A company’s custom software is an increasingly important part of growing profitability, shrinking expenses, and reaching new markets. It is critical to corporate success or failure. Software deals and licensing models are evolving as quickly as the technology, becoming more complicated and costly. Companies that do not understand the current trends and common pitfalls when negotiating software contracts may find themselves facing unexpected and unnecessary expenses and litigation. In this webinar, Carlton Fields Shareholders Eleanor Yost and Jack Clabby sit down with Michael Ritchie to discuss best practices for scoping and negotiating custom software and IT agreements.
Intellectual Property Resources
Intellectual Property (IP) is often an early stage venture’s most valuable asset. But who really “owns” the IP a startup uses? In many cases the answer isn’t clear, and problems frequently aren’t identified until an investor or acquisition partner starts due diligence.
IP ownership problems can be easy to address at the outset by establishing the right procedures, but difficult (and expensive) to fix down the road. The first step is to recognize the four different kinds of IP, broadly categorized below, and the steps required to address ownership issues as to each.
1. Confidential Material
Examples include your business plan, development plans, and new product or service ideas. Generally, people and businesses cannot own ideas or items like price or customer lists. A company can own the physical documents on which they are recorded, but the abstract idea or information is generally not legally considered “property” that a business can own. Still, you can protect yourself. There are at least two ways to prevent others from taking your ideas and using them for themselves.
The first is to use non-disclosure agreements (NDAs). These are contracts under which you agree to disclose your secrets to someone who, in return, agrees to keep them private and not use them for their own purposes. NDAs are critical for startups, which must often disclose their valuable ideas to others early in their lifecycle. Startups should use NDAs religiously—with suppliers, customers, contractors, investors, employees, shareholders, and anyone else who receives your confidential information.
The second way is to treat ideas as trade secrets. To be a “trade secret,” information must meet two primary requirements. First, it must have economic value from not being known or readily discovered. Second, it must be subject to reasonable efforts to maintain its secrecy. If you take reasonable precautions to protect such information, the law provides a remedy if someone “misappropriates” it. Key factors that demonstrate you’ve taken reasonable precautions often include (a) having agreements in place making clear that the company owns the trade secret information and preventing its unauthorized use or disclosure; and (b) having procedures to ensure your confidential information is treated with a level of care and respect commensurate with its value to your venture.
Inventions are more than ideas for new products, services, or ways of doing something. They must be “reduced to practiced,” meaning they must be fleshed out in enough detail that a typical person in your field could implement them without extensive testing and experimentation. Some inventions (e.g., Coca Cola’s formula) are maintained as trade secrets and protected in the same way as other confidential information (albeit with an even greater level of care). Others are protected through patents, which give the patent owner the right to prevent others from practicing the invention for a period of time without the owner’s consent.
Inventions are generally owned by the person (or persons) who first conceived of them. Many business owners mistakenly believe that if their employee or contractor conceives an invention while working for the company, the company owns the invention. This is generally not true. In reality, the inventor owns the invention and the company merely has a right to use it. To own the invention, a company must have a written agreement in place with the inventor stating that any inventions developed will be owned by the company, and assigning rights in those inventions to the company. This is true whether the inventor is an employee, contractor, founder, or owner.
Before beginning work, everyone involved in developing or refining IP should sign a written agreement that documents the understanding that all inventions will be owned by, and assigned to, the company. This is especially important given that key personnel sometimes leave the venture (voluntarily or otherwise) before a liquidity event. When that happens, it may be difficult, expensive, and/or impossible to get that person to retroactively assign their IP rights back to the company. It is much easier and cheaper to have good IP agreements in place at the start.
3. Works of Authorship
Works of authorship (“works”) include software code, website content, and marketing materials. Generally, works are owned by the author as of the moment they are created (written down or typed into a computer). But when the work is created by an employee within the scope of his or her duties, or in very limited circumstances, by a contractor with a special written agreement, the employer is deemed the “author” of the work from the outset. To avoid ownership problems related to works, ensure that you either (i) fit squarely into one of the exceptions under which the company is the author; or (ii) have a written agreement (yes, it must be written) assigning the rights to the company.
Many startups mistakenly think their founders or contractors fit within the exception, only to later learn that some legal formality was missing, making the exception inapplicable. So, wise entrepreneurs always have written agreements (that include an assignment) with their employees, founders, and contractors, that clearly state the company owns all works. They don’t simply assume that the “work for hire” exception applies.
Because many works incorporate third party materials, things can get even more complicated. For example, to get a jump start, a startup may use “open source software” or a developer may use code she created for a previous project, refining it to work for the new company. This extremely common practice can make it very difficult to determine after the fact which parts of individual works are owned by the company, and which are merely licensed. This issue would take a series of articles to cover. Here, it suffices to say entrepreneurs must do their best to make sure they know whether any pre-existing or third party content was used to create their IP and, if so, where it came from and how it was used.
Your brand (e.g., trademarks, domain names, social media identifiers, etc.) is how your customers know a product or service comes from your company, and not from your competitors. Brands are generally protected by trademark law and can be among the most valuable assets of a new venture. Conveniently, rights in a “trademark” run to the company by default, and not to any individual. So, in this case, founder, contractor, and employee agreements, while still important, are not quite as critical.
However, you still must: (i) make sure your brand is distinctive enough that you can be its exclusive owner, (ii) be certain nobody else is already using anything confusingly similar to your unique brand, and (iii) be sure the company owns and controls all of the domain names and social media accounts that help your brand reach your customers.
A detailed explanation of the steps needed to ensure your brand doesn’t run afoul of these requirements is beyond the scope of this summary. But the following broadly outlines the steps entrepreneurs must take: (a) choose your brand wisely and avoid generic terms for your products or services (e.g., use something distinctive like Apple did when it chose “Apple” for its computers, not something generic like “Steve’s Computers”); (b) do a trademark search before investing in your brand and, once you are clear, register your trademarks so others can’t free-ride on their popularity after you have made them valuable; and (c) ensure that all domain name registration and social media accounts are opened in the company’s name, not those of individuals, and that you have the login and password information for the registrar accounts that control those registrations.
Ownership of IP, often a new venture’s most valuable asset, is unquestionably complicated. But if you start early, using good NDAs, founder agreements, services agreements, and the like, you can avoid expensive complications down the road. Recognizing the different kinds of IP and the ownership issues related to each is the first step.
1. Your primary asset is your intellectual property. Protect it before you do anything else.
Talk to an intellectual property attorney, a specialist who’ll be able to tell you what you have and how best to protect it (e.g., with patent, copyright, or trade secret law).
If you can’t afford an intellectual property attorney, look for firms that give seminars at university incubators, or those with startup-oriented practices. Find a law school with an intellectual property clinic.
Learn about and understand the various types of IP you have. Have an attorney search the patent office and trademark office records to determine whether you have the right to use your IP, and most importantly, protect it before you start engaging with third-parties. File your patent, trademark, and copyright applications; and establish an internal trade secret/confidential information protection program.
…the first things a potential investor wants to know is what IP you have and how is it protected.
Don’t make the mistake of failing to protect your IP because “the company” doesn’t have the money. Put your own money into it if you have to. But get those applications filed. You’ll regret it if you don’t, because the first things a potential investor wants to know is what IP you have and how is it protected.
2. Decide who owns the IP.
Presumably one or more of the members/shareholders developed the IP. The IP is originally owned by the inventor(s)/creator(s). If the company is going to own it, the inventor(s)/creator(s) need(s) to assign it to the company. If the inventor(s)/creator(s) will continue to own it, they need to grant a license (preferably exclusive) to the company. Your IP attorney can help you with this. Just remember, you’ll have a better chance of attracting investors if ownership is clearly addressed.
3. Make sure you have a good non-disclosure/confidentiality agreement in place…
…before you discuss your products with anyone outside your company, including prototype manufacturers, designers, independent contractor programmers, potential customers, interested investors, etc. Without one, you may unwittingly give away your intellectual property and confidential information. And there may be nothing you can do about it. See No. 1.
GET IN WRITING. GET IN WRITING. GET IT IN WRITING…
4. Make sure you own what you think you own.
Maintain your chain of title and ownership. If you hire independent contractors, get a written assignment. “Work for hire” is a term of art that does not equate to an assignment, and generally has no application to the tech industry (no pun intended). Whatever you do, GET IT IN WRITING. In fact, make that your mantra: GET IT IN WRITING. Make sure your employees sign intellectual property assignment agreements, or have such provisions in written employment agreements.
5. Don’t give away your IP.
Make sure you have good license agreements in place if you’re going to allow others to use your IP. Make sure you understand what the agreement says, and what you’re actually allowing the other guy to do. Make sure you retain control over the IP. GET IT IN WRITING.
6. Don’t forget about international IP protection.
If you’re going to be manufacturing overseas, or if your customers or licensees are located internationally, think about protecting your IP in those countries as well. Intellectual property protection is territorially limited and you’ll need to protect yourself on a country-by-country basis. There are exceptions to the rule, so again, be sure to retain a good IP lawyer who can help you with all of the nuances of foreign protection.
7. Have an exit strategy.
Plan upfront for the disposition of the IP in the event the company doesn’t work out. Will one person own it? Will more than one share ownership? With intellectual property ownership comes obligations and responsibilities, so again, see Rule No. 1.
Originally published by JD Supra Perspectives.
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Joint Ventures and Intellectual Property Assets
When your company uncovers evidence that an employee misappropriated trade secrets it must act swiftly. The company may want to fire the employee to protect itself from the potentially devastating consequences. But how can you minimize the risk that the employee may sue the company claiming he did not misappropriate trade secrets?
These tips will minimize the risks posed by an employee’s claim:
1. Inventory your trade secrets and have clear policies
You should know what your trade secrets are and the protocols in-place to safe guard them. There should be policies about access to and use of trade secrets that are informed by the Uniform Trade Secrets Act and the Computer Fraud and Abuse Act. Your policies should be clear that the company owns the computing systems and data and that unauthorized use and misappropriation is strictly prohibited. Crafting a policy and protocol that passes muster with regulators is tricky, however, so you should consult an experienced attorney.
2. Once you learn of possible misappropriation, involve HR
Human resources professionals are experienced in handling employee discipline and terminations and can help you avoid potential pitfalls. They can provide objective oversight that will strengthen any decision adversely affecting the employee.
3. Don’t act hastily
Never base the decision to terminate an employee on rumor or speculation. You could be held liable for wrongful termination if the decision is based on misinformation supplied by a manager. You should thoroughly investigate suspected misappropriation, and consider placing the employee on paid leave (without access to company computer systems) to minimize liability in the event that misappropriation did not occur.
4. Make sure it’s actually a “trade secret”
Employers may think that any business-related information is a protected asset However, state and federal regulators have taken the position that much information related to employees’ wages and working conditions is not protected as confidential, and therefore an employee cannot be fired for disclosing it. Similarly, courts look closely at what a company may cast as a trade secret. If the information has not been protected by the company or is available in the marketplace it may not be a trade secret.
5. Check the contract
When deciding whether to terminate the employee, review their employment contract, if there is one. A contract may spell out procedures you must comply with, notice you must provide, or create other obligations.
6. Don’t discriminate
When considering whether to terminate an employee, make sure you treat the employee the same way you have treated other employees who have done the same thing. If you discipline the employee more harshly than another, they could claim it was based on a protected characteristic such as race, age, etc. Keep in mind too, that the way in which you punish the employee will set the standard for how you treat similar offenses in the future.
7. Be civil
Be mindful about the manner in which you convey the termination. Some jurisdictions recognize a cause of action for negligent infliction of emotional distress where an employee is treated unreasonably (i.e. too harshly) during the termination process. For example, don’t fire the employee publicly or in a humiliating manner. Also, to limit the risk of a defamation claim, the termination details should be shared only on a need-to-know basis. You should ensure that the message is delivered with a witness in the room.
8. But don’t sugarcoat
Although you must be civil, you should ensure that you are consistent in stating the reasons for the discipline; i.e., the misappropriation. Providing conflicting explanations can suggest an improper motive and invite a lawsuit. In particular, you should ensure that the explanation provided to the state for unemployment purposes matches the true reason for termination.
9. Don’t forgo compliance
If you believe an employee stole trade secrets, it may be tempting to hold their final paycheck or otherwise retaliate against them. However, you need to ensure compliance with wage and hour law, COBRA requirements, etc. The fact that the employee stole trade secrets will not be a defense to a claim under these laws.
10. Document everything
Jumping through all of these hoops is worth little if you don’t document your actions. Thorough documentation will give you the best chance if the employee decides to sue you. But, of course, take care to maintain the confidentiality of privileged communications with your attorneys and their work product.
Keeping these tips in mind will put you in a stronger position to defend any claim a former employee brings.
Patents have long been a method of protecting business innovation. However, before any patent is obtained, confidential innovation that has economic value and is not generally known may already be a trade secret, if it is the subject of reasonable efforts to protect its secrecy. Procedures to protect trade secrets, including computer and physical security; limiting information access to those who “need to know”; and non-compete, non-solicitation, or non-disclosure agreements, should all be considered carefully and employed before deciding whether to seek a patent.
Patents are governed by federal law. After repeated, recent high profile hacking thefts of business’ computer-stored data, Congress is poised to increase protection of businesses’ confidential and proprietary information including trade secrets. Until now, trade secrets were governed by each individual state’s adoption of the Uniform Trade Secret Act. All but two states have adopted some version of the Act. The remaining two rely on common law. Although standards differ slightly from state to state, a trade secret can be any information that is not generally known that has independent economic value and has been subject to reasonable efforts to be kept secret. Trade secrets can include a formula, pattern, device, methodology, or compilation of information including business methods and confidential customer information or lists.
In 2015, for the first time, Congress is likely to pass a law incorporating a federal civil cause of action for trade secret misappropriation. Much valuable, confidential, and proprietary business information, such as customer lists and marketing plans, is incapable of patent protection. However, this “business” information is often a candidate for trade secret status.
Many inventions are potentially trade secrets before a patent application is published. In those cases where the sale of the product allows reverse engineering to determine the secret innovation, patent protection is the only viable option. In the United States, a patent application is usually published 18 months after filing and until publication, the application is secret. If the application is denied after publication, the information is public and fair game for use by all. Thus, before publication, a decision must be made regarding whether to continue with the patent application and lose trade secret status, or to withdraw the application and avoid publication, to maintain trade secret status.
As with the application for a patent, an attempt to protect intellectual property through trade secret law has risks. If there is independent development of the same or similar idea by another, that other could apply for a patent or use the information. The ability to reverse engineer a trade secret invalidates it. If the information is publicized, either intentionally or accidentally, it can lose its status as a proprietary trade secret. Trade secrets are regularly lost through theft by employees or third parties. This risk is heightened with increased work force mobility and the ease with which large amounts of data may be copied onto a hard drive, or photographed with a cell phone and taken for use by others.
The executive branch of the federal government is putting considerable effort into addressing the theft of corporate trade secrets by foreign and domestic hackers. However, despite large investment in computer security and government efforts it seems breaches are increasing. Trade secret misappropriation, whether by insiders or third parties, is often hard to detect. Trade secret status is not confirmed until done so by a court in a dispute over misappropriation. The litigation is often expensive. Most states provide for criminal liability for trade secret misappropriation and in some cases trade secret theft is also the subject of federal criminal liability. There are certain benefits to the trade secret owner in pursuing enforcement of rights through civil or criminal channels that should be reviewed with counsel.
Trade secrets have for some time been viewed as having two advantages over patents: the low cost of obtaining the rights, and an infinite duration. In the current legal environment, they may have become more attractive. A recent California court noted, in Altavion, Inc. v. Konica Minolta Systems Laboratory, “…because a substantial number of patents are invalidated by courts, resulting in disclosure of an invention to competitors with no benefit, many businesses now elect to protect commercially valuable information through reliance upon the state law of trade secret protection.” To establish trade secret misappropriation it is not necessary to prove that all the elements of the secret have been used. Instead, establishment of a cause of action can rest on access and substantial similarity. The level of novelty required to establish a trade secret is less than that required for a patent. The fact that there is some knowledge of the invention in the public domain may be enough to invalidate a patent but may be insufficient to void a trade secret. Additional advantages for trade secret enforcement include the availability of damages for unjust enrichment and a lower bar for recovering excess damages for willful and deliberate misappropriation. Also, injunctions are generally easier to obtain in trade secret misappropriation cases. Reliance upon trade secret law as a substitute for patent protection, while inappropriate in many circumstances, offers an increasingly attractive alternative, especially where proprietary innovation is easily kept secret, is not likely to be duplicated, and cannot be reverse engineered.
In my previous article, we discussed choosing a trademark for your company’s new product that lets you walk and chew gum at the same time, releasing millions of uncoordinated people from the embarrassment of having to turn down an offer of Orbit (and a sparkling mouth) on the way back to the office after lunch at the Stinking Rose. (Yes, it’s a real restaurant in San Francisco, and everything they serve has lots and lots of garlic in it.)
So anyway, the marketing folks wanted to call it the Walk ‘N Chew because they said it described the product perfectly – it would get their message across immediately. But you read my blog (and my father is very proud of me that I wrote it and you read it, and thank you very much) and told them about the dangers of using a descriptive term and asked them to come up with a mark that has nothing to do with the product. First they said “You want us to do what? Are you nuts?” And then you had them read my blog (my father thanks you again) and now knowing better, they changed it to YOWZA!!.
Full Speed Ahead… Stop!
So now Creative Services wants to start designing the way YOWZA!! will actually appear on the product and packaging, what the packaging will look like, and of course they want to get the advertising agency on the phone. And the product marketing department wants to put the mark on the product and get it to manufacturing ASAP.
Can they? Yes. Should they? I wouldn’t. (Bet you knew that was coming). Okay you say, rolling your eyes heavenward, now what? Well, the thing is that someone else may already be using a mark that could cause you problems if you use or try to register YOWZA!!.
Do Your Homework
You can get a pretty good idea of whether you could have any problems once you start using YOWZA!! by having your Intellectual Property counsel do a trademark search, which is kind of like a Google search on steroids. It goes through all the records of the U.S. and 50 state trademark offices, trade and industry journals, newswires and press releases, websites and other databases, looking for any mark that could even remotely cause you trouble (and a lot of time and money) down the line.
Sometimes the search results show nothing to worry about (at least nothing that showed up in the search; remember the only thing guaranteed in life – and trademark searches – are death and taxes). Sometimes they show prior uses that could pose some risk of objection (maybe they’ll send you a nasty letter, but you have a good chance of getting them to go away). But sometimes they show prior uses that could be significant risks (OK, here you’re taking a real chance if you go ahead). Once you know what’s out there, you can make an educated decision whether to use the mark.
Assess Your Risk
Doing a trademark search is not a pre-requisite to using or registering your mark. You don’t have to do one. I just think it makes good business sense to find out if you might have some big problems down the road before you start putting all that time and money into production, advertising, and marketing. It’s a lot cheaper to change the mark before all that happens rather than afterward. Or, if you decide to go ahead knowing there’s a real risk out there, at least you know you’ll need to budget enough for legal fees (if you get sued), or if you decide to try to buy that pesky prior mark to get it out of your way.
It all comes down to that old business mantra: Cost + Risk = Benefit.
So should I order that search for you? Yup, that’s what I thought. I’ll have the results for you in a couple of days.
Originally published by i-Sight.com.
Your company has just come up with an exciting new product that enables someone to walk and chew gum at the same time! Just imagine all of the potential buyers out there who have been suffering for years from “Can’t Walk and Chew Gum Syndrome.” It’s the first product of its kind and the marketing folks want to call it….the “Walk ‘N Chew.” Why? Because it tells a potential customer what the product does.
Perfect, right? Wrong!
In terms of strength of infringement protection and enforceability, there are basically four types of marks. The stronger the mark, the more likely it will be enforceable against others and the easier it will be to stop them from using the same or similar mark on the same or similar goods. The weaker the mark, the less protectable and enforceable it is, and the more difficult it is to stop subsequent users, raising the likelihood that it will be used by others in one form or another.
Strongest – Most Enforceable Against Infringers
Put some thought into protecting your intellectual property
1. Fanciful Marks
Fanciful marks are made-up words. They have no meaning other than as a trademark for the owner’s particular goods or services. Fanciful marks tell you nothing about the product, but they are memorable precisely because they don’t. This is what you want – if consumers remember your mark, they remember your product, no matter how many competitors you may have. Fanciful marks have the strongest protection, and in some cases are so well-known, or “famous” that they can be enforced against use of the same or a similar mark on unrelated goods and services:
- GOOGLE computer search engine
- VERIZON telecommunication services
- ROLEX watches
- STARBUCKS coffee
2. Arbitrary Marks
These are real words or images (logos) used for completely different and unrelated goods or services. As with fanciful marks, arbitrary marks tell you nothing about the product, but stand out as more memorable among the same type of goods or services of the competition. This is really the whole point of having a trademark. Arbitrary marks have strong protection, but unless they are “famous” marks, they generally don’t have quite the scope of enforceability as do fanciful marks.
On the one hand, the word mark APPLE might not be enforceable against someone using the term APPLE CAFÉ for a restaurant in NYC. But if that same restaurant substituted the Apple Logo for the word APPLE, the Logo would be enforceable against the restaurant.
- APPLE computers
- GEICO insurance services
- BANANA REPUBLIC clothes
- HARD ROCK restaurants
- QUAKER cereal
3. Suggestive Marks
Suggestive marks are the weakest of the marks. They “suggest” something about the goods or services; they give you a hint as to what it is or what it does, without going so far as to describe it. You have to think about it before you can figure out what the product or service is.
Suggestive marks are usually existing words or combinations of words, or the equivalent graphic logos. Suggestive marks are generally enforceable only against the same or similar mark on the same or similar goods because they are only one step away from “descriptive” marks (explained below). In fact, the line between descriptive marks and suggestive marks is often very thin and subjective.
- 7-11 convenience stores (open from 7 to 11)
- FRESH ‘N CLEAN pet shampoo
- CITIBANK financial services
- TOTAL cereal
4. Descriptive Marks
A mark that describes a quality or function or feature or tells the customer what the product is or does is called a “descriptive” mark. And descriptive marks are generally not protectable precisely because they are descriptive.
If the mark is deemed descriptive, anyone in the industry is free to use the mark in whole or in part, either in the name of their own similar product or as a descriptive term in text. While no one can stop you from using a descriptive mark, in turn, you can’t stop anyone else from using the same or similar mark. In fact, the term “descriptive trademark” is a misnomer.
A non-descriptive trademark is a proprietary right; a “descriptive trademark” has no proprietary rights and is therefore not a trademark. It is the name you call your product, but it is not protectable and not enforceable. There is a way to get a descriptive mark registered, but we’ll discuss that in a later article.
- PARK ‘N FLY airport parking service
- RAISIN BRAN cereal
- COMPUTERLAND computer stores
5. Generic Terms
Generic terms aren’t trademarks. They are the products themselves such as table, chair, chewing gum, automobile, computers. Generic terms can never be trademarks. They are the nouns which are modified by the trademarks.
- APPLE computers
- GEICO insurance services
- STARBUCKS coffee
Think of it this way – strong marks give you strong ownership rights, strong protection, and are easier to enforce in the comparative sense. Weak marks give you weak ownership rights, weak protection, and are difficult to enforce by comparison to stronger marks.
Economically, strong marks cost less to protect and enforce than weak marks, and give a broader scope of protection. Strong marks are less likely to run into problems during the application/registration process and are more likely to be successfully enforced against a subsequent user of the same or similar mark, for the same or similar goods and services, or even related ones.
Weak marks, on the other hand, can cost far more to protect and enforce, and provide only a narrow scope of protection. Weak marks almost always have problems during the application/registration process, making it harder to get them through to registration (resulting in greatly increased legal fees); they usually have to contend with marks already in use that, while perhaps not identical, have definite similarities; and weak marks are likely to be successfully enforced only against someone who later uses the same or substantially similar mark for the same or substantially similar goods and services.
So back to WALK ‘N CHEW.
You’ve put extensive time, money and resources into research and development, designing the product, getting it ready for commercial production, developing marketing strategy and, in this case, being first to market. Still think WALK ‘N CHEW is the best trademark?
Yeah, didn’t think so.
Now if it were up to me, I’d call it … a miracle!
Originally published by i-Sight.com.
A trademark (one word) is the identity you give your products. A service mark (two words—don’t know why, just the way it is) is the identity you give your services. Trademarks and service marks are essentially treated the same way, so from now on let’s just call them trademarks. Effective IP protection requires an understanding of what these assets are.
Back to that identity. It’s how people are going to know that a particular product or service came from you and no one else. A trademark can be a word, a graphic design, a picture, a color, a sound, a character, even a smell. Or a combination of any of them. It’s just like your own name. That’s how other people identify you. You use a trademark to ensure they identify you with that product or service.
Examples of trademarks:
- APPLE – computers
- CHANEL NO. 5 – perfume
- COCA-COLA – soda
- ABSOLUT – vodka
- ROLEX – watches
Examples of service marks:
- JETBLUE – airline services
- HYATT – hotel and resort services
- OLIVE GARDEN — restaurants
- SUNTRUST – banking services
- HARVARD – education services
Logo vs. Trademark
A logo is a trademark. It’s a picture or drawing or character or something other than words alone that creates the association between you and your product.
It’s just another name for a trademark with a design component. Think of the Apple logo, GEICO lizard, Mickey Mouse, Mercedes star, and Fruit Loops. These are all logos and they are all trademarks. One and the same thing.
- APPLE LOGO – computers
- GEICO LIZARD – insurance services
- MICKEY MOUSE – coffee mugs
- MERCEDES BENZ LOGO – cars
- FROOT LOOPS LOGO – cereal
Speaking of Froot Loops, there’s a very funny and very true story about a series of lawsuits that were brought against Kellogg’s for false advertising because FROOT LOOPS has no fruit in it. A similar lawsuit was brought against the maker of Cap’n Crunch with Crunch Berries because the crunch berries had no fruit. None of the lawsuits made it very far, but imagine if they did and the products had to be taken off the market. Would the plaintiffs then be cereal killers?
OK, enough groaning, back to business.
The way a product itself looks or is packaged can also be a trademark – that’s called trade dress. Whether it qualifies as trade dress, and thus as a trademark, depends on a few things.
First, the shape of the product or the packaging has to be something no one else in the industry needs to use for a similar type of product. In other words, it can’t be functional. And it has to be in use for a long enough time to develop sufficient public recognition aka “secondary meaning” or “acquired distinctiveness.”
For example, you can’t claim trademark rights in the rectangular paper box that most perfume products come in. BUT if you create a memorable design on that box and use it long enough – usually at least 5 years or so – without anyone else using the same design on their packaging, and you can show that all important “acquired distinctiveness” – there’s your trade dress. Or if you put the perfume itself in a bottle shape that no else uses and the shape of the bottle doesn’t serve any purpose other than to identify your product, there’s your trade dress.
Two perfect examples of both types of trade dress:
The perfume box itself is pretty common, but the overall look of the packaging – the white background with the black borders – is immediately identifiable as a Chanel perfume box. Similarly, the bottle itself is unique – and so iconic that Andy Warhol did a silkscreen of it in his series “Ads.” The bottle doesn’t need to have the trademark on it to be instantly recognized as the Chanel No. 5 bottle.
Originally published by i-Sight.com.
*Images above are the property of their respective trademark and/or copyright holders. They are used for identification purposes only.