How do I Choose a Patent Attorney?

Choosing the right patent attorney is one of the most important decisions you can make in protecting your invention. The problem is that the “right” patent attorney is probably not going to tell you what you want to hear. The right patent attorney will tell you that the patent process is long, expensive and no guarantee of sales, or even a getting a patent for that matter. That is tough talk when you compare it with invention development companies that promise the moon and the stars.

Drafting patents is not like getting an oil change. All patent attorneys are different and so are the patents they draft. So how do you choose? Years of experience? Size of the office? Hourly billing rate? The best way to choose is to get a recommendation from someone like you who has actually worked with a patent attorney they liked. Do not rely on recommendations from others based upon advertising or second hand knowledge. Similarly, do not rely on recommendations from large corporations, if you are an independent inventor. You want to know how the patent attorney will treat you and how broad the patent you get will be.

Even the best patent attorney cannot guarantee that they can get you a patent, but the better patent attorney you select, the better the odds are of getting a better patent. Even a first year patent attorney can draft a very narrow, and nearly worthless patent. What you want is a skilled patent attorney who can get you a patent that will carve out a monopoly for you in the marketplace. Things to look for include:

1) Does the patent attorney have a good reputation among similar clients?
Nothing is probably a better indicator of a good patent attorney than a good
reputation among clients similar to yourself.
2) How many years of experience does the patent attorney have?
Ten years drafting patents is probably more than enough.
3) Does the patent attorney have a good reputation among other attorneys?
Check out Martindale Hubbell to find out how your attorney rates.
4) Is the patent attorney actually the one who does the work?
If you hire a partner, do you want an associate doing the work?
5) Is the patent attorney accessible?
Can you call the patent attorney directly? If the attorney has someone to
screen calls, there may be a reason.
6) What size clients does the attorney usually represent?
If the patent attorney usually represents huge companies, how responsive
will the patent attorney be in responding to your needs?
A smaller firm, catering to individual attorneys might provide you a little more individual attention.
7) How many and what type of patents has the patent attorney drafted?
Search patents at the Patent Office for the patent attorney’s name
to see the number and type of patents being drafted.
8) Does the patent attorney litigate patents?
Patent attorneys who litigate patents as well often have a keen
understanding of what you want and do not want in your patent if you ever seek to enforce it
9) How do YOU feel about the attorney?
Does the attorney talk over your head or fail to explain things in sufficient
detail? Is the attorney knowledgable? Authoritative? Persuasive? Even if the
patent attorney excels at everything else, if you do not feel comfortable with
the patent attorney keep looking; you will eventually find your perfect fit.



Brett Trout

Holiday

I took the weekend off to go motorcycle racing in Council Bluffs. Race day was fantastic, despite me forgetting all of my protective gear in Des Moines. Due to my freakishly large stature, I was not able to borrow any gear from the very friendly people at the track. Luckily, my fabulous pit girl, Martha Boesen, grabbed my gear before leaving Des Moines and met me with it at the track well before my first race. Despite my still phlegmatic starts, I was able to pass a considerable number of riders and turned personal bests in both of my races. Our personal godfather of racing had a little off track excursion viewable at Randy Norian's website. Don't worry folks . . . that beautiful bike came away with only a scratch.

Copyright FAQ

What is a “work made for hire?”
Under 17 U.S.C. 101, a ''work made for hire'' is:
a) A work prepared by an employee within the scope employment; or
b) A work (if the parties expressly agree in a written instrument signed by them that the work should be considered a work made for hire) specially ordered or commissioned for use as:
a contribution to a collective work,
a part of a motion picture or other audiovisual work,
a translation,
a supplementary work (forewords, afterwards, editorial notes etc.),
a compilation,
an instructional text for use in systematic instructional activities,
a test,
an answer material for a test, or
an atlas.

Note that software development and website design do not fall under any of the “work for hire” categories. Therefore, while a company owns software development and website design produced by its employees, it does not own such materials produced by an independent contractor. Even if the parties agree software development and/or website design are to be a work for hire, these works do not meet the statutory criteria. Therefore, it is very important for a company not to rely on a work for hire designation to transfer rights in such projects. Instead, the company must obtain a written assignment of the copyright in the commissioned work from the independent contractor.

How long does a copyright last?
For an individual author, copyright protection extends for the life of the author, plus 70 years. For anonymous works and works for hire, the term is 95 years from publication, or 120 years from creation, whichever comes first.


How can I tell if something is in the public domain?
Unfortunately, there is no sure way to confirm a work is in the public domain. While it is possible to check the Copyright Office to confirm a copyright is registered, the absence of registration does not mean the work is in the public domain. Unless a work was published prior to 1923, you simply cannot tell if something is copyrighted. Do not rely on the absence of a copyright notice, Internet urban legends, or the fact that you might have received the work via email as an indication that the work is in the public domain. Infringers rarely provide the copyright notice when posting infringing material online and testaments as to the “public domain” or “open source” status of a work are notoriously inaccurate.

A rather unscrupulous tactic is for an author to write a poem or software module and “somehow” place the work onto the Web. Once unrelated third parties begin to present the work as being in the “public domain” the work spreads like wildfire, making it impossible to trace back to the author. Meanwhile, the author registers the copyright in the work, does a simple online search and tracks down all the infringers. As U.S. copyright law provides statutory damages for violations, the author simply sends the infringer a copy of a generic lawsuit, along with a demand for several thousand, to tens of thousands of dollars. The author notifies the infringer that the use of the work is unauthorized, and that the author will file the lawsuit if the infringer does not pay the demand. Monetary demands are typically calculated to be slightly less than the cost of defending the lawsuit. It is nearly impossible to prove the author actually placed the material online, so the infringer has little choice but to pay the demand. As tempting as it might be to use that undocumented “open source” software module or online poem, DO NOT use, copy, or transfer any copyrightable material, unless you can prove its public domain pedigree in court.

What is Fair Use?
17 U.S.C. 107 states that “fair use” of a copyrighted work is not an infringement. Fair use, however, is rarely applicable to online usages of copyrighted works. There is no set number of words or type of use that constitutes “fair use.” Rather, to determine whether use of a copyrighted work constitutes “fair use” courts examine:
a) The purpose and character of the use (including commercial or nonprofit);
b) The nature of the copyrighted work (forms having an implied license to distribute);
c) The amount and substantiality of the portion used (publishing the “heart” of a novel);
d) The effect of the use upon the potential market (televising Evil Knievel’s jump)
Although this provision shields many parodies, news items, and commentaries, its application is extremely technical. Blind reliance on its provisions is foolhardy, and will quickly cast the unwitting into a time consuming and costly infringement battle. Even many non-profit, complementary, minimal and attributed usages do not constitute fair use. Copyright owners typically have deep pockets and boilerplate lawsuits. Do not rely on the fair use doctrine unless you are prepared to defend your use in court.

Is Copyright Infringement a Crime?
It can be. While copyright infringement is typically a civil matter, in certain circumstances, U.S. copyright law makes it a misdemeanor or even a felony to willfully infringe on a copyright.
What is the Digital Millennium Copyright Act (DMCA)?
The DMCA is a law designed to address online copyright issues the original drafters of U.S. copyright law never anticipated. Although the DMCA has many provisions, it primarily limits liability of Internet Service Providers (ISPs), prohibits circumventing anti-piracy software, and requires rebroadcasters of copyrighted material to pay royalties. DMCA’s reach is so strong; it has even been held to prohibit linking to a site containing DVD cracks. The DMCA is very controversial, as many in the online community feels it unfairly stifles free speech.


Brett Trout

Copyright FAQ

What is a copyright?
A copyright is the exclusive right to reproduce or distribute an original work of authorship. Original works of authorship include software programs, photos, text and sounds, as well as other intellectual works. A copyright does not protect ideas, procedures, processes, systems, forms, methods of operation, concepts or principles.

How do I get a copyright?
Since 1989, copyright protection attaches to a work as soon as it is “fixed” in a tangible medium. Copying to a disk or hard drive, or ripping to a CD all constitute “fixation” for the purposes of copyright protection.

Do I need to register my copyright?
Neither publication nor registration is a prerequisite to secure copyright protection. Copyright registration does, however, provide several advantages. Registration is a prerequisite to U.S. copyright owners bringing an infringement lawsuit in the U.S. Registration also provides statutory damages and attorney fees in certain cases.

What is the proper copyright notice?
The Universal Copyright Convention (the UCC), of which the U.S. is a member, dictates that proper copyright notice consist of the symbol © (the word “Copyright” or the abbreviation allowed under U.S. law are not acceptable), the year of first publication, and the name of the copyright proprietor. Example: © 2002 Brett J. Trout. The copyright notice should be permanently placed on copies of the work in a manner that it gives reasonable notice of the claim of copyright under normal usage. Since March 1, 1989 affixation of proper copyright notice is not mandatory in the U.S. Proper copyright notice, however, prevents an infringer from limiting damages by claiming “innocent infringement.”

Who owns the copyright in a work?
Upon fixation, the copyright immediately becomes the property of its author. If an individual creates a work outside of any contractual or employment obligation, the individual is the author. If an individual creates a work as part of an employment obligation or as a “work for hire” the employer is the author. An author can assign the copyright in the work to a third party. In such a case, the third party would own the copyright, but the authorship would not change.

Why Register My Trademark?

The Biggies – Damages

Two important reasons to register your trademark with the United States Patent and Trademark Office is the recourse it provides registrants. In addition to providing for an injunction to stop the infringer from further use of the registered trademark, the federal trademark law (also known as the Lanham Act) provides for the recovery of damages, as measured by one of the following:
1. Defendant's profits
2. Plaintiff’s actual damages and losses
3. Plaintiff’s lost profits

Additionally, if the infringer is found to have acted knowingly and willfully, the Lanham Act allows the trial allows the judge to award the following additional damages:
1. Up to three times the actual damages shown above; and
2. An increase or decrease of the award of profits if the court determines the award is either inadequate or excessive.
While the Lanham Act does not specifically provide for punitive damages, punitive damages are often recoverable under the state law torts of trademark infringement and/or unfair competition.

Under the United States legal system you are very rarely able to recover your attorney fees. As such, competitors are often willing to risk minor infringements on your intellectual property, knowing it is unlikely you will spend fifty thousand dollars in attorney fees to recoup five thousand in damages. The specific provision in the Lanham Act for the recovery of attorney fees makes federal trademark registration a very powerful tool.

While most trademark cases get resolved early on with a preliminary injunction and therefore never make it to the damages phase, the availability of triple damages and attorney fees makes infringers much less eager to take on a federal trademark registrant, as opposed to a state trademark registrant or a common law trademark holder. Faced with the possibility of not only paying their attorney fifty thousand dollars or more and then having to pay your attorney the same amount, most infringers avoid encroaching on federally registered trademarks altogether, or back down very quickly when confronted.

The key to winning any fight is to convince the other side they will lose. Federal trademark registration provides a huge arsenal of benefits to registrants against infringers. Contrary to popular belief, would be trademark infringers are not dumb. They will pick the most vulnerable prey, while keeping them insulated from damages. Accordingly, very few willful infringers fight in the face of a federal trademark registration. Most recognize the danger and avoid infringing a federally registered trademark altogether. Probably the greatest benefit of federal trademark registration is the dozens of lawsuits you never had to fight.

Why Register My Trademark?

In addition to the pre-lawsuit advantages outlined yesterday, federal trademark registration has several advantages once you get into a lawsuit as well. The best thing about these in-suit advantages is that since your competitors know you have these benefits available to you, they are more likely to settle the matter before going to court and, more importantly, less likely to infringe your trademark in the first place.

In-suit advantages.

Access to Federal Court – Without a federal trademark registration, if your trademark infringer was out of state, you would either have to sue the infringer in their home state, or substantiate damages sufficient to obtain diversity jurisdiction. Even if most of your claims are state law claims, if you file in federal court based upon your federal trademark, you can have your state law claims heard in federal court as well.

Presumption of Validity – Without a federal trademark registration, to succeed against an infringer at trial, you will have to prove that your trademark has been validly acquired and has not been abandoned. A federal trademark registration serves as prima facia evidence that the trademark is valid. The infringer may, of course, overcome this presumption with additional evidence, but federal registration saves the time and expense of placing this burden on the infringer.

Presumption of Ownership - To succeed against an infringer at trial, you will have to prove that you actually own the trademark. Especially in situations where the trademark has changed hands, where the company name has changed or where there are subsidiaries using the trademark, proof of ownership can be a costly and time consuming process. A federal trademark registration serves as prima facia evidence of your ownership of the trademark. Again, the infringer may overcome this presumption with additional evidence, but with the federal registration, this initial burden is on the infringer.

Presumption of Exclusive Rights in Trademark –To succeed against an infringer at trial, you will also have to prove that you have exclusive rights to the trademark. In situations where there are others using the trademark in different locations or on different goods, or situations where there may be multiple infringers, it may be quite difficult to prove your exclusive right to the trademark without a federal trademark registration. A federal trademark registration serves as prima facia evidence of your exclusive rights in the trademark. While the infringer may overcome this presumption with additional evidence, the initial burden is on the infringer.

Presumed Not Abandoned – To succeed against an infringer at trial, you will have to prove that the trademark has not become abandoned. If the trademark has been in existence for a long time and/or there are not a large number of documented sales, proving continuous use sufficient to prove non-abandonment of the trademark can be very burdensome. A federal trademark registration serves as prima facia evidence the trademark has been in continuous use and has not become abandoned. Again, the infringer may overcome this presumption with additional evidence, but with the federal registration, this initial burden is on the infringer.

Incontestable – Within one year following a 5-year period of continuous use of the mark in commerce a federal trademark registrant may file what is referred to as a § 15 Declaration. Once this declaration is accepted, the trademark is "incontestable," meaning the federal registration is conclusive evidence of the validity of the registered mark, of the registration of the mark, of the owner's ownership of the mark and of the owner's exclusive right to use the mark with the goods/services. While an infringer may still attack the registration on certain limited grounds, the infringer can no longer successfully argue the trademark is not inherently distinctive (e.g., is merely descriptive or misdescriptive, primarily geographically descriptive or misdescriptive, or primarily merely a surname) or that the trademark lacks secondary meaning.

As noted above the advantages of a federal trademark registration not only reduce the time and cost associated with trademark litigation, they may also reduce the likelihood you will ever have to sue an infringer in the first place. Tomorrow. The biggies. Advantages of federal trademark registration after trial.

Why Register My Trademark?

So you have a trademark. Why go the extra step and register it with the federal government? Several reasons, not the least of which is keeping you out of court. The dozens of advantages of federal trademark registration break down into three basic categories: 1) pre-lawsuit advantages; 2) advantages during trial; and 3) increased payments if your suit is successful. All three of these advantages combine to scare off infringers and keep you out of court in the first place. First, let us examine the advantages a federal trademark registration provides before trial.

Pre-lawsuit advantages.

Constructive Notice - A federal trademark registration provides nationwide constructive notice of your rights. This prevents infringers from claiming innocent infringement or trying to register your trademark in other parts of the country.

Actual Notice – Once you file your application for federal trademark protection, your trademark will begin appearing on search reports third parties conduct to find available names. Appearing on these search reports reduces the likelihood a reputable competitor might accidentally adopt a similar name in good faith.

Exclusivity - A federal trademark registration grants you the exclusive right to use your trademark in association with particular goods or services. Unlike domain names, more than one company can own a single trademark. One company can use the trademark “Apple” for computers, one company can use the trademark “Apple” for shoes and, of course, everyone can use apple to sell apples. Federal registrations are organized by “classes.” You can obtain federal registration in as many classes of goods or services in which you are using the trademark (and in which you are willing to pay the additional federal filing fees).

Protection for Descriptive Trademarks – Federal registration can turn what would otherwise be an unprotectable “descriptive” trademark into a fully protectable trademark. The Trademark Office will initially require descriptive trademarks be registered on the Supplemental Register. After five years of continued use of the trademark, you may then submit a declaration of the continued use and other evidence the trademark has obtained a “secondary meaning” in the marketplace. The Trademark Office will then move the registration from the Supplemental Register to the Principal Register, granting the formally descriptive trademark full federal protection.

United States Priority – A federal trademark registration gives you priority in every state. Without a federal trademark registration, your common law trademark rights extend only as far as your use. If you are not using the trademark in Iowa, someone else can obtain common law rights to the trademark in that state. It can become a rather unfortunate situation if you were to invest millions of dollars promoting a trademark, only to have someone else reap the benefits in a distant state.

Foreign Filing Priority – Filing a federal trademark application allows you to use your filing date as a priority date if you later decide to file a trademark application in a foreign country. This can come in handy if another company begins to use your trademark internationally, or if a foreign infringer attempts to capitalize on the goodwill of your United States trademark.

Search Customs – Federal trademark registrants can register their trademarks with the United States Customs department. Customs will then run the trademark against imports to check for infringing or gray market (legitimate, but licensed for sale more inexpensively in another country) goods.

Use of the Registered Trademark Symbol ® - Only federal trademarks may bear the ® registered trademark symbol. This symbol puts everyone on notice of the powerful rights behind the trademark. Proper use of the symbol will go a long way toward dissuading infringers and competitors from adopting the trademark without a license from you.

Stop Cybersquatters – Most domain name registrars and the Internet Corporation for Assigned Names and Numbers have domain name dispute resolution procedures which strongly favor federal trademark registrants. Remember though, unlike domain names, more than one company can own a single trademark. Your federal trademark registration will typically not top an identical federal registration for the same goods. Accordingly, a federal trademark registration is a good way to avoid a third party with a federal registration from taking away your domain name.

As you can see, federal trademark registration carries a lot of clout. In my practice, the existence or non-existence of a federal registration is often the determining factor in whether we can avoid a lawsuit. If one party has priority and a federal registration, it is often enough to convince the other party to resolve the matter as amicably as possible. Tomorrow . . . Advantages federal trademark protection provides at trial.

What is a Trademark?

A trademark is a word, name, phrase or symbol used to identify the source or origin of a good or service. Trademark rights arise through use of the trademark in association with a good or service. For this reason, naked assignments of trademarks are not allowed. A valid assignment must also assign the goodwill associated with the trademark. As soon as a trademark is used in commerce in association with a good or service, common law rights to the trademark attach. While not nearly as powerful as a federal trademark registration, common law rights can still be effective in obtaining an injunction or a judgment against an infringer.

The protection afforded a particular trademark depends in large part on how descriptive the mark is of the particular product or service provided in association with the mark. For example, if the product is apples, the mark “APPLE” would be deemed “generic,” the mark “RED” would be deemed “descriptive,” the mark “DEVIL’S FRUIT” would be “suggestive,” the mark “ROYAL” would be “arbitrary,” and the mark “QWIPPLE” would be “fanciful.” These distinctions are important as generic marks are neither protectable nor registerable, while suggestive, arbitrary and fanciful marks are both protectable and registerable.
Descriptive marks fall into two categories—the descriptive and the merely descriptive. Descriptive marks, while often not registerable in and of themselves, may be registerable if the owner can demonstrate that consumers have attached a secondary meaning to the mark. Secondary meaning attaches when, in the minds of consumers, the trademark is associated more with the particular product than with the word’s ordinary meaning. If a trademark is determined to be merely descriptive, however, the mark is not federally registerable. The United States Patent and Trademark Office has determined that in such cases the descriptive nature of the mark is such that no amount of advertising or sales would be sufficient to override the descriptive connotaion of the mark.

Trademarks are not limited to words, but include logos and symbols, and may even include such diverse attributes as color, in the case of pink fiberglass, sound, as is the case with the NBC chimes, or scent, for floral scented yarn. Trademarks typically associated with the Internet include .com domain names (of which over 30,000 are presently pending), animated browser icons, and “e” (for electronic), “i” (for Internet), and “o” (for online) marks, such as E-VIDEO or I-MUSIC.

As with any other type of trademark, the types of protection available range from common law protection, which attaches to a protectable mark as soon as it is used in association with a good or service, to state law registration, to federal law registration. While state law protection provides some added benefit over common law registration, it is no substitute for a full, federal registration, the benefits of which we will discuss in the next blog.


Brett Trout

Comparative Advertising-How Far can you Go?

Over the past decade and a half I have gone from advising clients as to what they legally "can" do on the internet to what they practically "should" do. More important than whether you can legally do something online, is whether you are going to get sued. For the most part, any internet advertising that you do not get sued over is far preferable to legal advertising that ties you up in court for years. You may "win" the case, but waste hundreds of thousand of dollars on internet attorneys and years of time you could have devoted to running your business. So, what are the most important considerations when embarking on an online comparative advertising campaign? Here are the factors to consider when making a "practical" analysis:

1) How big is the company that might sue you?
2) How likely is it that the internet activity would come to the other company’s attention?
3) How likely is the other company to sue you (regardless of whether they are likely to win or not)?

If you are dealing with an eight-hundred pound gorilla that sees your online ads every day and has an itchy suing finger, you should obviously avoid the comparison, even if you have a legitimate right to do so. Even if the initial press outweighs the cost initially, over time the litigation costs will likely far outweigh the publicity benefits. Although the extra media attention is a factor to consider, bear in mind that you are not the one in charge of making the lawsuit go away.

Now for the "legal" analysis. If you answered the foregoing three questions to your satisfaction (or if you want this to be your "Waterloo", but still want to position yourself to win a pyrrhic victory) internet product comparison statements must still be accurate and non-deceptive.

In addition to product comparison issues, you must also consider the following to avoid having to pay damages for trademark infringement and unfair competition:

1) Make sure the comparison information is truthful; do not mislead the consumer either by act or omission;
2) Use the competitor’s trademark in an accurate manner. Do not alter or deface it in any manner;
3) If your competitor’s trademark is federally registered, use it in association with the circle ®;
4) Note clearly, somewhere in the advertising, who the owner of the other trademark is, and that they are not affiliated with you;
5) Do not connote in any way that the owner of the trademark endorses or sponsors you or your product in any way;
6) Do not use the competitor’s trademark in a manner more prominent than your own, and do not alter meta tags to drive traffic based upon the use of the competitor’s trademark;
7) Properly note the comparison in a manner which does not demean the competition;
8) Document and preserve the substantiation of all comparison claims;
9) Obtain all testing or factual criteria from a recognized, legitimate, objective, third party source;
10) Remove claims immediately once the comparison is no longer valid or supportable;
11) Make the comparison an honest, “apples to apples” comparison; and
12) Avoid sham comparisons designed solely to increase visibility by comparing a complete unknown to the industry leader.

Bear in mind, however, there are few hard and fast rules in this game. While the foregoing rules obviously cannot guarantee immunity from suit, they will go a long way toward mitigating what could otherwise be years of crippling damage to your business.

No More Injunctions for Patent Trolls?

The United States Supreme Court, in eBay Inc. v. MercExchange
has taken on the general rule in patent cases that courts will issue injunctions once validity and infringement have been proved. Turns out, this is not the general rule at all. The Supreme Court held that the test for issuing permanent injunctions in patent cases is the same test for issuing permanent injunctions in any other case: (1) has the plaintiff suffered an irreparable injury; (2) are remedies available at law, such as monetary damages, inadequate to compensate for that injury; (3) considering the balance of hardships between the plaintiff and defendant, is a remedy in equity warranted; and (4) would the a permanent injunction be in the public interest.

The case revolves around MercExchange, an L. L. C., which holds a number of patents, including business method patent number 5,845,265 for an electronic network of consignment stores facilitating sales between individuals by acting as an assuror of trust in the transaction. MercExchange tried to license the patent to eBay, but the parties could not agree to specific terms. MercExchange then sued eBay in the United States District Court for the Eastern District of Virginia. A jury eventually awarded MercExchange $35 million. A trial judge later reduced the jury award to $29.5 million and denied MercExchange's motion for a permanent injunction. 275 F. Supp. 2d 695 (2003).

The District Court ruled that the "plaintiff's willingness to license its patents" and "its lack of commercial activity in practicing the patents" would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue. Conversely, the Court of Appeals for the Federal Circuit later reversed the District Court, applying the "general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances." 401 F. 3d 1323, 1339 (2005).

The Supreme Court found that both courts were mistaken, eschewing any general rules other than the four-part test outlined above. Just as a court should not automatically deny an injunction in a case where a patent troll chooses to license, rather than manufacture a patented device, the court should also not issue injunctions as a matter of course in patent cases. Instead, courts must exercise their considerable discretion in applying the specific facts of the case to the standard four part test for injunctions.

Even though the Supreme Court remanded the case to the District Court to apply the four part test, this ruling is a boon to internet based companies and a strike against so called “patent trolls.” As injunctions no longer issue as a matter of course in patent infringement cases, patent trolls lose a very large “stick” they had previously been able to wield to threaten large settlements in otherwise mediocre cases. Many internet companies were not worried about paying large damage awards, but a permanent injunction could mean the end of their business.

Even if an internet company felt it had a fair shot at succeeding at trial, the risk of a permanent injunction saw many companies pay patent trolls exorbitant license fees rather than run the risk of a permanent injunction. With this new ruling, internet companies can breathe a little easier and fight a little harder, knowing that a patent trial loss may not necessarily mean the end of their business.

Top Ten Internet Legal Mistakes-No Written Policies

1. No Written Policies

Liability: Many companies float along without any specific written policies regarding website use and appropriate procedures for intellectual property protection. The main reason companies fail to put down a policy in writing is the same reason a written policy is so valuable. Once you write a policy down, you have committed yourself to the actions outlined therein. It is easy to constantly change an unwritten policy to fit the circumstances.

By the time a problem does arise, it may be too late to correct it. Time wasted determining the appropriate procedures may lead to an irreversible loss of intellectual property or expose a company to punitive damages associated with willful infringement. Eleventh hour attempts to formalize a written policy are unlikely to contain the vast amounts of liability the policy was designed to avoid altogether.

Solution: Companies need detailed written policies and procedures before a problem arises. Writing the policies is much easier than you might think. Although appropriate policies will vary from company to company, the foregoing nine issues are a good place to start when constructing a general policy outline. From the outline, you can incorporate strategies and key provisions, detailing proper reporting and administrative procedures.

Your company must follow the policy closely, but constantly be on the lookout for ways to improve and adopt the policy to new technologies. Treat your written policy as a living document. Periodically review and update your policy to address changes in the corporate information technology structure, as well as changes in the intellectual property portfolio. Enlist the assistance of a qualified information technology attorney to adapt a policy framework to your particular business and website. A qualified attorney can also assist in continually modifying your policies and procedures to limit loss, increase efficiency and avoid unnecessary litigation.

Top Ten Internet Legal Mistakes-Losing the Farm

2. Losing the Farm
Liability: Companies which rely on the Internet for sales live or die by their legal counsel. One false step in the minefield of contracts or intellectual property protection can destroy a company that took years to develop. Whether it is losing a multi-million dollar trademark through misuse, binding the company to a perpetual contract or landing the company in the middle of a multi-million dollar lawsuit, failing to plot a proper course is a recipe for disaster. Indeed, a single patent or trademark may be the difference between a company’s success or failure in the marketplace. A single contract can tie up and indefinitely shelve your company’s most valuable asset. If you plot your course without experienced legal counsel by your side, it is only a matter of when, not if, disaster strikes.

Solution: Contracts and intellectual property portfolios are as varied as the companies that have them. As such, there is simply no “one size fits all” strategy. To plot the appropriate strategy, your company must develop specific plans and policies geared toward its own needs, intellectual property and strategic initiative. As for contracts, giving your company a way out of exclusive licensing arrangements, can prevent third parties from using extortion tactics to gain the upper hand or put your company out of business. Similarly, a well conceived portfolio protection plan, developed prior to the acquisition of new intellectual property is essential. Preparing a strategy beforehand reduces the costs, delays and potential hardships associated with remedial efforts to try and regain lost assets. Talk to your intellectual property attorney today to avoid many, many headaches tomorrow.

Top Ten Internet Legal Mistakes-Bad Contracts

3. Bad Contracts

Liability: Given the time and expense involved with executing appropriate contracts, many companies attempt to cobble together parts from existing contracts or forego written contracts entirely. Most of the time, both parties perform their obligations and bad drafting never causes a problem. The company repeats the process until a problem arises. Unfortunately, the types of problems that arise can bring the company’s operations to a grinding halt. In these situations, inartfully drafted contracts can actually be worse than having no contract at all.

Improper assessment of a company’s existing intellectual property portfolio, information technology procedures and existing security policies can have catastrophic consequences. Acting, or failing to act in accordance with the language of the cobbled contract can gut a company of its intellectual property and rain down costly and time consuming lawsuits. Even if your lawyer drafted you an appropriate contract, if you do not inform your key personnel of important contractual provisions, they may inadvertently breach the terms of the contract, in turn, leading to large liabilities for your company.

Solution: It is critical that you coordinate with your intellectual property attorney to develop comprehensive contractual strategies to prevent any of your intellectual property from slipping through the cracks. Rigorous review of third party contracts is also essential to ensure the availability of an exit strategy for you and to prevent overreaching contract provisions from crippling your company.

The time and cost associated with drafting appropriate contracts and bringing your key personnel into the fold may seem burdensome initially. Over time, however, as templates for particular strategies emerge, the time and costs decrease. Compared to the time and costs associated with litigating misdrafted or absent contract points, proper contract preparation translates into a huge cost savings.

Congress Stealing From Inventors

For the last decade and a half Congress has used governmental patent fees paid by inventors as its personal piggy bank. Fees at the United States Patent and Trademark Office continue to rise, but instead of using the money to pay for more Examiners, Congress funnels this money right out the back door of the Patent Office. How much you ask? Well, according to Senator Orrin Hatch, since 1992, Congress has diverted over $800 million dollars in patent fees to pay for completely unrelated programs. Senator Hatch's words echo the sentiments of inventors across the country: “At a time when our economy needs support, it seems doubly wrong to levy what amounts to a tax on innovation, a tax imposed by taking a portion of the fees America’s innovators and businesses pay to secure protection for their economy-generating products and services and spending it on unrelated government programs.”

In 2001, inventor Miguel Figueroa filed a class action lawsuit against the United States arguing the imposition of extra fees for unrelated Congressional spending is patently unconstitutional and demanding the return of the nearly one billion dollars in overpayments. Despite agreeing that the current patent fee regime is misguided and creates the wrong incentives, the United States Court of Federal Claims, in Figueroa v. United States, No. 01-457C, ruled against Mr. Figueroa on the issues of unlawful taking and illegal taxation.

Last month, on April 4, 2006, the U.S. Court of Appeals of the Federal Circuit (CAFC) heard arguments in Mr. Figueroa’s appeal of the lower court ruling. You can listen to the audio of the arguments here. The CAFC’s decision in this case will profoundly affect every inventor and everyone who intends to used patented inventions in the future. If the CAFC rules against Mr. Figueroa, Congress will have the ability to continue to increase the backlog of patent applications at the Patent Office, continue to decrease funding for the Patent Office and continue to increase fees paid by inventors.

It is time to consider the contributions inventors make to this society. It is time to consider the reason our forefathers so highly regarded the role of inventors so as to include specific protections for inventors directly in the Constitution itself. The miniscule short term fix afforded by this pilfering from inventors pales in comparison to the innovation stifled and the inventions that will never see the light of day. The CAFC truly has before it a decision for the ages. Let us hope this court is imbued with the Constitutional fortitude to give our children the advantages the framers of the Constitution so selflessly afforded us.

Top Ten Internet Legal Mistakes-No Chain of Command

4. No Chain of Command

Liability: Costly litigation often arises as the result of everyone in your company thinking someone else is handling the problem. A primary cause of such problems is keeping your lawyer out of the loop. Lawyers are valuable troubleshooters, but they cannot help if you do not let them know what you plan on doing. Given the speed at which problems multiply online, it is always advisable to get everything approved by a lawyer before making changing the way you do business on the internet.

An additional cause of problems is failure to coordinate internally. Failure of key personnel to coordinate with one another, or to even know to whom they should report an issue, can lead to numerous types of liability. Nowhere is this more of a concern than business activities on the internet. Not only may your company be liable for the inevitable results of these failures, but officers and directors may also be held personally liable if they know about an internet related liability, and fail to take appropriate action.

Solution: Every company doing business on the internet must develop a coordinated chain of command. Written reporting procedures and protocols for addressing IT issues on a timely basis are imperative. Designating a Chief Information Officer ("CIO") to coordinate directly with the Board of Directors can reduce critical delays and failures associated with internet and other information technology issues. If you do not already have chain of command reporting policies in place, do it today. If you wait until a problem arises, you could find yourself out of a job and/or on the wrong end of a lawsuit.

Top Ten Internet Legal Mistakes-Breaking the Law

5. Breaking the Law

Liability: Hundreds of laws govern the internet. The number and complexity of these "internet laws” often make it difficult to navigate the maze of regulation with any precision. Adding to the confusion is the fact that many of these "internet laws” are industry specific. As only certain types of companies are required to follow them to the letter, the laws generate much less publicity and information about compliance issues.

Failure to work with your attorney to comply with industry specific federal legislation, however, such as COPPA, Graham-Leach-Bliley, HIPAA, or international conventions such as the EU Directive, could lead to drastic penalties. Monetary penalties may include fines and injunctions associated with failure to comply with federal and/or international law. Even more of a concern are the costs associated defending your company in court against alleged violations of these laws. Compliance violation defense costs can run half of a million dollars or more.

Solution: Any company that relies on its internet presence for business should have a working relationship with a knowledgeable attorney and an internal legal regulatory compliance committee. The committee is responsible for following statutory regulations governing your company and its internet activities. The language of online regulations is available long before Congress passes the language into law. Once the language becomes the law, Congress typically implements a compliance deadline date at some time in the future. Outlining policies to obtain the regulatory language as far in the future as possible and working with your lawyer to comport with the requirements far in advance of their deadline date is critical.

Ambiguities inherent in internet related legislation makes strict compliance difficult, and often requires a certain amount of seasoned guesswork. It is, therefore, often necessary to enlist the assistance of specialized attorneys, well versed on internet related issues, to coordinate compliance efforts and respond to government agencies regarding specific laws. The main thing to remember is that identifying and comporting with industry specific internet regulations sooner, rather than later, is often enough to move the regulatory crosshairs off your company and onto a less nimble competitor.

Top Ten Internet Legal Mistakes-IP Loss

6. Failure to Protect Intellectual Property

Liability: As your company’s internet presence grows, so does its reliance on its “intellectual” property. Whether it is trademarks, customer lists, proprietary technology or patents, companies doing business on the internet depend on their intellectual property to maintain a competitive advantage in the marketplace. Unfortunately, many companies do not fully realize or protect the value associated with their intellectual property. Mismanagement can cause your company’s intellectual property to move into the public domain. Without intellectual property, your company’s competitive advantage, and even your entire business could disappear overnight.

Solution: Due diligence is the first step. Work with a patent attorney to determine what intellectual property your company has and collect the documentation regarding ownership. Many items, such as the design of a website, are owned by the developer. This may be true even if your company dictated the parameters of the website and fully paid the developer for the time involved in creating the site.

If your company discovers that some of its intellectual property has been improperly transferred, work with your lawyer to immediately execute and file the appropriate paperwork with the appropriate entities to attempt to secure rights which became lost, or which remained with the owner after the “transfer.” A well documented intellectual property portfolio allows easy analysis and access to intellectual property transfer documentation.

It is critical to incorporate intellectual property transfer procedures into your company’s standard policies. Most importantly, you should always have your lawyer draft and execute appropriate transfer documentation well in advance of any use of intellectual property received from outside your company. While drafting and executing proper intellectual property transfer documentation before the transfer is relatively painless and straightforward, trying to effectuate a legal transfer after the fact can be outrageously expensive and time consuming. That is the good news. Sometimes, the attempted transfer is so botched, or the intellectual property so mismanaged that it moves in to the public domain and no amount of time or money can ever put the genie back in the bottle again.

Top Ten Internet Legal Mistakes-Security

7. Security Breaches

Liability. There are only two types of companies doing business on the internet. There are those with security breaches and those that lie about it. Many companies cover up or bury their heads in the sand when it comes to internet security issues. Whether it is corporate espionage, theft of customer information or virtual vandalism security breaches are stealing money from your bottom line.

Often, lapses in internet security translate into damages many times the value of your entire company. Security breaches may arise from hackers, who do it for fun or profit. The most common security breaches, however, result internally from disgruntled or careless employees. Damages associated with information technology security breaches total over $1.5 trillion annually.

Solution. Obviously an online security policy suitable for a wholesale mattress manufacturer is not appropriate for an internet dating business. As the types of security breaches are as varied as the types of companies, you must carefully tailor your internet security policy to the particular type of company and website you own. Even if not legally required, a strict online security policy is essential for keeping your company online, in business and out of court. The scope and depth of your policy will also depend on the type of business you run.

Depending upon the relationship you have with your competition, it may be worth collaborating on security issues and keeping an open door policy with regard to breaches. If you notice unusual internet activity indicating an attempted security breach, it might be worth discussing the issue with your competitor to determine if they have experienced a similar problem and what they did to resolve the issue. Although the temptation may be great to use your competitor’s security issues inappropriately, the long term rewards you will reap from keeping the line of communication open will likely far outweigh any short term gain the security issue might provide.

The best advice, as always, is to seek out the advice of an experienced ecommerce attorney to assist you in drafting and implement an online security policy, tailored specifically to your business.

Top Ten Internet Legal Mistakes-Infringement

8. Intellectual Property Infringement

Liability: Lawsuits over intellectual property infringement can range from an injunction to a multi-million dollar judgment. Even if you succeed in court, the lawyer fees alone can be enough to bankrupt your company. With the average patent jury trial costing $1.5M per side in attorney fees, many internet reliant companies cannot even finance a lawsuit long enough to get their case before a jury. Unfortunately, once you run out of money, you lose.

Even if your internet infringement of someone else's patent, copyright, trademark, trade secret or trade dress only leads to your website being removed by court order, the results can be unpleasant. For a company that relies on the internet for a majority of its sales and communication, your company may not be able to survive long enough to see its internet sales recover. If your company becomes aware of an accusation of infringement and you fail to contact your lawyer immediately, the court may additionally award punitive damages and order the company to pay the intellectual property owner’s attorney fees as well.

Solution: The only way for small to medium sized online business to win this game is not to play. Do not infringe patents, trademarks, copyrights or trade secrets on your website. Make everyone in your company, especially those developing content for the internet, acutely aware of the proper use of trademarks, copyrighted material and patentable processes. You can help your employees and your website developers by working with a knowledgeable lawyer to adopt a detailed policy relating to the use and/or dissemination of intellectual property. It is critical that all intellectual property used on your website is owned by your company or properly licensed. No material should be assumed to be “freeware,” in the public domain or corporate property without detailed documentation to that effect.

As no policy or documentation can absolutely insure the provenance of intellectual property, every company must have a contingency procedure in place. Once an allegation of infringement is levied, time wasted in contacting your lawyer and determining the appropriate course of action can cause your liability to skyrocket. Informing your employees of the appropriate procedures in advance, can be the difference between simply removing the infringing material from the internet and having your company’s online operations brought to an abrupt halt.