Intellectual Property After September 11: Ten Things to Consider
 
February 4, 2002
 
Scott W. Petersen- Chicago

In the aftermath of the tragic events of September 11, 2001, American businesses are looking not only to the immediate issue of damage control but also to the question of how their businesses may be affected in the future. While corporate intellectual property holdings may not be directly impacted the terrorist attacks, those events give rise to a variety of issues that business technology should consider.

Identification. This includes the ability to identify just what is and what is not an intellectual property right. Since patents, trademarks and copyrights are actual "assets" that fall on the plus side of a corporate ledger, it is truly important to be able to properly identify these intellectual properties with accuracy and precision.

Protection. This includes formalizing the protection of intellectual property assets where appropriate. Formal protection comes about through the filing of applications to register copyrights and trademarks. It also includes the filing of patent applications to protect new technology and ideas.

Education. The more companies know about intellectual property, the easier it is to protect those holdings. Thus it is important to get all employees on the "same page" when it comes to identifying, understanding and protecting a company's intellectual property assets.

Implementation. This involves taking those steps necessary to implement an intellectual property program or policy.

Defense. Defensive strategies are just as important as offensive strategies. This means taking those steps required to avoid infringing the intellectual property rights of third parties. Defensive strategies typically rely heavily on employee education.

While the above five points will continue to serve as a template for corporate intellectual property programs, in the wake of September 11, there are a number of dynamics that have come into sharper focus and a number of steps businesses can take to better protect their intellectual property assets. Some of these points will apply only to specific businesses or product areas. Others will be universal in their application. Here are 10 points to consider as you go forward:

Documentation of Intellectual Property Assets

Carefully document your foreign and domestic intellectual property holdings. This includes maintaining duplicate or triplicate lists of your intellectual property portfolio and keeping these inventory lists electronically and in hard copy (in different locations). By conducting this inventory, you may be assured that, in the event of another tragedy or computer system corruption, documentation of your important assets remains intact for purposes of identification and required maintenance.

Protecting Intellectual Property Assets Abroad

Since intellectual property assets are usually intangibles, embodied in products, compositions, source identifiers or works of authorship, maintain a heightened sensitivity to the development, control and licensing of intellectual property. Make sure of the extent and status of your entire intellectual property inventory and take steps to further protect it and keep it under careful and tight rein.

Cultivating Legal "Resources" Abroad

The protection of intellectual property assets abroad will inevitably depend on a team of quality associates who can provide intellectual property counseling and protection in foreign countries as need arises.

Insurance

Given the current tumult in the insurance industry, businesses would be prudent to assess the nature and levels of insurance coverage for intellectual property holdings. Currently, many general liability policies offer coverage for defending against trademark infringement actions (usually under "advertising injury" clauses). Companies can, however, also secure endorsements that provide for defense of copyright and trade name infringement, misappropriation of trade secrets, violations of antitrust laws, unfair competition and even patent infringement. Companies also may wish to consider the more non-traditional offensive insurance products to cover the costs of protecting intellectual property assets from misappropriation or infringement by third parties.

International Treaties and Conventions

Companies that do business internationally should have at least a basic grasp of those treaties and conventions that may affect them. The United States Department of State is also a cooperative resource that has regional and national "desks" where citizens can get answers to an abundance of business and travel questions by telephone. The main telephone number for the DOS is 202-647-4000 and the DOS Web site is located at http://www.state.gov. An excellent summary of international treaties is located at http://www.lawresearch.com.

Background Checks

Background clearances not related to national security issues are now running eight to nine weeks behind normal due to the reorganization of FBI resources in the wake of September 11. Companies that offer products or services that require FBI clearances as a prerequisite to employment may be affected by delays in these security clearances.

Patents at Risk

There are times when, despite strong and formal protection for patented technology, patents may nonetheless be at risk from government usurpation (both at home and abroad). On rare occasions, the patent owner will have little or no recourse to endure this governmental preemption. There are two instances when patent owners may find their patents at risk:

Suspension of Patent Rights by Governments. In times of war or national emergency, patent rights may be suspended by the government if the patented product is deemed essential for a war effort or for responding to a national crisis. We saw this eventuality flicker briefly in early November when the French government announced that it was suspending the Bayer patent for Cipro (the antibiotic used to treat anthrax) so it could mass-produce this antibiotic to meet intense demand. On November 13, 2001, Health and Human Services Secretary Tommy Thompson declared that the U.S. government might suspend the Bayer patent if prices for Cipro were not lowered. Canada and several other countries followed suit with this threat. In the United States, the U.S. Court of Claims cannot enjoin the government's infringement of a patent but it can award damages. The law obviously varies from country to country. Moreover, 35 USC § 202 gives the federal government "march in" rights on patented inventions that were developed through funding from the government. Thus, the government can gain immediate control of the research it is underwriting - if that control is needed.

Confiscation of Intellectual Property by Foreign Governments. Occasionally, rogue states will confiscate the property of foreign nationals (including financial assets, real estate and intellectual property), such as Cuba did in 1959 with the fall of Fulgencio Batista. While there may be recourse in the U.S. courts, property rights within the subject country may be lost for years or decades.

Trading with the Enemy Act

Various federal laws prohibit Americans from travelling to Cuba, Libya and several other specified countries, whether for a weekend away or for the purpose of conducting business. Federal regulations create an important exception, however: Americans are allowed to protect their intellectual property interests in some of those countries (including Cuba, Libya, Burma, Iran, Sudan and Iraq).

Export Control Act

Several countries in the Middle East (including Syria, Iraq and Libya) require that applicants for trademarks or patents sign a declaration in which they state that they affirmatively are not and will not engage in trade with Israel (these are called Boycott Declarations). American companies are prohibited from signing such declarations under the Export Control Act of 1949. While there are ways of circumventing the strictures of this Act, companies should be sensitive to the fact that if regional stability in the Middle East deteriorates, other countries may choose to endorse this requirement. Companies who do business in these countries should consider their potential exposure in view of this vagary of international law.

Export Licenses

In the wake of recent events, the issuance of export licenses for certain products by our government may become more restrictive. For example, if a company manufactures computer software used for grinding and polishing submarine propellers, to make a boat run silently, for example, the sale of such technology to foreign countries is restricted or at least regulated by the U.S. Department of Commerce (Bureau of Export Administration). All products that relate to national security (a term that often can be redefined from moment to moment) and which are sought to be sold abroad are subject to careful scrutiny by our government. The DOC generates lists of "authorized and unauthorized" countries and "authorized and unauthorized" products. While this is not a pure intellectual property issue, it is nonetheless a technology licensing/assignment issue that may have impact on corporations that do business abroad. If export licenses become more restrictive, it is likely to impact the bottom line of companies that rely on these licenses for international sales. The Web site of the U.S. Department of Commerce Bureau of Export Administration is http://www.bxa.doc.gov.

The events of September 11 will leave an indelible mark on American business; but with careful planning and common sense, the financial impact may be minimized.

For more information, contact Scott Petersen and Matt Sobolewski at 888-688-8500 or via e-mail at speterse@hklaw.com or mdsobole@hklaw.com, respectively.