Oftentimes, this becomes an issue for a business because of the price at which the items are being sold (usually lower than the business would like) or possibly because of the bad reputation of the seller in question. Other times, it is a grey market situation where goods that were originally produced and sold in overseas markets make their way back to the United States.

The question my clients have is almost universally, “How do I stop this?” Generally speaking, the answer is that in the United States, it is either extremely difficult to stop it or you flat out cannot stop it at all, due to a theory of law called the Right of First Sale.

The Right of First Sale doctrine is recognized in both trademark and copyright law. Trademark law protects source identifiers of goods and services – basically brand names and logos. Copyright, on the other hand, protects creative works of authorship – books, movies, music, etc. While slightly different in the technical application, in copyright and trademark law the underlying theory is essentially that the owner of a branded item or creative work is entitled to control and receive compensation for the first sale of the product.

The first sale is just that, the first sale of the product – regardless if it is to a retail consumer or to a distributor/wholesaler. Therefore, authors are entitled to royalties only on the first sale of their book and not any subsequent resale of the book. On the basic level this makes sense and allows for a robust secondary market of used goods. Think of the pain it would be if you had to pay a royalty to J.K Rowling for selling a used copy of Harry Potter on Amazon, or if you sold your Specialized Shiv time trial bike on eBay.

However, the questions can get a bit more sticky when the seller isn’t unloading unwanted items, but is instead engaged in a commercial enterprise and the goods might be new instead of used. For example, what happens if due to market conditions a product is sold at a lower price in a foreign country than it is in the United States?

Depending on the price differential, there may be an arbitrage situation where a foreign purchaser can purchase the product in the foreign country and then turn around and sell it to American consumers for less than the domestic retail prices at a guaranteed profit. This very scenario came before the Supreme Court in the case of Kirstaeng v. John Wiley & Sons. In the case, a student named Kirstaeng from Thailand came to the United States to study at Cornell and U.S.C.

Since college is not cheap, the entrepreneurial student sought ways to defer his expenses. One thing he noticed was that textbooks were a lot cheaper in Thailand than they are in the United States, so Kirstaeng arranged to buy legal copies of popular textbooks in Thailand, import them here and resell them at a large profit – somewhere in the ballpark of $100,000.

The publisher, not liking this, sued and originally obtained a $600,000 judgment against Kirstaeng. The Supreme Court in a 6-3 decision overwhelmingly overturned the lower court decision. The Court also did something that it normally doesn’t do in copyright cases – it drew a clear line in the sand.

As long as the copyrighted works that were made overseas were done legitimately (not counterfeited), then the first sale doctrine applied and the copyright holder cannot ban their importation and sale in the United States. Similarly under trademark law, as long as a party is merely stocking and reselling the goods (no modification to the goods), then the first sale doctrine applies.

So what is a business owner to do? There are a few different things to try to minimize the impact. The first would be to take a look at your pricing structure. Are there any markets in which you might be at risk for an arbitrage situation? In theory, exchange rates should equal out prices, but sometimes distortions do occur.

Don’t just look at foreign markets, because these situations can happen in domestic markets as well. An example would be a pricing decision concerning a large clearance sale. Could a savvy party buy a large amount of clearance items and then resell them on eBay? Careful pricing and quantity limit strategies can help eliminate this risk.

Additionally, if you sell your products through authorized distributors that you have contractual agreements with, you can add language that prevents the distributor from selling the products back into the United States, or allows you to revoke their distributorship if they violate lot size restrictions or if they knowingly sell to customers that intend to export the products back into the United States. While these strategies are not foolproof, they are the best tools that companies have to combat these sorts of situations.

At first glance, the popular answer may be “Absolutely nothing.” But those three seemingly unrelated topics might actually have a profound effect on your business and the quality of your intellectual property legal representation.

Peter writes a bimonthly column for ColoradoBiz Magazine

Yahoo made some waves last month by issuing an edict that it was discontinuing its telecommuting program.  While many in the techno press panned the decision as backward thinking, Yahoo’s rationale is actually quite interesting.  Yahoo’s reasoning was not based on efficiency, productivity or employee morale, it was based on innovation.

Yes, innovation—that magical moment sparked by conversations and personal interaction at the vending machine, water cooler and even in the restroom.  While some studies have shown an increase in worker productivity through the use of telecommuting, studies by Google and Isaac Kohane of Harvard Medical School have shown that people who work in close proximity create a positive impact on a company’s business, including innovation.  Therefore, telecommuting may work for those who perform repetitive routine tasks as their productivity may increase, but it may not be so effective for employees whose jobs rely on collaboration with other individuals.

For example, telecommuting may work well for telemarketers, call centers, help desks, etc., but probably will not work well for people in product development or other strategic departments.  While individual employees may feel that their performance or efficiency increases through telecommuting, the performance of the company as a whole may actually decrease.

Effect of Face-to-Face Interaction on Innovation

So what does this have to do with the delivery of legal services, and in particular legal services pertaining to intellectual property?  Intellectual property is different from a lot of other areas of the law in that it is based mainly on federal statutes.  Most other areas of law are primarily based on state law.  State unauthorized practice of law rules generally limit the possible pool of attorneys that can represent a particular client.  If a lawsuit is filed in Colorado state court, for instance, it can only be tried by attorneys that are admitted to the Colorado Bar.

Because most intellectual property cases are based on federal laws, they are considered a nationwide practice.  Thus, an attorney in New York can represent a client in San Francisco for IP matters.  This fact has created many “firms” that advertise on a nationwide basis.  Oftentimes these firms offer cut rates and rely on a high-volume business model that offers only limited contact over email or the phone.

While we are big believers in technology and frequently employ it with our clients that live out of state or in remote parts of Colorado, nothing beats good old face-to-face interaction.  The spontaneous conversations that happen often lead to insights that help us represent our clients better.  Sometimes it’s the ability to manipulate and play with a prototype with the inventor present; other times it’s sitting down and listening to a few tracks of a musician’s CD, or even visiting a client’s business to understand their processes and how they do what they do.  Unfortunately, many times these intangibles cannot be communicated in a phone call, email or even over Skype.

Recently, I was watching a local program on PBS that featured representatives from local wine and spirits companies.  They were commenting on how consumers in Colorado really get into the “buy locally” concept.  A representative from Shanahan’s Whiskey recounts seeing consumers pulling out bottle after bottle in a liquor store looking for one that was bottled by a specific individual or bottled while listening to specific bands.

If people take such care in buying whiskey, why not take the same care in choosing a law firm to protect some of your companies most valuable assets?  The plain and simple truth is that while technology is great, it simply cannot replace actual human interactions.  Virtual law firms and out of state high volume legal service “mills” can offer a lower price point; however, they cannot offer the quality of representation that one gets when you meet face to face, and the client learns about the firm, and even more importantly, the firm learns the ins and outs of its client’s intellectual property.

While technology is a wonderful tool, there are some things it cannot replace:  The chance meeting at the water cooler that sparks a revolutionary idea, the impression left by someone’s office space, or the sweet sound of a note being played through an all tube guitar amp.  Some things just still need to be done the low tech way.

• “Can I patent an improvement to a device that is already available?”
• “Is it correct that in order for something to be patentable, it has to be at least 10 percent different than the known device from which it is derived?”
• “Can I get a patent on something that is already on the market, but I am using it in a new manner?”

The scope and breadth of what is patentable is very broad and wide. Chances are if your invention is useful, new (also referred to as “novel”) and not obvious, it is patentable.

Patents protect the rights of inventors to exclude others from making, using, offering for sale, or selling their invention throughout the United States or importing it for a specific period of time. Most people know this. But ask the same people what an invention is, and more often than not, the response will be much more narrow than is actually the case.

The prototypical invention is a completely new widget, tool or device that does something or accomplishes a task better (faster, easier or cheaper) than whatever was done before. In popular imagination, the likes of Thomas Edison remain the prototypical inventor: a person sitting in his lab, garage or workshop dreaming up ways to solve the world’s problems. Factually, however, the prototypical invention and the prototypical inventor are the exception rather than the rule.

Given the foregoing, perhaps the next question is: “What exactly is considered an ‘invention’?” You would think that this would be an easy inquiry to answer, but that would be wrong.

At its broadest according to Merriam-Webster, an invention is “something invented,” which requires us to look up the meaning of the verb “invent,” which is “to produce (as something useful) for the first time through the use of ingenious thinking and experiment.”

Putting this together, an invention is something new and useful invented by a person, and it can be anything from a new drug to a new medical device to a gardening tool to a manufacturing process to a musical composition. In other words, an invention may improve upon or create a new process, machine, device, product, result, function, discovery, art object—or even a genetically modified plant. Often times companies overlook patent protection because they do not consider the item or process an “invention.”

For example, even if the ultimate product is not patentable, the specific process, tool or machine that you use to make it is. If that process, tool or machine yields a product or result that is faster, cheaper or better than patenting the process, tool or machine may have enormous value to your company as you can prevent others from doing the same thing. This can give companies a competitive advantage in the marketplace, especially in mature industries.

If you think your invention is patentable, by all means protect it. Consult an attorney. The next step is to obtain a U.S. patent for your invention, which is the granting of a property right to the inventor(s), issued by the U.S. Patent and Trademark Office. Contrary to popular belief, new patents are issued all the time to ordinary people, just like you, with not-so-ordinary ideas.

The Child Online Privacy Protection Act (“COPPA”) was passed in 1998. The purpose of the bill was to regulate how online businesses collected and used personal information of children under age 13. The act sets forth requirements for what must be disclosed in privacy policies and mandates that covered businesses seek verified consent from parents prior to obtaining any information from children under 13 years of age.

Originally, the act applied to commercial content providers that focused primarily on delivering  content to children. Therefore, the “Dora The Explorer” website would have to adhere to COPPA, but Facebook, which requires its members to be at least 18, does not. This distinction made determining whether a company was subject to the COPPA regulations relatively easy. Additionally, to add a bit of extra clarity, many companies include a statement in their Terms of Service or Privacy policy that their website is not intended to be used by those under 13. By and large, that would make sure that a company was not subject to COPPA.

In December the FTC announced final regulations that will go into effect on July 1, 2013 that will exponentially expand the reach of COPPA in terms of who and what technologies will be subject to the regulations. The regulations no longer apply just to content providers that derive significant portions of their revenue from providing content to children, but apply if the content is directed at children under 13, regardless if it is 100 percent of the content or just a portion of the content made available by the provider.

In determining whether the content is directed at children, the FTC will look to the subject matter, visual content, use of animated characters, child oriented activities or incentives, the nature of any audio content and other “kid-centered” characteristics.  Furthermore, the FTC will also look at empirical evidence regarding the composition of the actual audience for the material (thereby creating the possibility that a content provider may be inadvertently subject to COPPA just because many under 13-year-olds visit the site, even though the site provider never intended the content to be “directed” to children). Companies can be subject to COPPA even if a small fraction of their overall content is directed at children.

The FTC also broadened the scope of technology that falls under COPPA. Under the new regulations websites, parts of websites and even cell phone and tablet apps are covered under COPPA. The FTC also greatly broadened the definition of what constitutes “personal information,” which triggers an operator’s obligation to first obtain verified parental consent.

Back in the good old days, personal information was pretty much confined to the basics: name, date of birth, social security number, address, etc. Now any data that could be reasonably used to reveal the identity of the child is covered by COPPA, as long as it is not collected and maintained purely for the operation and maintenance of the website.  Basically this covers widely used tracking tools such as cookies, javascript tags, flash cookies and beacons. Additionally, in the cell phone app world, this would mean device IDs and other persistent identifiers. This can have major implications for ad-brokers, ad-networks, social networks and any other company that shares data with third party services.

If a content provider is subject to COPPA, the provider must obtain verified parental consent prior to collecting personal information from anyone under the age of 13. The new regulations include many new technological options, such as scanned signed consent forms, video-conferencing, or sending an email requesting consent with a delayed confirmation of the consent sent to the parent. As one can see, none of these methods are particularly painless, and they require substantial investment and forethought by the content provider.

In the next six months, it will be important for business owners to take stock of the electronic content they are producing and whether that content may subject them to the new COPPA laws. The federal government has been ramping up COPPA law enforcement in recent years. Companies such as Ms. Fields Cookies, Hershey, and Girls Life, Inc. have been slapped with COPPA enforcement actions. UMC Recordings, Inc. was fined $400,000 for COPPA violations in connection with a website that promoted then 13-year-old music star Lil’ Romeo.  As silly as it sounds, under the law Lil’ Romeo had to get his parents’ permission before signing up for his own website.

With the broadening of the regulations, expect enforcement actions to continue and most likely exponentially increase in the years to come. Make sure your company isn’t added to the ever growing list of companies that were bitten by that little known law called COPPA.

In 2011, Congress passed the America Invents Act (AIA), with the provisions of the act to be amended over time.  The most significant provision takes effect on March 16, switching the U.S. patent system from a first to invent paradigm to a first to file paradigm. This change brings U.S. patent laws in this regard in line with those of almost every other industrialized nation.

Under the old paradigm, the pertinent consideration in awarding a patent to one person over another was when the inventor first conceived of his or her invention. Conception of an invention occurs the first time an inventor mentally envisions the invention: in other words, the “ah ha” moment. At this moment, the inventor might not know exactly how the invention will work or be implemented, but the invention is formulated in her mind to a sufficient degree. It is considered a sufficient degree if the details of the invention can be disclosed to someone of at least average skill in the particular field to which the invention pertains, and this person could, through the development process, make or implement the invention.

After conception, an inventor is required to reduce the invention to practice. This can be accomplished in one of two ways: by actually making or implementing the invention or by filing a patent application. Providing the inventor is diligent in developing the invention from conception through reduction to practice and files a patent application, she will be awarded a patent over co-pending applications by inventors who later conceived of a similar invention. The foregoing is the case even if the other inventors actually filed a patent application first.

All this changes on March 16, when only the inventor who first files a patent application on a particular invention will be eligible for a patent. If you file your application on March 17, it will not matter at all that you have been working on the invention diligently for years. Rather, someone else who first conceived of the same invention independently of you only a month ago, but files a patent application before you on March 16, will be awarded the patent.

The new first to file paradigm will change the inventing process in the United States. For instance, in my firm’s practice, we will be recommending that clients file patent applications sooner rather than later, even if there are a few bugs to be worked out in a particular invention. In the past we often recommended the inventor perfect his invention before filing, since the filing date was not wholly determinative of patent priority. If the invention changes after the application is filed, an additional sibling application can be filed to incorporate any new or different features. Inventors will also be encouraged to more quickly reduce an invention to practice, compressing development times as much as possible.

For smaller companies and independent inventors, the new paradigm may prove more costly, requiring more resources to be expended on development and requiring filing of additional patent applications as a new product morphs into a final design during development. Certainly, these changes favor larger entities with substantial product development and legal budgets.  However, large companies are also often bureaucratic in nature and take longer than they should to accomplish even the most sensible tasks, so their new-found advantage may not be fully realized.

Nevertheless, this column is a call to action for any company or individual that has a product or process that they have been developing for some time to consider filing a patent application on the invention before March 16, thereby preserving first to invent status for the invention.

As the lead times in drafting a patent application can be significant, the sooner you discuss your situation with a competent patent attorney the better. Filing before March 16 instead of after could make all the difference in whether you can ultimately receive patent protection.

Apparel companies are a good example of where two different theories of intellectual property protection come together and, to some extent, overlap. When applied to an apparel company, the two main forms of protection we are talking about are trademarks and copyrights.

While design patents may be applicable, the practical considerations of time and cost usually rule them out for fashion-oriented clothing; they cost too much and take too long to gain the protection. In the case of the graphic T-shirt, the graphical design that is applied to the T-shirt is protectable under copyright law as two-dimensional artwork. Therefore, another T-shirt company cannot copy the graphical design or, with knowledge of someone else’s design, create something that is substantially similar.

On the other hand, decorative elements such as the three stripes that appear on Adidas shoes are protectable trade dress and as in the Payless case, shoes with two or four similar stripes are considered to infringe Adidas’s trademark rights. In each of these instances, it is important to note that the design of the clothes themselves is not protectable, only the aesthetic design elements that are added to the clothing.

Producers of high-end designer clothing have a bit more of a challenge when it comes to protecting their products. In these sorts of situations, the actual design of the clothes is most often the desired aspect of the product. The tough thing for the designers is that these features are not currently protectable under any theory of law in the United States.

This is why you can go to your local discount clothing retailer and buy designer “knock offs.” In the recent case of Jovani Fashion, Ltd. v. Fiesta Fashions, the 2nd Circuit Court of Appeals upheld this concept by stating the it is well settled that articles of clothing are considered “useful articles” and are not protected by the copyright act and that design elements may have protection under copyright law only in the situation where the elements are 1) physically severable or 2) conceptually severable from the clothing itself.

The case involved a fight surrounding the design of prom dresses. Specifically, Jovani claimed that Fiesta illegally copied Jovani’s design for a prom gown that had an “arrangement of decorative sequins and crystals on the dress bodice; horizontal satin ruching at the dress waist ,and layers of tulle on the skirt.”

While I am not exactly sure what ruching or tulle are, they don’t seem to be a stand-alone product that you can remove and sell by themselves. Furthermore the adornment of the clothing with these features doesn’t seem to transform the concept of the gown into something altogether different; it’s still a gown, now it just has ruching and tulle.

So what would satisfy the courts requirements? In the case, the court cites Halloween costumes for one, although I would probably guess that most of Cee Lo Green’s outfits would also qualify.

So what does all of this mean for clothing and apparel companies out there? If you make Halloween costumes you should be pretty pleased with the decision because you can copyright your costume designs and sue infringers to your heart’s content.  Likewise, manufactures of articles such as T-shirts, hoodies and other clothes that incorporate printed graphical designs – those graphical designs are copyrightable and you would be wise to get registrations on all of your designs.

If you make clothing that won’t change over time and isn’t really based on yearly trends (think Levi Jeans), then design patents may be an interesting route to protect the aesthetic look of your clothes. To those that are looking to get into high fashion, some thoughtful planning on how you are going to insulate yourself from the knock-off issue is probably in order.

One solution might be to have a business operation that isn’t directly affiliated with your high-end line that sells lower priced knock-offs. That will allow you to capture both market segments and hopefully avoid the issue of someone else profiting off of your hard work.

Of course, there are always calls to amend the copyright laws to allow for the protection of clothing designs and legislation to do that is introduced every year. Ultimately, these bills fail because when you start to get into it these issues, they are complex. For example, could a company copyright something like the butterfly collar and essentially have a monopoly on it for 95 years?

Although the chance of getting something through Congress is probably pretty small, apparel companies would be wise to keep a watchful eye on what is going on in Washington. It could change the nature of your business overnight.

Has a trademark taken Tebowing off the table?

The short answer: No. Neither Tim Tebow nor any business entity with which he is involved owns a trademark on his signature move.

Interestingly, headlines just a week or so ago may have indicated otherwise. The opening line of the widely carried AP story reads, “Dropping to a knee like Tim Tebow might cost you now.” And an article on Yahoo Sports proclaimed, “We can argue that the intention of prayer shouldn’t be a copyrighted exercise, but Tebow’s legal and business acolytes would clearly disagree.” That particular author went on to write, “Genuine gesture or patent offense? The latter, we suppose.”

This kind of misreporting as it pertains to trademark law frustrates intellectual property attorneys, though maybe it shouldn’t. So long as lay people don’t understand intellectual property law and don’t know the difference between trademarks, patents and copyrights, my job is safe. And having a safe job in this economy is nothing to scoff at.

However, let’s set the record straight.

Tim Tebow’s marketing company XV Enterprises LLC, filed a number of trademark applications last year to protect use of the word, “Tebowing” to identify a number of products.  The application pertaining to the use of the mark to identify hats, shirts and t-shirts has been approved by the United States Trademark Office, and barring some unforeseen event, should issue in the next month or two. Once issued, selling t-shirts under the Tebowing name by anyone but Tebow himself will be infringement of a federally registered trademark.

Trademarks protect words and logos, often referred to as brand names, used to identify a product or a commercial service. They exist to prevent unscrupulous parties from trading off on the goodwill associated with a particular product or service as developed by another company.   Imagine if there were no trademarks and every soft drink company was able to call their cola, Coco Cola, and package it in the same manner as the real thing. When you went to buy a Coke, you wouldn’t be able to ascertain whether or not the cola on the shelf was the drink you know and love or some foul tasting knock off. Thankfully, because of trademarks, when you want a Coke and you buy a Coke, you can rest assured that it is a Coke.

Trademarks do not and cannot lock up the rights to non-commercial expression. They can’t prevent someone from selling a particular product or offering a particular service. They can only prevent people from using a particular name or logo to identify a product or service. Copyrights on the other hand can protect expression, but only an expression that is fixed in a tangible medium.

The act of Tebowing is not fixed in a tangible medium just as your strumming of Stairway to Heaven as you attempted to play the guitar so many years ago was not an infringement of Led Zepplin’s copyright. The act of Tebowing isn’t protectable by patent either, which requires a patentable method to be useful and have a tangible non-abstract result. While those partaking in Tebowing might take exception to any determination that the act is not useful, patent law is interpreted in relation to our physical existence and not benefits received or felt ethereally.

The moral of the story?  When you buy that Tebowing baseball cap, you can rest assured it’s backed by the original Tebower himself. And if this makes you want to fall down on one knee in prayer, feel free, because no one is going to stop you.

One of the battles employment attorneys constantly struggle with is raising
awareness about the consequences of misclassifying workers that are technically
employees as independent contractors. While these attorneys are concerned about
possible penalties from the government or lawsuits from employees, IP attorneys
are concerned with a possibly more serious issue – who owns potential “crown
jewel” assets of the company.

At the start, it may seem simple and less costly to hire someone as an
independent contractor. Classifying someone as an independent contractor versus
an employee is enticing to small employers in particular, as the company is not
responsible for paying the employers’ share of Social Security taxes, state and
local payroll taxes, unemployment, overtime and potentially offering the
workers benefits equal to the company’s other “employees.” However,
misclassification of employees is costly and not necessarily reserved for small
employers: Time Warner, Microsoft and FedEX have all paid millions, if not
hundreds of millions, due to incorrectly labeling workers as independent contractors.

As if potential fines and damages are not compelling reasons to pay
attention to this issue, there could also be catastrophic effects on a
company’s intellectual property rights. We’ve discussed (in a previous column)
the issues a company can face when they have another company create or develop
creative works on behalf of the company (logos, website content and design, and
source code for software developed for the company are examples).

These same issues are present when a company labels a worker as an
independent contractor versus an employee. Under copyright law, when an
employee creates a creative work in the course of their employment, the
employer is automatically considered the author of the work and holds the
rights to the work.

The opposite is true if an independent contractor created the works, that
is, the independent contractor is the author and holds the rights to the works.
Furthermore, the rights can only be transferred by a written assignment
document signed by both parties. If the independent contractor agreement
between the company and worker (assuming a written agreement exists) does not
contain provisions assigning the ownership of the copyrights to works created
by the worker, the company is most likely out of luck. Additionally, even if
the worker is clearly an employee under the law, the company will most likely
be estopped from arguing that the worker is anything other than an independent
contractor.

This can be of serious consequence for a company that treats workers that
probably should be employees as independent contractors, especially when the
workers are responsible for creating intellectual property that is protected
under copyright law, such as computer software or the copyrights to the
company’s logo. A decision to save a few bucks on taxes could very well mean
that a company is not the owner of key technology that its business is based
upon or potentially worse — in certain situations the contractor may be able to
license the works to the company’s competitors.

None of this confusion or potential loss of valuable intellectual property
need ever happen, of course. Have this conversation internally and with a
well-versed IP attorney at the start of hiring and staffing; revisit it when
replacing personnel, particularly creative personnel.

Time Warner’s and Microsoft’s experiences illustrate that the time-worn
adage remains true: An ounce of prevention and all that.

Peter Lemire is a founding member of the
intellectual property law boutique, Leyendecker & Lemire. Leyendecker &
Lemire specialize in patents, trademarks and related complex civil litigation.
Peter Lemire can be reached directly at 303.768.0641 or peter@coloradoiplaw.com. Visit www.coloradoiplaw.com for further information.

That phrase has expanded, in the wake of businesses turning to Facebook and YouTube and in the development and use of better consumer digital cameras and video. That new and improved phrase is this: “User-generated content is king.” Soliciting user-generated content (UGC) is often an attractive marketing strategy: It engages customers and cultivates much-desired online content for a business all at the same time.

Some companies have come to regret that marketing move, however, as users who generate content are bringing suit when their material appears in future advertising, marketing or other company collateral, as McDonalds recently found out.

In the McDonald’s case, the wheels were set in motion in 2008 when McDonald’s hosted a “Big Mac Chant” contest on MySpace. Contestants created videos of their chants and uploaded them to the website. One participant, Daniel Calden uploaded a video of him in sunglasses with a sock puppet singing “Big Mac. Big Mac. Big Mac.  Everybody wants to eat a Big Mac.” Nothing came from the entry, although a few days after it was submitted it was removed, and Mr. Calden’s inquiries with McDonald’s and their marketing firm went unanswered.

A year later, McDonald’s launched a commercial involving a fish mounted on a wall singing to a man about wanting a Filet-o Fish sandwich. Three years later, Calden filed suit against McDonald’s and their marketing company for theft of intellectual property, breach of the contest contract, copyright infringement and a host of other theories. (Interestingly, the statute of limitations on a copyright infringement case is three years.) McDonald’s fired back with a motion to dismiss the claims, citing among other reasons, that the works are not similar in the least except that both works contained men, non-human characters, and music about McDonald’s sandwiches.

Probably the McDonald’s case is one where the plaintiff is fishing for a settlement.  However, it serves as a good example of the perils of soliciting UGC. No doubt McDonalds crafted their contest contract in a careful manner, which will definitely help them in the case, however even careful drafting might not prevent a business from being sued. While wanting to be involved with customers on a more interactive basis is an admirable objective, business owners must remember that generally people are passionate about their creations and creative works. They can and often do get very possessive and angry if they feel they have been taken advantage of – even if they assigned their rights to the company in the contest rules. Something that might make good business sense to a marketing professional may leave a customer feeling cheated, taken advantage of, or betrayed.

The worlds of contests and UGC also have a lot of legal issues associated with them.  Contests are subject to state gaming laws and can potentially lead to serious liability for illegal gambling if not structured correctly. Additionally, a business will want to make sure that it owns any UCG submitted and that the contestant is not entitled to any additional compensation other than what is provided for in the contest rules – even if they are not the contest winner.

These contracts need to be tightly drafted. Otherwise a company could wake up with a much-enlarged audience resulting from an online initiative, but simultaneously be subject to not just intellectual property violations, but illegal gaming issues as well.

“Content is King,” still applies, but care and caution could help a company’s online efforts from also becoming costly.

Peter Lemire is a founding member of the intellectual property law boutique, Leyendecker & Lemire. Leyendecker & Lemire specialize in patents, trademarks and related complex civil litigation. Peter Lemire can be reached directly at 303.768.0641 or peter@coloradoiplaw.com. Visit www.coloradoiplaw.com for further information, including Leyendecker & Lemire’s weekly blog, “Control, Protect & Leverage.” 

Lawyers can get a bad rap for shark-ism and sometimes, that’s fair. In this case, however, the pain is shared across the board, by both the lawyers and the clients. No one, including a hard-working and ethical attorney, likes seeing people have to spend blood, time and money on heartbreak and angst that is fairly easy and cheap to avoid.

Our firm has been involved in a number of litigations that were very costly to our clients, but which could have been avoided. For the most part, those costs could have been side-stepped if the clients had engaged an IP attorney to help them set up intellectual property policies and procedures; properly protect the intellectual property (IP); and clearly define ownership.

Human nature being what it is and cash always being tight in a young growing company, non-essential tasks and expenditures are often put off as more pressing fires are fought. This short-sightedness, however, can come back to haunt. It can be painful to witness.

The math is simple: An IP attorney review of website content may cost up to $1000, depending on its size. However, if one or more third-party photos are found on the site, an expensive five- or six-figure copyright infringement settlement could be immediately eliminated.

Moreover, seeking the blessing of an IP attorney and filing for trademark registration before settling on a brand for a new product or service might set an enterprise back less than a couple thousand dollars, but could save hundreds of thousands of dollars in litigation when, for example, a well-heeled competitor decides the brand is too close to one of theirs.

Registering copyrights for important materials and images typically cost a few hundred dollars each. It’s money well spent. Doing so can deter competitors from copying all or in part of the fruits of a business’ hard work and expenditures. Infringement could cost $150,000 per instance in statutory damages.

A business that institutes and follows a trade secrets policy that includes non-compete agreements with key employees might cost a few grand, all said and done. However, instituting a trade-secrets policy could prevent employees from being able to take specific knowledge learned while employed to a competitor. Not doing so, can cause a business to lose a competitive advantage worth hundreds of thousands if not millions of dollars over time.

Having clear and concise intellectual property clauses drafted for use in contracts with third party contractors sets an organization back a few saw bucks. Alternatively, the matter often ends up in federal court as the business and the contractor both claim ownership to a valuable piece of IP. If lucky, the experience will settle before trial and a company may only be out a $100,000 or so.

Many a wise business owner understands these warnings, but immediate demands call out.  The phone rings or a colleague comes into the office, or a deliverable needs immediate attention. Several years later, a complaint and the prospect of spending hundreds of thousands of dollars defending the company in court presents itself.

Sometimes an ounce of prevention truly is world’s better than a cure. No one likes to watch money eaten up after-the-fact on avoidable circumstances. IP protective measures can and often are an easy and preventative business strategy — and the truth is that everyone, including good lawyers, feel better about that.