By: Andrew K. Jacobson ©2004

In his autobiography, “My American Journey,” former Joint Chief of Staff Chairman General Colin L. Powell presents several tests to determine when the nation should commit to battle. These tests eventually became known as the “Powell Doctrine.” These tests are as applicable to litigation as they are to war:

1. Commit only if vital interests are at stake.
2. If committing, do so with all the resources necessary to win.
3. Go in only with clear objectives.
4. Be flexible to match the commitment to the objectives, as objectives change.
5. Only take on commitments that have the support of those who must bear the burden.
6. Commit forces only as a last resort.

Vital Interests. An employee has left with vital trade secrets. A former partner has left with the cash of the business. These are emergencies that demand an immediate response.

Usually, though, the threat is less clear. A former employee has left, in a hurry, but the reason for leaving is unknown. A supplier is withholding products, but there are unresolved payment issues. A customer with a clean payment history is now sixty days behind on a large bill, and phone calls are being ignored. The question of a vital interest depends on the situation. An attorney can help assess the situation and suggest solutions short of litigation.

Necessary Resources: Sticker Shock. Even well-off clients are stunned by the resources necessary for litigation. However, unlike most wars, there can be assistance. In California, the costs of some intellectual property disputes are covered under general business liability insurance policies as “advertising injury.” Some business principals may have personal liabilities covered by their home general liability insurance. Some contracts provide that one side will indemnify the other for certain actions. The first question after “what happened?” should usually be, “what insurance policies might be available to cover it?” Even if no one indemnifies you, there are other ways to curb costs.

The first is to take precautions to prevent the dispute from occurring. An attorney is most cost-effective when a relationship is being formed. Ignoring the potential for disputes merely compounds their destructive capability. Cheaper alternatives to full-blown litigation, such as mediation or arbitration, can not only lower the cost of a dispute, but also keep the relationship intact.

Attorneys can also structure contracts to lower the costs to the prevailing party when a dispute occurs. The “American” rule is that litigants pay their own attorneys’ fees. However, if parties contractually agree, the winner may get attorneys’ fees in addition to any other relief.

However, other litigation costs cannot be forgotten. Litigation requires management’s active participation. This can often require tremendous amounts of time from top executives. Employees up and down the chain have to be consulted on the facts, called to deposition, review papers, or otherwise be taken away from more profitable pursuits.

There are also intangible costs. Litigation strains relationships, especially when the combatants are formerly close associates. People caught in the middle have their loyalties sorely tested, and often respond by avoiding both sides. Nights spent worrying about the litigation are also a cost.

Specific Objectives. Deciding the objectives of litigation is often more difficult than it first seems. Crushing the opposition is a wonderful result, but rarely achieved cheaply.

Reaching an objective in litigation means knowing what is possible. Civil courts cannot put people in jail. Forcing a person back to work is very rare. Some outcomes are more likely. Preventing someone from benefitting from your labors can be achieved in the right circumstances. While courts hesitate to be proactive early, they will preserve the status quo through a preliminary injunction. Cases can quickly settle thereafter.

In most cases, only a monetary solution will work. A litigant must balance the size and prospect of the award against the costs of achieving that award. Judges and juries often take a view different from that of either litigant. My own rule is that there is never more than an 80 percent chance of winning, even for the most certain of cases.

Preparing to Change Objectives. Litigation, like war, is never static. A litigant must always be prepared to change the means and the goals. Cases are never as simple as they seem. Documents supporting the case are never found. New case law alters the field of battle. Witnesses cannot be found, or will not get involved. This is often the “fog” of war.

Good litigants are ready for these ups and downs. If the million dollar award no longer looks so certain, be prepared to take a more modest, but certain settlement offer. Alternatively, a defendant may avoid later costs and risks by making a more modest offer early on. These ups and downs are part of the ride.

Support to the End. Litigation’s initial “rush” can be invigorating. It soon wears off, replaced by slogging through document after document, tiresome demands from the opposition, and unwelcome attorney bills. Significant cases now take about eighteen months to reach a courtroom – much faster than before, but still a long time. The initial reasons for the litigation are often forgotten in the meantime. How much of eighteen months ago is still fresh in your mind?

Litigation as a Last Resort. Litigation is too expensive to be the first reaction to any crisis. Often, those interests can be served through litigation’s alternatives. Litigation should be considered only once the alternatives are ruled out.

Copyrights, Trademarks, Trade Secrets, & Patents

Copyright

What’s a Copyright?

A Copyright gives you the right to control what happens to a work that you’ve produced. You have the right to control the copying of it (hence the term “Copyright”), but you have other rights as well. For example, you have the right to control who performs it, in the case of a play. You have the right to control the making of works that are derived from the original work – a sequel, perhaps.

What do I have to do to get a Copyright?

You just have to publish your work – essentially, show it to outsiders, either by fixing it in a written form, presenting it to an audience, etc.

Don’t I have to register the work to get a Copyright?

Not anymore. Now, all you have to do is have evidence that you published it. Registration for widely known works may still be valuable, as promptly registering your Copyright with the Copyright office with give you some more rights should you ever have to protect your Copyright in court.

Can I Copyright a concept, such as, for example, young webheads learning about business?

No, you can Copyright only the expression of an idea. For example, no one has the Copyright for a young wizard learning to cope with new-found powers, but someone – J.K. Rowling – has the Copyright for a young wizard named Harry Potter, and his adventures. It’s her particular expression of the idea of a young wizard that is protected.

I created some web pages, but my boss says that they don’t belong to me. Why not?

Well, answering the question depends on what you created, what you used to create it, and why you created it. Since you created the web pages at work, you presumably used your employer’s computers, and did so at your employer’s direction, so that tends to suggest your employer owns it. However, if you published web pages at home, for purposes unrelated to your job, those would belong to you.

For more information, go to http://www.Copyright.gov/circs/circ1.html#hlc.

Trademarks

What’s a trademark?

A trademark is an image, phrase or otherwise distinctive mark that shows the maker or owner of the product in a way that is distinguishable from all others. Words (Xerox®), shapes (the old glass Coca-Cola bottles), sounds (the National Broadcast Corporation’s three chimes), colors (green-gold professional ironing board covers), and even perfumes have been found to be trademarks, so long as they are not functional, but help identify the product.

What do I have to do to get a trademark?

You pretty much have to use it in commerce before anyone else in your geographic area. There is a constant balancing act ? you want something that is quickly associable with your product, but it has to be distinctive from all others. A trademark does not have to be registered with the U.S. Patent & Trademark Office, but it can help.

What has to be done to register my mark?

You can apply for one before using it, but the most important thing is to actually use the mark. The registration form now is actually online, at www.uspto.gov. Before that, though, we strongly recommend a database search in all the jurisdictions that you want to use the product in, to make sure that you are not violating someone else’s mark. While the US Patent and Trademark Office’s web site has a database of registered marks and those in the application process, that is not enough — someone could be using it without registering it. A full search may cost some money, but it is far cheaper than to waste your investment in marketing on a mark that someone else has priority to.

My friend’s company registered its trademark, but then some other company claimed to use it first, and made my friend stop using it. How can that be right?

The first to use the mark has priority, not the first to register. During the registration process, a search is made to see if the proposed mark is too close to other marks. However, the databases are never foolproof.

What happens if I find someone who is using our mark?

The first step is usually something called a “cease and desist letter,” sent to tell them about your priority to the mark, or the confusing similarity of their mark to yours. If they do not stop using the mark, then you may sue them for trademark infringement. While you do not have to have the trademark registered, it can be a big help, If your mark is registered and valid, then you can recover your attorney’s fees for the case and possibly have a greater recovery, if you win.

Misappropriation of Trade Secrets

Do I have to register a trade secret?

No. In fact, to make it publicly known would destroy the value of a trade secret.

What is a “trade secret,” and how is it different than a trademark?

A trade secret is (1) a secret formula, recipes, method, compilation, program, or technique that is valuable because it is not generally known in the industry, and (2) is subject to reasonable efforts to keep it secret. While a trademark is a way of making your product known, a trade secret is protectable only if it is not generally known.

What are some examples of trade secrets?

Recipes – for example, the formula for Coca-Cola or the “Eleven Secret Herbs and Spices” of KFC. Business methods or manufacturing processes can be considered trade secrets. Customized computer programs, almost always used in-house, can be trade secrets. Customer lists are often subject to trade secret lawsuits.

My business has a secret customer list, and our competitor now is marketing to the same customers. Can we sue to stop them?

It depends on how they came to know about your customers. The identities of customers themselves are rarely secret ? those are usually businesses that want to be known. If your competitor found out the information independently of you, it hasn’t taken your trade secret. However, if you can show that the competitor is using your list that was expensive to put together, you may be able to stop it from using your list, or get damages for their use.

How long does a trade secret last?

Potentially forever – see, for example, the recipes above. A trade secret can last as long as it is valuable because it is secret, and it is subject to reasonable efforts to protect it.

How do I protect a trade secret?

Trade secrets should be clearly marked as “confidential,” or some other marking that clearly shows it should not be shown outside your business. Also, get a written agreement with your employees to protect that information. The best time to do that is at the beginning of the employment relationship, because that is when people are most likely to sign. If you wait until after they start working, you may need some additional compensation to them, although a lawyer may help you structure the process to reduce your cost. Still, protecting your most valuable asset is worth the trouble and expense.

One of my Southern California sales reps left, and is going to work for a competitor. Can I stop him?

Probably not. California has a very strong tradition of protecting employees. Standard employee non-competition agreements are valid in many states, but not California. Even stopping a former employee from announcing his move to a competitor is not likely in California, although you can stop the former employee from using your trade secrets. Many nationwide companies fall victim to this part of California law.

A competitor has just shown up with a device that looks like a copy of ours. Can we stop her from using it?

Yes, if she “stole,” or misappropriated it from you. If she properly reverse engineered it, or developed entirely independently of your trade secrets, she is entitled to compete.

Patents

What is a patent?

A patent is an exclusive right to use or market a unique design, process, formula, or device. It is a monopoly that is authorized by the Constitution’s establishment of a patent office.

What do I have to do to get a patent?

You have to apply for one at the US Patent & Trademark Office (the “USPTO”) within a year of formulating the unique design, process or device. If the USPTO finds that it is sufficiently novel, it will then publish the proposed patent, to see if anyone opposes it. If no opposition succeeds, then the patent can be issued.

How much does a patent cost?

Patents cost from several thousand to twenty thousand dollars or more, depending on the type of patent and the size of the proposed inventor. There are also maintenance fees after a patent is granted. A patent lawyer – who may not be a regular lawyer, but someone specialized in some part of the patent world – is a vital part to putting together a good patent application. We can work with you to find a patent lawyer who meets your needs.

How long does a patent last?

A utility patent, for formulas, devices, and the like, is now 20 years from the date of the application.

What good does a patent do me?

A patent gives you the exclusive right to use or market the invention. For both practical and legal reasons, you may want to licence someone else to use your patent, and you would be entitled to get a reasonable royalty for it. If someone is using the patent without permission, you can stop them from doing so.

Do you have to be employed as an inventor to get a patent?

No. Abraham Lincoln received one relating to steamboats. The actress Hedy Lamarr (of the “Road” pictures, with Bing Crosby and Bob Hope), invented a radio frequency skipping process that is used today in cellular phones.

For more on trademarks and patents, go to http://www.uspto.gov/main/faq/.