This summer, our firm presented a free, four-part webinar series on hardening your small- to medium-sized business against litigation. Following is a recap of the third webinar in our summer series:
On July 27, litigation attorney Ray Panneton presented a webinar on how to protect and defend the ideas and information that give your business a competitive edge.
Trade Secrets vs. IP
Ray began by emphasizing the significance of intellectual property and trade secrets for businesses, referring to them as the “backbone of a company's operations.”
He distinguished between intellectual property and trade secrets: IP includes forward-facing elements such as logos, branding, trademarks, and slogans. Trade secrets encompass behind-the-scenes information on how a business operates, such as client lists, financial data, patents, formulas, and pricing strategies.
Protecting Intellectual Property: Copyrights
Copyright protection is governed by federal law and covers original works of authorship – such as books, paintings, computer programs, and blog posts – as soon as the work is fixed in a tangible form.
If copyright protection automatically applies when a work is created, why register it with the U.S. Copyright Office? A failure to register your copyright will affect your ability to fully enforce your rights.
Once a copyright is registered, you have the option to file a lawsuit seeking statutory damages, attorney’s fees, and costs for copyright infringement.
To register your copyright, you will need:
- Copyright registration form (the specific form necessary will depend on the type of work being registered);
- Filing fee; and
- A copy of the work being registered with the Copyright Office.
DMCA Takedown Notices
Even if you failed to register your work, there are still enforcement options available, the most potent being the Digital Millennium Copyright Act (“DMCA”)
Any entity or individual with a valid copyright claim can submit takedown requests to online service providers.
A DMCA takedown notice must include:
- A statement that you are (or authorized to act on behalf of) the copyright owner;
- Specific identification of the infringing material;
- Identification of the location of the infringing material on the website;
- Contact information;
- A statement that the use of the material is unauthorized; and
- A sworn statement that the information submitted is true and correct.
Once submitted, online platforms must take prompt action to either remove or disable access to infringing materials.
While the DMCA does not provide a damage model, it’s an effective tool to stop unauthorized reproduction of your work.
Protecting Intellectual Property: Trademarks
Trademarks are protected by both federal and state laws, with the possibility of registering with the U.S. Patent and Trademark Office (USPTO) for nationwide protection or the Texas Secretary of State for statewide protection.
According to the Texas Secretary of State, a trademark is:
- Something “used in connection with tangible goods or products”; and
- Defined by statute as “a word, name, symbol, or device, or any combination of those terms, used by a person to identify and distinguish the person’s goods from the goods manufactured or sold by another.”
Under Texas law, you do not have to register your mark as you do with copyrights to protect your rights, as Texas recognizes certain common law rights in this regard.
However, Texas does have a process to register your mark with the Secretary of State. Registration enhances your ability to enforce trademark rights and prevents others from using your brand name in Texas for the same class of goods or services.
The federal system of registering trademarks is like the Texas system in that you can register any mark which distinguishes your products. Federal trademarks are registered with the USPTO.
Federal trademark claims protect owners of a federally registered mark against the use of similar marks nationwide if such use is likely to result in consumer confusion or if the dilution of a famous mark is likely to occur.
Protecting Intellectual Property: Licensing Agreements
Once you have registered your copyright or trademark, you have the option to license this work to others.
Under a licensing agreement, you can allow a third-party to use your trademark or copyright in exchange for a fee. The agreement further clarifies that while a third party can use the work, they are not the owner of the mark.
Alternatively – especially in the world of content creation – you can craft a licensing agreement whereby you grant ownership of your work to a third party but retain a license to use your work in connection with your own business.
Protecting Intellectual Property: Infringement Enforcement
If someone infringes on your copyright or trademark, you have several options for legal action, depending on whether your IP is registered or not.
- DMCA Takedown Notices
- Federal suit for copyright infringement
- Federal suit for trademark infringement
- Texas State court action for common-law trademark infringement
Intellectual property that is registered as a copyright or trademark generally provides greater enforcement capabilities, including statutory damages in addition to actual damages.
Protecting Trade Secrets: Non-Compete Agreements
Texas law, as of today, upholds and enforces non-compete agreements.
To be enforceable, a non-compete agreement must:
- Be ancillary to an otherwise enforceable agreement, such as an employment agreement;
- Be reasonable in scope of activity;
- Be reasonable in geographic area; and
- Be reasonable in duration / time limits.
if your agreement is overly broad, a judge has the discretion to either:
- Redline your non-compete to make it enforceable; or
- Choose not to enforce your non-compete agreement.
Non-competes are not viewed by the courts as a punitive agreement, but rather as what is necessary to protect your legitimate business interests. As such, when enforcing a non-compete, you must articulate what the former employee knows that must be protected from disclosure.
Protecting Trade Secrets: Non-Solicitation Agreements
Non-solicitation agreements, commonly used alongside non-compete agreements, contractually prevent former employees from reaching out to customers, employees, or vendors to lure them away from the business.
Unlike non-competes, non-solicitation agreements don't require specific geographic limitations.
Side bar: Given the recent moves on the federal level to ban non-competes, we may see a trend toward putting stiffer non-solicitation agreements in place.
Protecting Trade Secrets: Texas Uniform Trade Secrets Act
Even without a non-solicitation or non-compete agreement in place, your trade secrets are still protected under Texas law.
Under the Texas Uniform Trade Secrets Act (TUTSA), a trade secret is defined as “information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers, that:
- Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
- is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
If an employee or former employee improperly uses or discloses your trade secrets, a lawsuit may be filed for the misappropriation of trade secrets.
Misappropriation occurs when a trade secret is improperly acquired, or the trade secret is disclosed without proper consent.
In assessing whether misappropriation occurred, courts will look at:
- The scope of the trade secret known outside of the business;
- The degree of knowledge possessed by others involved in the business, including employees;
- The measures taken by the business to keep the information a secret;
- The value of the information to the success of the business;
- The value of the information to competitors of the business;
- Time, money, and effort put into developing the trade secret; and
- How easy or difficult it may be for competitors to acquire or duplicate the protected information.
If a misappropriation occurred, you can seek injunctive relief and damages.
Ray concluded by emphasizing the importance of protecting and monetizing intellectual property effectively and encouraged businesses to register their IP to safeguard their rights and interests.
Ray also reminded viewers of the importance of having well-crafted contractual agreements in place – such as non-compete and non-solicitation agreements – to bolster the protection of trade secrets. Additionally, he stressed the need for proactive enforcement to demonstrate the economic value of trade secrets and maintain a favorable position in legal disputes.