburgers and so on.  Burger King uses its own trademarks to sell hamburgers.  The hamburgers as a category have different trademarks well-advertised by their owners for the consumers to identify different sources for McDonald’s and Burger King’s hamburgers.  For more about trademark types, see my post on trademark portfolio creation.  Stepping back for a fuller view of the IP portfolio view:  if McDonald’s wanted to protect the technology of a grill used in making the hamburgers, or a special sauce used in preparing the hamburgers, McDonald’s could look to patents or trade secrets.

Domain Names

As a business pointer:  in this era of cybersquatting and typosquatting, you should consider locking in domain names on your desired trademarks early, at their modest costs.  You would prefer to cut out middlepersons who habitually review trademark office public records and squat on domain names, with their intention to seek an advantage and/or premium for getting your intended domain.

Licensing

An IP owner can retain ownership of the IP and grant a license to others for a selected subset of the rights.  The license can be exclusive to the grantee or non-exclusive.  In general, the terms and royalties may be negotiated.  Other times, little opportunity may be available for negotiation such as in a shrink-wrap license or end-user license agreement (EULA).

“Legal Fiction” of Software License

The software industry uses “the legal fiction that software is merely licensed” rather than sold, from comments by Tim Lee copyright 2008.  Tim cautioned “the terms of shrink-wrap licenses may not be legally binding” if software is characterized as sold rather than licensed in upcoming court decisions.  The context Tim described is software firms have used the “licensed, not sold” theory to discourage ”the market for used software” and restrict “reverse engineering that would otherwise be fair use under copyright law.”

Property

Property principles support the full enjoyment of a product by a purchaser.  Reverse engineering would be fine.  Excepted for obvious reasons, are anti-DRM (digital rights management) measures, discussed in the US Digital Millennium Copyright Act (DMCA) as copy-prevention systems and technical-protection measures.

Contract

A license is a contract, where in the US and many additional countries you can agree to things like a prohibition against reverse engineering.

Open Source - Freedom

Under Open Source Software (”OSS”) licensing, the source code is available with broad rights of software modification and distribution.  The OSS model speaks to permissions rather than the restrictions detailed in proprietary models, as I had earlier posted.  In OSS “free” refers to freedom, not price. People who redistribute free software are encouraged to charge as much as they wish or can.

Comparison of Open Source and Proprietary Licensed IP Rights

Trade Secret

OSS:  The source code is released, ending trade secret protection.

Proprietary:  Only compiled form of the software is released, not the source code.  Logic and architecture that remain hidden may be protected as trade secret.

Patent

OSS:  Conditional use of patented technology.

Proprietary:  Narrow patent license for running the software is limited to the licensed work.

Copyright

OSS:  Conditional, unlimited reproductions of the software and creation of derivative works.

Proprietary:  Narrow license for running the software limited to the licensed work, plus archival copy.  No further reproductions, nor distributions or derivative works.

Trademark

OSS:  Usually no discussion of trademarks; no expectation of rights.

Proprietary:  Restricted and strategic use when trademarks are addressed.

Comparison of Open Source Licensing and Other Non-Proprietary Models

OSS:

• Consistent license terms
• Fees may be charged for:
  • distributing copies of the software and the source code
  • providing warranties and supplemental services
• Source code access

Freeware:

• Inconsistent license terms
• Available at no cost
• Source code need not be provided

Public Domain:

• No license terms; no IP rights; wide-open freedom
• No cost
• Source code need not be provided

Free Software Licenses

Licenses of free software intend to guarantee users the freedom to run, copy, distribute, study, reverse engineer, change, and improve the software.  A prominent class of free software licenses is the GNU General Public License (“GPL”) including its versions 2 and 3 (“GPLv2″ and “GPLv3″).  Just to be clear as already stated above, GPLv2 and GPLv3 endorse selling software for money.

The open source aspect is the source code must be made available to whom the binary file is made available.  You can charge any fee you wish for distributing a copy of the software, with a pricing limitation that the fee to download the source code cannot be greater than the fee to download the binary file.  After someone pays your fee, they are free under GPLv2 or GPLv3 to release the software to the public with or without a fee.

Under GPLv2

The software is copyrighted and licensed to give legal permission to copy, distribute, and/or modify the software.  With notice, the license applies to copies of the software and derivative works.  Upon publication or distribution, you must give recipients all the rights you have at no charge, and make sure the recipients have access to the source code and terms.  Note:  the license continues, for the whole work; this is not public domain material.

We can look at Joomla!™ as an exemplary Open Source Content Management System.  Joomla!™ is licensed under GPLv2, as stated in the Joomla!™ License FAQ which reaffirms the selling of extensions for profit.  Joomla!™ extensions include plugins, components, and modules.  To distribute a Joomla!™ extension, a license under GPLv2 or a GPLv2-compatible license is encouraged since GPLv3 is incompatible with GPLv2.  For more discussion centered on Joomla!™ see the worldwide and Chicago fora.

On GPLv2 at large, an interesting thread discusses a dual-licensing situation of some code released under both GPLv2 and a proprietary license.

Under GPLv3

The software in unmodified form and a work based on it are covered works.  Conveying, modifying, publishing, or propagating a work triggers the license.

Prohibitions, for example:

• Disallows sublicensing, under GPLv3 § 2.3.
• Anti-DRM:  circumvention of technological measures is favored, under GPLv3 § 3.2.
• Atop the allowed selling to the recipient, the exercise of licensed rights by the recipient cannot require a fee, royalty, or other charge, under GPLv3 § 10.3.
• Cannot initiate litigation or a cross-claim or counterclaim in a lawsuit alleging any patent claim is infringed by the licensed software, or any portion of it, also under GPLv3 § 10.3.

A contributor grants a non-exclusive, worldwide, royalty-free patent license of its essential patent claims for the contents of its version of the software, under GPLv3 § 11.3.  If you grant a patent license to some parties receiving the software, then the patent license is automatically extended to all recipients of the covered work and works based on it, under GPLv3 § 11.6.

Considering both GPLv2 and GPLv3, an interesting thread discusses using non-GPL libraries therewith.

Exhaustion of Rights Coupled with License Effect

Further to the notes above on property and contract principles, patent and copyright laws share analogous concepts of exhaustion from the sale of a product.  In view of the software protection gains from licensing strengths, it is instructive to consider a decision by the US Supreme Court from Monday June 9, 2008 on a dispute over patent exhaustion and licensing.

Quanta Computer, Inc. v. LG Electronics, Inc., 553 U. S. ____ (2008)

LG Electronics licensed a patent portfolio to Intel.  The license permits Intel to manufacture and sell microprocessors and chipsets that use the patent portfolio.  The license stipulates that no license is granted to any third party for a combination of the licensed products with items, components, or the like acquired from a party other than LG Electronics or Intel.  The license also expressly left alone the effect of patent exhaustion that applies upon sale by LG Electronics or Intel, of the licensed products.  In a separate master agreement, Intel agreed to give written notice to its own customers that the license does not extend, expressly or by implication, to any product that the customer makes by combining an Intel product with any non-Intel product.

Patent Exhaustion

The longstanding doctrine of patent exhaustion provides that the initial authorized sale of a patented item terminates all patent rights to that item.  Quanta purchased microprocessors and chipsets from Intel and received the notice from Intel required by the master agreement.  Nonetheless, Quanta manufactured computers using Intel parts in combination with non-Intel memory and buses in ways that practice the patent portfolio.  In aligning the Quanta products with the patent portfolio, the Court traced the Intel products delivered to Quanta and ruled the incomplete articles from Intel substantially embodied the patent portfolio because the only step by Quanta necessary to practice the essential features is the application of common processes or the addition of standard parts.  With attention to the licensing aspects the Court held Intel’s sale of an article authorized by LG Electronics that substantially embodies the licensed patent portfolio, exhausts LG Electronics’ rights and prevents it from invoking patent law to control postsale, postpurchase use of the article by Quanta.

Language of the License

The license contained no restrictions on Intel’s right to sell its microprocessors and chipsets to purchasers who intend to combine them with non-Intel parts.  The master agreement required Intel to notify its customers against practicing the patent portfolio with non-Intel components, although that notice did not condition Intel’s license to sell its products embodying the patent portfolio.  Notwithstanding specific disclaimer in the license against third parties practicing the patents, the question of implied license to third parties is irrelevant because Quanta asserts its right to practice the patents based not on implied license but on exhaustion.  Exhaustion turns only on Intel’s own license to sell products practicing the patent portfolio.

Because Intel was authorized to sell its products to Quanta, the doctrine of patent exhaustion prevents LG Electronics from further asserting its patent rights with respect to the patents substantially embodied by those products.  The Court noted that the authorized nature of the sale to Quanta does not necessarily limit LG Electronics’ other contract rights.  For example, a breach-of-contract claim might be available even though exhaustion operates to eliminate patent damages.

Text Copyright © 2008 Bob Brill

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