Issue No.02 - Feb. (2012 vol.45)
Published by the IEEE Computer Society
Brian M. Gaff , Edwards Wildman Palmer LLP
Ralph A. Loren , Edwards Wildman Palmer LLP
Elizabeth A. Spinney , Edwards Wildman Palmer LLP
DOI Bookmark: http://doi.ieeecomputersociety.org/10.1109/MC.2012.56
The second in a series of articles providing basic information on legal issues facing people and businesses that operate in computing-related markets focuses on the enforcement of intellectual property rights. The featured Web extra is an audio podcast by Brian M. Gaff and Ralph A. Loren, two of the article's coauthors.
Last month, we discussed the various types of intellectual property (IP) protection relevant to people and businesses that operate in the computer hardware, software, networking, and social media markets. In this article, we focus on the enforcement of IP rights.
Subsequent articles will address data security, protection, and privacy issues, forming a business, raising funds, employment matters, and other topics relevant to both start-ups and established companies.
Be sure to check the IEEE Computer Society's website for the podcast that accompanies each article ( www.computer.org/portal/web/computingnow/computing-and-the-law).
Enforcing Intellectual Property Rights
Protection of IP rights is critical to any business in today's technology-driven world. In computer-related markets in particular, where vital information such as source code could be readily copied and distributed to others, IP rights must be enforced. IP owners have many options when they discover infringement of their rights. Certain enforcement actions, like litigation, can be expensive and time-consuming. Any IP enforcement action can be complex, however, and each option requires careful consideration before selecting one.
Enforcement in the US
An IP owner who wants to avoid the costs and time commitment of litigating should consider licensing an accused infringer. This assumes that the IP owner doesn't object to the accused infringer continuing to use the IP in return for receiving a royalty payment.
To initiate licensing negotiations, the IP owner can send a cease and desist letter, but it must be writtencarefully to avoid giving the accused i
nfringer grounds to file a lawsuit against the IP owner. These types of lawsuits are called declaratory judgment actions. Therefore, before sending a cease and desist letter, ensure that an experienced IP litigation attorney reviews and approves it.
If licensing isn't an option or the parties can't agree on the terms, an IP owner can file a lawsuit to enforce its IP rights. Most IP lawsuits in the US are filed in federal court, although it might be necessary to file certain trade secret and trademark claims in state court.
Once a lawsuit is filed, the parties can continue settlement negotiations while the case progresses. Keep in mind that an accused infringer can—and often does—respond to a lawsuit by filing counterclaims asserting that the IP rights are invalid or unenforceable.
During litigation, the parties will pursue discovery, which is typically one of the most expensive parts of a lawsuit. An accused infringer will seek information in an attempt to support its defenses and any asserted counterclaims.
For computer-related companies, discovery can be particularly complicated. For example, in a copyright litigation, an accused infringer might seek the copyright owner's source code that it is accused of copying. Similarly, in a trade secret case, an accused infringer might seek information related to the trade secrets it is accused of infringing.
A patent owner might be obligated to open its engineering and laboratory notebooks to allow inspection by the accused infringer's attorneys. In many lawsuits, the litigants might be required to produce for inspection the voluminous e-mail traffic between the individuals involved with the IP.
In cases with significant discovery, confidentiality agreements and court-issued protective orders are important to protect information from reaching a competitor's hands or, worse, from becoming public. After discovery, the parties will file any necessary pretrial motions, and then a trial will be conducted with the verdict determined by a judge or jury.
Because of the complicated nature of IP disputes, litigation, especially if it doesn't settle and goes to trial, is expensive. Parties wanting a less costly, less time-consuming way to resolve their conflict can pursue alternative dispute resolution procedures, such as mediation and arbitration.
Mediation offers the parties more control over the outcome. While rules regarding mediation differ by state, the basic elements are common. The parties jointly select and pay a mediator to listen to both sides. The mediator then offers a resolution or facilitates settlement negotiations. The parties are not obligated to accept the mediator's recommendations, however.
Arbitration, on the other hand, concludes with a final decision either from one arbitrator or a panel of arbitrators. Although the parties lack the control over the outcome in arbitration that they would have had in mediation, they are at least guaranteed some resolution. Compared to litigation, the costs of arbitration are often substantially lower because discovery is typically limited and the timeline is shortened.
Whatever enforcement method an IP owner wishes to pursue, measures can be taken to ensure the best outcome. For example, while official US government registration of a trademark or copyright might not be necessary to create certain IP rights, having a registration can be beneficial when enforcing those rights. Registration helps to provide proof of ownership and is required to obtain certain forms of compensation for infringement.
To have the best position in litigation, a trade secret owner will also want to make sure it has taken all possible measures to protect the confidentiality of its IP. In other words, it should keep its trade secrets secret.
Globalization and the rapid proliferation of technology, especially in computer-related industries, have elevated the importance of enforcing IP rights abroad. The inconsistencies among the degrees of protection and enforcement methods available in different countries, however, can create challenges for US companies.
US patents, for example, are enforceable only inside the US and generally have no effect in a foreign country. Therefore, protecting an invention outside the US requires filing a patent application in each of the other countries where the protection is needed. Patent applications filed under the Patent Cooperation Treaty can streamline the process of filing in multiple countries. In certain cases, applicants for a US patent can concurrently seek protection in many other countries.
Some standards for the protection and enforcement of IP rights do exist under treaties or other international agreements. For example, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the World Trade Organization (WTO). The agreement establishes the minimum standards for many forms of IP regulation for WTO member countries. The agreement provides for the enforcement of those standards both internally and at the border, and it includes a dispute resolution mechanism.
Similarly, the Berne Convention for the Protection of Literary and Artistic Works provides a mechanism for addressing copyright infringement that occurs in a foreign country. Under this international agreement, signatory countries must honor the copyrights of authors from other signatory countries. A copyright owner can enforce its rights by asserting the laws of the country in which it files suit. Not all countries are part of the Berne Convention, however, and some do not recognize copyright laws at all. Like the US, most countries that do recognize copyright laws require copyright registration to maximize enforcement.
In other countries, as in the US, IP owners pursue infringement claims through civil litigation. Internationally, avenues to address IP infringement vary by country, as local laws dictate.
Remedies For Intellectual Property Infringement
When faced with IP infringement, an IP owner can file a lawsuit and ask the court for a preliminary injunction early in the case. However, obtaining a preliminary injunction can be difficult because it requires the IP owner to show, among other things, that it is likely to succeed in the overall litigation and that it will suffer irreparable harm without an injunction.
If the court grants it, a preliminary injunction can stop the infringing activities almost immediately and keep them stopped for the duration of the litigation. This can put the accused infringer under significant pressure and, in some cases, promote an early settlement.
If the IP owner is successful in its lawsuit, it can ask the court for a permanent injunction. As the name implies, this court order permanently stops the infringing activities. Under current law, obtaining a permanent injunction can be difficult; in some cases, the court might allow the infringer to continue its activities but order it to pay the IP owner a royalty to do so.
Generally, the IP owner bears the burden of demonstrating that an infringer caused economic harm. Because of the complexities in showing economic harm, proof typically requires the services of an expert witness. The IP owner will call on the expert to show the superior financial position that the IP owner would have had if the infringement had not occurred.
The measure of economic damages varies by the type of rights asserted. A copyright owner might be entitled to its actual damages plus the infringer's profits, or damages set by statute if certain other conditions are met.
In a patent or trade secret infringement action, damages are usually in the form of lost profits, price erosion, or a reasonable royalty—the most common form over the past few years. A royalty rate that is "reasonable" reflects the rate that the parties would have agreed on in a hypothetical negotiation of a licensing agreement before the infringement occurred. The analysis is based on an assessment of several factors, known as the Georgia Pacific factors, that require explicit consideration of the facts and circumstances of the case.
If the court concludes that the infringement was willful, it then has the discretion to double or triple the amounts awarded at trial. In addition, the court has the discretion to order the losing party to pay the winning party's attorneys' fees and costs in certain "exceptional" cases.
Another type of remedy in certain IP cases involves seizing infringing articles. In a copyright action, for example, a court can order the impounding or destruction of all copies that the court found to infringe the copyright owner's rights, including any means for reproducing the infringing articles. US officials can seize counterfeit products as they are imported into the US and hold them for later destruction.
Intellectual property protection and enforcement are extensive and complicated topics. In this and the previous article, we've provided just a brief overview of these subjects. When you encounter issues like those we describe, consult a qualified attorney for advice on how to proceed.
Brian M. Gaff is a senior member of IEEE and a partner at the Edwards Wildman Palmer LLP law firm. Contact him at email@example.com.
Elizabeth A. Spinney is an associate at Edwards Wildman Palmer. Contact her at firstname.lastname@example.org.