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Posted: December 06, 2010

Don’t be like the Winklevoss twins

Protect your intellectual property

David London

In the movie Social Network, the importance of intellectual property (IP) is illustrated in dramatic fashion. The movie tells the story of Facebook founder Mark Zuckerberg and the Winklevoss twins, who sued Zuckerberg for stealing what they claimed was their idea for a social networking website.

Facebook is today one of the best-known examples of rapid technological change and American innovation. However, the roots of this innovation date all the way to our founding fathers, who, in a moment of foresight, made provision for the protection of IP in our Constitution. Article 1, Section 8, Clause 8 of the Constitution secures for authors and inventors the exclusive "right to their respective Writings and Discoveries."

In the 18th Century when the Constitution was drafted, the most likely examples of IP were writings and mechanical inventions. Today, IP law protects the ideas, inventions and technologies that are fueling some of the most rapid change impacting our planet, and our society - from computer chips, to advanced pharmaceuticals, to the proverbial space-age materials.

The rapid change of our computer culture brings into sharp focus two issues of particular concern from an IP law standpoint.

The first is securing the rights to IP. Many people don't realize that in the United States, when you acquire, or commission the development of technology, such as a piece of software, you don't really own the technology unless you acquire the IP rights too. So, if a company outsources the development of a critical piece of software, the company will end up owning only the physical media on which the software sits, unless the company makes sure to acquire the IP rights in the software too. Likewise, if a company has a marketing firm develop a new logo or slogan, the company won't really own the logo or slogan unless it is careful also to obtain the IP rights in the logo or slogan. And the only way to obtain IP rights is in a written agreement, containing legally-effective transfer of rights provisions.

Why does obtaining the IP rights matter, when you buy a piece of software, or have a new logo developed? Because only the owner of the IP rights has the right to make changes to the software or the logo. And only the owner of the IP rights has the legal right to prevent others from using the software or logo. That's right: unless you obtain the IP rights, the person you just paid handsomely to develop software, trademarks, or other IP for you may be able to cross the street and sell the same IP to your best competitor.

The second issue of increasing concern to companies is the protection of confidential and trade secret information. In this rapidly changing world of technology and communications, information is power, and you are wise to protect it. An organization's trade secrets must be identified and aggressively protected. Confidential information must not be shared with third parties unless an air-tight non-disclosure agreement has first been signed. And employees should not be exposed to valuable confidential information until their agreement to protect the information has been obtained, either through a written contract or a written employee handbook. The loss in book value to a company that can result from the inadvertent disclosure of confidential information or its theft by employees and contractors cannot be overemphasized.

So what happens if your IP is compromised? While litigation is an option, it is difficult to win an IP lawsuit, and fighting the lawsuit also can be cost-prohibitive. And sending a cease and desist letter may do little to deter a motivated "infringer." Your best strategy is to avoid IP theft (or other loss of IP rights) by planning. An attorney specializing in IP can guide you through the discovery process and help you put into place measures to protect all of your IP assets - even those you might not have considered.

Many people believe that we are in one of the most progressive times in history, with change, especially in the fields of technology and communications, accelerating exponentially. Don't be like the Winklevoss twins, who will not be remembered for having created one of the most culturally-significant innovations in modern history. Protect what is rightfully yours.
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David London has practiced law for more than 17 years and has been a partner with Hogan Lovells' Denver office for seven years. He advises both emerging and established companies on the acquisition, protection, and commercialization of intellectual property, including patents, trademarks, copyrights, and trade secrets. David has extensive experience in technology-related transactions and ventures, with an emphasis on licensing and outsourcing transactions. Contact him at david.london@hoganlovells.com.

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