Demystifying Intellectual Property: Understanding Trademarks & Trade Secrets

Posted May 13, 2010 in Demystifying the Law by

In Tuesday’s blog, we talked about the areas of intellectual property known as copyrights and patents. Today, we’ll take a more in-depth look at the two other major areas of intellectual property: Trademarks and trade secrets.

Before we talk about trademarks and trade secrets, a quick refresher from Tuesday’s blog.

Intellectual property, known as IP for short, is the area of law that protects the creative work of people such as writers, composers, designers and inventors (or the companies that employ them).

There are four basic categories of intellectual property:

  • Copyrights protect original works of authorship
  • Patents protect new and useful machines, articles, substances or processes
  • Trademarks protect identifying marks that distinguish goods or services, such as names, logos, designs, emblems, and distinctive sounds and smells
  • Trade secrets protect confidential business information or proprietary information, such as business plans, chemical formulas and customer lists

Trademarks

Trademarks protect identifying marks that distinguish goods or services. Trademarks include:

  • Names
  • Logos
  • Designs
  • Emblems
  • Other identifying marks distinguishing goods or services
  • Distinctive sounds and smells

To be a trademark, the mark must be identified in the minds of consumers with a particular source of a good or service. For example, people recognize the "swoosh" logo as belonging on Nike products and the apple with a bite taken out of it as representing Apple Computer. But not only are the Nike and Apple logos a form of trademark, the company names are also trademarked.

You can often recognize a trademarked item because it will include the letter(s) “TM” “R” or “SM” in a circle, usually to the upper right of the mark. (However, the trademark symbols are not required to indicate that something’s trademarked.)

A primary goal of trademark law is to protect consumers. If competing businesses use identical or similar marks, consumers may be confused as to which business they are dealing with or purchasing from. (For example, if I were to create a running shoe company called Nikes I think I’d quickly hear from Nike’s legal department.) Consumer confusion could be a particular problem if a consumer believes he or she has purchased goods of a certain quality, but mistakenly receives goods of a lesser quality.

Trademark law discourages business fraud in which a dishonest business intentionally tries to pass off its goods as those of another business. If lower quality goods are passed off as those of a known business, consumers may be angry or dissatisfied and blame that business by mistake, damaging its reputation.

Most states have trademark protection laws and simple procedures for registering a trademark. State registration is usually only effective within that state and not effective for businesses engaged in multi-state operations. The federal registration process (handled by the U.S. Trademark Office) is more complex and is similar to the application process for a patent.

Trade Secrets

Trade secrets protect confidential business information or proprietary information, such as business plans, chemical formulas and customer lists. To maintain business information as a trade secret, a company and its employees must take reasonable precautions to prevent the information from becoming generally known to competitors.

The law of trade secrecy discourages industrial espionage (or business information theft) by punishing the efforts of competing businesses to learn one another’s proprietary information by improper means.

Trade secrets can be a concern when employees leave a company to join a competitor or to start their own businesses. The employee may know many trade secrets, and may consciously or unconsciously use that information in his or her new job.

Trade secret law is primarily state law. It can include criminal penalties in some circumstances.

Using Someone Else’s Intellectual Property

If you want to use something that is protected by intellectual property law, you will have to contact the owner and request permission to use their intellectual property.

Some IP owners may give permission and simply ask that you give them appropriate credit. For example, if you were quoting several lines of a poem in a magazine article, the poet might let you include the poem for free as long as you include a note that the poem protected by copyright and used with the permission of the poet. In other instances, the IP owner may require you to make a one-time or ongoing payment before agreeing to let you use their intellectual property.

If you use IP-protected material without permission, the IP owner can take legal steps to prevent you from using it in the future and to force you to compensation them for the unauthorized use.

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