Video Transcript

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Hi there, it’s Gary Schuster, your friendly neighborhood inventor, and welcome to Innovation Cafe. Today we’re going to have a little bit of a hard talk — and by hard, I mean lawyers make everything complicated. So I’m going to go over some definitions that will help you understand your lawyer and help you understand what you read about intellectual property and, in particular, intellectual property law. This isn’t legal advice, but you probably need this information to understand the legal advice your lawyer is going to give you.

I’m going to break this up into IP, which is this video, and separate ones for patents, copyright, trademark, and trade secrets. I’ll create playlists — you can watch them all at once if you want. Maybe get a meal if you’re going to do that, because there are a lot of definitions. Lawyers have certainly complicated intellectual property law.

Let’s turn to what you need to know about the basics. What is intellectual property? Well, IP for short, intellectual property is something that anybody can copy but for the government saying you can’t. So it’s not like physical property. If you steal my car, I don’t have a car anymore. But if you copy my book, I still have a book. You just also have a book. And intellectual property law says that’s not okay — you can’t just do that without permission.

Why does intellectual property matter? Well, it matters because if you were to spend a billion dollars developing a drug that cures a disease, and the day after you released it, anybody could just copy it and sell it, you would never spend a billion dollars developing a drug. Society needs to incentivize innovation. This concept goes back to the founding of the United States — it’s literally in the Constitution. Article I, Section 8 gives Congress the power to promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.

Now, there have been examples where inventors didn’t profit from their inventions other than reputationally. But for the most part, you’re not going to find drug companies spending a billion dollars to develop a drug and then just going, “Yeah, you know, public, use it. It’s all cool.” There does need to be a way to protect intellectual property.

What does intellectual property consist of? Intellectual property includes patents, and there are three main kinds: plant patents, which you probably are not going to run into much in your life; design patents, for ornamental designs; and utility patents, for things that have function. These are called by different names in other countries, but it’s the same concept for the most part.

Next up, trademarks. Trademarks are basically a designation of where the goods or services originated. So if you see a can on the shelf and it’s got the Coca-Cola logo, it should originate with Coca-Cola. And if someone is using that logo without permission, they’re violating the trademark. There are registered trademarks and unregistered trademarks. You don’t necessarily need to register a trademark to have some protection, but registration gives you a lot more power to enforce it.

Copyright is next. Copyright protects creative works — books, music, movies, photographs, code, artwork. It arises automatically when you create the work. You don’t have to register it, though registration helps if you need to enforce it. The duration of copyright is quite long — for works created today, it’s the life of the author plus 70 years.

And then trade secrets. A trade secret is information that derives value from being secret. The classic example is the formula for Coca-Cola. As long as you take reasonable steps to keep it secret, it’s protected. Unlike patents, trade secrets can last forever — but if someone independently discovers or reverse-engineers your secret, you have no recourse.

Now let’s get into some important terms that apply to all intellectual property. Probably the biggest one that you’re going to hear about is infringement. Infringement means using something illegally — essentially without permission. If I use a patented method to manufacture medication and I don’t have permission, that’s infringement. If I were to copy an album by your favorite artist and just not pay for it, that’s infringement. If I were to label all of my knockoff sodas with the Coca-Cola label, that’s infringement. Infringement is a synonym for: I took your intellectual property, I didn’t pay you for it, and now I’m using it.

Another thing to know about infringement is you don’t even have to be the one to do it to have some liability for it. Encouraging someone else to infringe can be contributory infringement. Typically, for federally controlled rights like patents, copyrights, and registered trademarks, the way you enforce it is you go to federal district court and you sue someone. That’s the normal route.

But what we’ve learned in recent decades is that there are alternative dispute resolution mechanisms. The most common one in IP is the International Trade Commission, or ITC. If someone is importing infringing goods into the United States, you can go to the ITC and have them blocked at the border. It’s faster than a district court case and can be very effective. There’s also arbitration, which is increasingly common in IP disputes, especially in licensing agreements.

Let’s talk about non-disclosure agreements, or NDAs. You’re going to encounter these all the time if you’re an inventor or creator. An NDA is a contract that says the parties agree to keep certain information confidential. They’re used in all kinds of contexts. People who’ve been harmed by a company can be prevented from saying that the company paid them in a settlement and how much. So it has a broad set of uses, but in the intellectual property context, it typically shows up in every patent transaction I’ve ever done — and that’s why I can’t give details about specific transactions. I have to talk in generalities.

It’ll show up when you’re talking about computer code, which is subject to copyright and might also be subject to patent. It’s less likely for trademarks because those are kind of by their nature public. But NDAs are used to keep things secret. Even the contents of a patent application, which is eventually going to be published to the world when the patent issues, can be subject to a non-disclosure agreement — although the NDA will always say, once the patent is issued or the application’s published, it no longer applies. It should say that. If it doesn’t, well, it should.

Now let’s talk about licensing and assignment. If you’re an inventor, you’re going to have too many inventions to build a company around each of them. It just doesn’t happen. If you’re a high-velocity inventor, you’re just not going to have the resources available to build a company around every one of your inventions. So there will be licensing.

A license can be split up in so many ways. You can make it an exclusive license, so no one else can do it or have it. You can make it non-exclusive — say, I’m going to license to 20 different companies, and they each have the right to do it. You can chop it up geographically — you have all the rights east of the Mississippi, I have the rights west of the Mississippi. It can even be limited to some uses. As an example, say I came up with a new antibiotic and I’m running a company that makes human treatments. Well, what am I going to do with the veterinary applications? I can license those to a veterinary pharmaceutical company separately.

An assignment is different from a license. An assignment is a transfer of ownership. When you assign a patent, you no longer own it. The new owner does. Assignments are common when companies acquire other companies or when an inventor sells their patent portfolio.

One more important concept: re-examination. This is a process where someone can challenge a patent’s validity at the patent office, even after the patent has been issued. It can be incredibly disruptive. I was involved in a transaction where we were licensing a patent, and the counterparty filed a re-examination request the next day. The deal fell apart. Ultimately, the re-exam went nowhere — the patent stayed intact, there were no modifications to the claims — but the window had already closed on the deal, and it ended up being an extremely costly error.

What should we have done? We should have had a non-disclosure agreement that said you don’t get to put us into re-exam or disclose to the patent office anything that we tell you that is not public information.

So those are sort of the big-picture intellectual property terms. I’m going to get into specifics — apologies in advance, the utility patent one is hyper-technical because they have all kinds of technical terms. I wish that lawyers would let us just conduct our business in English, and I say this as someone who’s gone to law school and has a license to practice law. We make it too hard for people. Thank you for watching, and I encourage you to check out the other videos. Going to do the patent one next, and then we’ll go from there. Thanks!