From Internet Law and Business Handbook
by J. Dianne Brinson and Mark F.
While copyright law is the most important intellectual property law for the Internet,
you need to know enough about patent, trademark, and trade secret law to avoid infringing
intellectual property rights owned by others and to be able to take advantage of
the protection provided by these laws. These three intellectual property laws are
discussed in this chapter.
In chapter 26, we discuss ways in which you can use these three laws and copyright
law to protect your own material. Ownership of intellectual property is discussed
in chapter 3. Choosing product names is covered in chapter 15.
Patent law in the United States is based on a federal statute, the Patent Act. States
are prohibited from granting protection similar to that provided by the Patent Act.
Types of Works Protected
Patent law protects inventions (utility patents) and ornamental designs for articles
of manufacture (design patents).
Inventions protected by utility patents include any new and useful process, machine,
manufacture, or composition of matter. Inventions can be electrical, mechanical,
or chemical in nature. Examples of inventions protected by utility patents are a
microwave oven, genetically engineered bacteria for cleaning up oil spills, a computerized
method of running cash management accounts, and a method for curing rubber.
Internet-related inventions protected by utility patents include communications
protocols, data compression techniques, interfaces, networking methods, encryption
techniques, interfaces, online payment systems, and information processing and retrieval
technologies. In the area of e-commerce, patentable inventions and processes include
electronic postage, electronic cash, and e-commerce business methods (discussed
later in this chapter).
Examples of manufactured articles protected by design patents are a design for the
sole of running shoes, a design for sterling silver tableware, and a design for
a water fountain.
There are strict requirements for granting utility patents and design patents. We'll
discuss the requirements in this section.
To qualify for a design patent, a design must be new, original, and ornamental.
Design patents are generally not suitable for protecting elements of Internet-related
software processes. Design patents are considered rather narrow intellectual property
protection because they are limited to the ornamental appearance of an article.
Owners of design patents rarely sue to enforce their patents against infringers.
To qualify for a utility patent, an invention must be new, useful, and "nonobvious."
To meet the novelty requirement, the invention must not have been known or used
by others in this country before the applicant invented it, and it also must not
have been patented or described in a printed publication in the U.S. or a foreign
country before the applicant invented it. The philosophy behind the novelty requirement
is that a patent is issued in exchange for the inventor's disclosure to the public
of the details of his invention. If the inventor's work is not novel, the inventor
is not adding to the public knowledge, so the inventor should not be granted a patent.
Meeting the useful requirement is easy for most inventions. An invention is useful
if it can be applied to some beneficial use in society.
To meet the nonobvious requirement, the invention must be sufficiently different
from existing technology and knowledge so that, at the time the invention was made,
the invention as a whole would not have been obvious to a person having ordinary
skill in that field. This requirement makes sure patents are only granted for real
advances, not for mere technical tinkering or modifications of existing inventions
by skilled technicians.
First to Invent or First to Apply?
Who gets the patent if two inventors, working independently of each other, achieve
patentable results around the same time? In the United States, the patent goes to
the first person who invented the claimed subject matter (even if the first to invent
was not the first to file a patent application). Only the U.S. and the Philippines
have a first-to-invent system. In other countries, the first person who files a
patent application gets the patent, even if he or she is not the first to invent
the claimed subject matter.
It is difficult to obtain a utility patent. Even if the invention or process meets
the requirements of novelty, utility, and nonobviousness, a patent will not be granted
if the invention was patented or described in a printed publication in the U.S.
or a foreign country more than one year before the application date, or if the invention
was in public use or on sale in the U.S. for more than one year before the application
date. This rule is known as the "statutory bar." If you think your technology might
be patentable, you should contact a patent attorney before you display or distribute
your invention. The one-year grace period following disclosure of the invention
is available only in the U.S. In most other countries, the patent application must
be filed prior to any public disclosure of the invention.
"Printed Publications" on the Internet
In applying the statutory bar rule, material is considered a "printed publication"
if it has been sufficiently accessible to that portion of the public interested
in the particular field. Presumably, material made available on the Internet could
count as a "printed publication." Contact a patent attorney before publishing information
about potentially patentable material on the Web.
Abstract ideas and mental conceptions are not patentable. Discoveries of scientific
principles, laws of nature, and natural phenomena are not patentable (although applications
of such discoveries are). Mathematical algorithms that have not been reduced to
some type of practical application have been held to be unpatentable. However, a
claim to a system or method that recites a mathematical algorithm and produces "a
useful, concrete and tangible result" may be patentable. State Street Bank &
Trust Co. v. Signature Financial Group, 149 F3d 1368 (Fed Cir 1998), cert.
denied, 525 US 1093 (1999). The software process involved in the State Street
Bank case was used by a computer system to recompute the share prices
of a pool of mutual funds after each day's trading activities ended, taking into
account the day's gains and losses and expenses attributable to each mutual fund.
The final share prices were the "useful, concrete, and tangible result."
Until recently, methods of transacting business were thought not to be patentable.
However, in the State Street Bank case, the court made it clear that systems
or methods which implement business methods are patentable if they meet the requirements
of novelty, usefulness, and nonobviousness.
You've probably read about new patents being issued for Internet-related methods
of doing business. Here are a few:
- CyberGold's patent for a method that rewards customers who receive online ads
- Netcentives' patent for rewarding online purchasers with airline frequent-flyer
- Priceline.com's patent for reverse auctions
- Open Market's patents related to secure online credit-card payments
- Amazon.com's patents on "one-click" technology and affiliate programs
Some people think that business methods should not be patentable. In the State
Street Bank case, the Court of Appeals for the Federal Circuit, which reviews
all patent appeals, held that processes which are otherwise patentable subject matter
are not rendered unpatentable because they involve business methods. The Supreme
Court, by denying certiorari, declined to review the position taken by the
Court of Appeals. Unless Congress amends the Patent Act, processes involving business
methods are patentable. However, they must meet the stringent requirements for patent
protection discussed earlier in this section. The Patent and Trademark Office is
now subjecting business methods patents to a second-level review.
Procedure for Getting Protection
Patent protection is obtained by demonstrating in an application filed with the
U.S. Patent and Trademark Office, www.uspto.gov, that the invention meets the stringent
standards for grant of a patent. The patent application process is an expensive,
time-consuming process (it generally takes at least two years). Although you can
file a patent application yourself, the application process is complex. You should
consider using an experienced patent attorney or patent agent (a nonlawyer who has
passed the special patent bar exam given by the U.S. Patent and Trademark Office).
If you want to be able to claim "patent pending" status without undertaking the
expense and paperwork involved in a regular patent application, consider filing
a "provisional patent application" (PPA). A PPA remains in effect for one year.
The PPA filing date can be used to prove that the invention described in the PPA
document predates other inventions in the field.
A patent owner has the right to exclude others from making, using, selling, offering
to sell, or importing the patented invention or design in the United States during
the term of the patent. Anyone who makes, uses, sells, offers to sell, or imports
a patented invention or design within the United States during the term of the patent
without permission from the patent owner is an infringer—even if he or she did not
copy the patented invention or design or even know about it.
EXAMPLE / Developer's staff members, working
on their own, developed software for manipulating images in multimedia works. Although
Developer's staff didn't know it, Inventor has a patent on that method of image
manipulation. Developer's use of the software infringes Inventor's patent.
Under current law (effective June 8, 1995), utility patents are granted for a period
of twenty years from the date the patent application was filed.
EXAMPLE / Amazon.com, Inc. was issued a patent
on its affiliates program on February 22, 2000. The patent application was filed
on June 27, 1997. The patent will expire in June 2017.
Under prior law, patent protection lasted seventeen years from the date the patent
was issued. Under the current law, if a patent application is pending for longer
than three years, the patent's term can be extended to give the applicant seventeen
years to enjoy the patent.
EXAMPLE / Inventor filed a patent application
on June 15, 1997. She was granted a patent on December 15, 2000. Her term can be
extended so that her patent will not expire until December 2017.
The extension is available only if the delay is not the fault of the applicant.
For utility patents in existence prior to June 8, 1995, the patent term is the greater
of seventeen years from the date of issue (the term under prior law) or twenty years
from the application filing date. Design patents are granted for a period of fourteen
The patent application must contain a written description of the invention and how
to make and use the invention in such complete terms as to enable others to make
and use it. Once a patent is issued, this information—known as the disclosure—becomes
available to the public, as do the patent's "claims" (patentee's defined legal rights).
Once the patent on an invention or design has expired, anyone is free to make, use,
or sell the invention or design.
The Patent and Trademark Office maintains a free online searchable database of U.S.
patents issued since January 1, 1976 at www.uspto.gov/patbib_index.html. IBM has
compiled a free searchable database of U.S. patents issued since 1971; it's available
at www.ibm.com/patents. Commercial services such as Micropatent (www.micropatent.com)
include pre-1971 patents in their databases. Patents may also be searched at Patent
and Trademark Depository Libraries located throughout the U.S. Information on the
libraries is available at www.uspto.gov.
Sample Specification & Claim Language
The specifications section of Amazon.com's affiliates program starts with this
description: "The present invention provides a software system and method for enabling
an Internet sales entity . . . to efficiently market and sell goods in cooperation
with Web sites or other network sites of respective business partners, referred
to herein as "associates." The first claim starts this way: "A method of selling
items with the assistance of associates, the method comprising: providing a Web
site system that includes a browsable catalog of items and provides services for
allowing customers to electronically purchase the items . . ." This patent is Patent
6,029,141, "Internet-based customer referral system."
While most countries publish patent applications, Congress has only recently changed
the U.S. Patent Act to allow the Patent and Trademark Office to publish patent applications.
Effective November 29, 2000, the Patent and Trademark Office will publish patent
applications eighteen months after they are filed, unless the applicant certifies
that foreign patent protection is not being sought in a country that requires publication
of applications eighteen months after filing. The publication provision does not
apply to applications for design patents.
Limitations on Exclusive Rights
There are two major limitations on the patent owner's exclusive rights. They are
discussed in this section.
Functionally Equivalent Products
A patent owner can exclude others from making, using, or selling products or using
processes that do substantially the same work as the patented invention in substantially
the same manner. However, a patent does not protect the patent owner from competition
from functionally equivalent products or processes that work in different ways.
EXAMPLE / Microco owns a patent covering a laser
printer. While Microco can prevent others from making, using, or selling laser printers
that work in substantially the same manner as Microco's printer, it cannot prevent
others from making, using, or selling laser printers that operate in a different
The validity of an issued patent is subject to challenge in an infringement proceeding.
Defendants in infringement suits usually raise the defense of patent invalidity,
asserting that the invention covered by the patent was not novel or nonobvious.
It is not unusual for a patent infringement suit to result in a determination that
the U.S. Patent and Trademark Office made a mistake in granting the patent.
Patent invalidity is certain to be an issue in infringement suits to enforce e-commerce
business methods patents. For example, when Amazon.com sued Barnesandnoble.com for
infringing Amazon's "One-Click Shopping" patent, Barnesandnoble.com's defenses included
patent invalidity. Barnesandnoble.com maintained that One-Click Shopping was not
novel or nonobvious—and that the patent examiner who granted the patent to Amazon.com
would have realized that had the examiner had all the relevant "prior art" available
to him when he reviewed Amazon's patent application.
New Internet-related and e-commerce patents are being granted in record numbers.
If you learn of a patent and are concerned that your operations may infringe it,
get advice from a patent attorney.
Consulting a patent attorney is particularly important if your potentially infringing
operations are still in the planning stages. Based on the legal advice you receive,
you may decide to modify your operations to avoid infringement—or you may decide
to get a license from the patent owner. Avoid investing more money or time in your
plans until you get legal advice.
If you learn that a patent has recently been granted on a method of doing business
you are already using, you may have an "early inventor" defense (also known as a
"first inventor" defense). The early inventor defense was added to the Patent Act
in late 1999, after the State Street Bank case (discussed earlier in this
section) was decided. Prior to that decision, business methods were thought not
to be patentable. Now thousands of business methods patent applications are being
filed. The early inventor defense, applicable only to business methods patents,
is a complete defense to infringement for those who meet two requirements:
- Commercially used the subject matter covered in the patent prior to the patentee's
patent application date.
- Acting in good faith, "reduced the subject matter to practice" (executed the invention)
at least one year before the patentee's application filing date.
"Submarine patents" have long been a concern in fast-moving fields. A submarine
patent is one that remains secret until it is issued, by which time competitors
and other companies have made substantial investments to use the technology covered
by the new patent. There is nothing you can do to eliminate the risk of submarine
patents. However, the fact that many patent applications will now be published eighteen
months after they are filed helps to reduce the risk.
If you are concerned that someone else is going to apply for a patent on a business
method they and you are already using on the Internet, take comfort in the statutory
bar mentioned earlier in this section. No patent can be granted on an invention
that was in public use or on sale in the U.S. for more than one year prior to the
patent application date.
Trademarks and service marks are words, names, symbols, or devices used by manufacturers
of goods and providers of services to identify their goods and services, and to
distinguish their goods and services from goods manufactured and sold by others.
EXAMPLE / The trademark FrontPage is
used by Microsoft Corporation to identify the company's Web development software
and to distinguish its software from other vendors' Web development software.
For ease of expression, we will use "trademark" in this book to refer to both trademarks
(used on goods) and service marks (used for services).
For trademarks used in commerce, federal trademark protection is available under
the federal trademark statute, the Lanham Act. Many states have trademark registration
statutes that resemble the Lanham Act, and all states protect unregistered trademarks
under the common law (nonstatutory law) of trademarks.
Types of Works Protected
Examples of words used as trademarks are Kodak for cameras and Burger King
for restaurant services. Examples of slogans used as trademarks are Fly the Friendly
Skies of United for airline services and Get a Piece of the Rock for
insurance services. Examples of characters used as trademarks are Pillsbury's Dough
Boy for baked goods and Aunt Jemima for breakfast foods.
Sounds can be used as trademarks, such as the jingle used by National Public Radio.
Product shapes and configurations—for example, the distinctively shaped bottle used
for Coca-Cola—can also serve as trademarks.
Trademark protection is available for words, names, symbols, or devices that are
capable of distinguishing the owner's goods or services from the goods or services
of others. A trademark that merely describes a class of goods rather than distinguishing
the trademark owner's goods from goods provided by others is not protectible.
EXAMPLE / The word "corn flakes" is not protectible
as a trademark for cereal because that term describes a type of cereal that is sold
by a number of cereal manufacturers rather than distinguishing one cereal manufacturer's
A trademark that resembles a trademark already in use in the U.S. so closely that
it is likely to cause confusion or mistake is not protectible. Geographically descriptive
marks—"Idaho" for potatoes grown in Idaho—are not protectible trademarks for products
that originate in the geographical area (all Idaho potato growers should be able
to use "Idaho" in connection with selling their potatoes). Geographically misdescriptive
marks that are deceptive are not protectible.
EXAMPLE / Hiromichi Wada, the owner of a Michigan
leather goods shop, attempted to federally register the name New York Ways Gallery
for leather goods. The Patent and Trademark Office refused to register the name
because it thought the public would assume Wada's goods were from New York. The
Court of Appeals for the Federal Circuit upheld the Patent and Trademark Office's
decision. In re Hiromichi Wada, 194 F3d 1297 (Fed Cir 1999).
Procedure for Getting Protection
The most effective trademark protection is obtained by filing a trademark registration
application in the Patent and Trademark Office, www.uspto.gov. Federal law also
protects unregistered trademarks, but such protection is limited to the geographic
area in which the mark is actually being used.
Federal registration is limited to trademarks used in interstate commerce (or intended
for use in interstate commerce). Before November 1989, a trademark application could
be filed only after the trademark's owner had actually used the trademark in commerce.
Under current law, a person who has a "bona fide" intention to use a trademark in
commerce may apply to register the trademark.
For federally registered marks, the use of notice of federal registration is optional.
A federal registrant may give notice that his or her trademark is registered by
displaying with the trademark the words "Registered in U.S. Patent and Trademark
Office" or the symbol â.
State trademark protection under common law is obtained simply by adopting a trademark
and using it in connection with goods or services. This protection is limited to
the geographic area in which the trademark is actually being used.
State statutory protection is obtained by filing an application with the state trademark
office. Those relying on state trademark law for protection cannot use the federal
trademark registration symbol, but they can use the symbol tm (or, for a service
Domain Names as Trademarks
The mere registration of a domain name does not convey trademark rights. However,
if you use your domain name to identify your goods or services—using it in ads for
your e-commerce site, for example—it acquires trademark protection. This topic is
discussed in "Choosing a Strong Trademark," chapter 15. Domain name registration
is discussed in chapter 16.
Trademark law in general, whether federal or state, protects a trademark owner's
commercial identity (goodwill, reputation, and investment in advertising) by giving
the trademark owner the exclusive right to use the trademark on the type of goods
or services for which the owner is using the trademark. Any person who uses a trademark
in connection with goods or services in a way that is likely to cause confusion
is an infringer. Trademark owners can obtain injunctions against the confusing use
of their trademarks by others, and they can collect damages for infringement.
EXAMPLE / Distributed Learning Company is selling
a line of interactive training products under the trademark Personal Tutor.
If Giant Multimedia Company starts selling interactive training products under the
name Personal Tutor, purchasers may think that Giant's products come from
the same source as Distributed Learning's products. Giant is infringing Distributed
One of the most important benefits of federal registration of a trademark is the
nationwide nature of the rights obtained. For the registrant, federal registration
in effect reserves the right to start using the mark in new areas of the U.S.
EXAMPLE / In March 1999, Small Multimedia Company,
a California corporation, obtained a federal trademark registration on the trademark
Abra for computer games. Small Multimedia did not begin using the trademark
on computer games in New York until 2000. In September 1999, Giant Company started
using Abra on computer games in New York. Because Small Multimedia's federal
registration gives it a right to use Abra throughout the United States that
is superior to Giant's right to use Abra, Small Multimedia can stop Giant
from using Abra on computer games in New York—even though Giant started using
Abra in New York before Small Multimedia did.
Other advantages of federal registration are discussed in "Trademark Protection,"
A trademark owner's rights under state trademark law (and the rights of an unregistered
trademark owner under federal law) are generally limited to the geographical area
in which the owner has used the trademark.
EXAMPLE / (For this example, we changed just
one fact from the previous example.) Small Multimedia Company did not get a federal
trademark registration. Now Giant's right to use Abra on computer games in
New York is superior to Small Multimedia's right to use Abra on computer
games in New York, because Giant was the first to actually use the trademark on
computer games in New York.
In the last example, what if Small Multimedia Company, the first company to use
Abra on computer games, sold its games on a Web site? People anywhere in
the world could view the Web site. Does that mean that Small Multimedia was using
Abra throughout the world? We don't know the answer. It is unclear how the
above rule would apply when a trademark is protected only under state or common
law and is used on the Internet.
A certificate of federal trademark registration remains in effect for ten years,
provided that an affidavit of continued use is filed in the sixth year. A federal
registration may be renewed for any number of successive ten-year terms so long
as the mark is still in use in commerce. The duration of state registrations varies
from state to state. Common law rights endure so long as use of the trademark continues.
Limitations of Exclusive Rights
Trademark law does not give protection against use of the trademark that is unlikely
to cause confusion, mistake, or deception among consumers, but dilution laws may
provide such broader protection (see "Dilution," chapter 15).
EXAMPLE / Western Software has a federal registration
for the use of Flap on Web development tool software. If Giant Company starts
using Flap on its desktop publishing software, Giant may be infringing Western
Software's trademarks because consumers may think the desktop publishing software
and the Web development tool software come from the same source. If Giant starts
using Flap on fire extinguishers, though, Giant is probably not infringing
Western Software's trademark. Consumers are unlikely to think that the Flap
software and the Flap fire extinguishers come from the same source.
Tips on how to avoid trademark infringement in naming your products and services
are in chapter 15. Tips on how to avoid trademark infringement when choosing domain
names are in chapter 16. Rules for using trademarks owned by others are in chapter
This article is an excerpt from the book Internet Legal Forms for
Business by J. Dianne Brinson and Mark F. Radcliffe (Copyright 2000 by
Brinson and Radcliffe). The article is used on this site with the authors' permission.
You may copy the article for personal or educational use, as long as all copies
include the author and title source information at the beginning and this License
Notice at the end. The article may not be modified or displayed on other Web sites
or intranets without the written permission of the authors.