Common Questions – Can I Copyright My Formula?

Probably not. No matter how new a formula (a.k.a. recipe) may be, if it simply comprises a combination of ingredients mixed together to form a new and unique dish, it is not likely to be copyrightable. And, once published, even if the recipe contains additional descriptions or commentary or similar copyrightable expressive content, nothing would actually prevent someone from making the dish.

Consider an example of the brand-new restaurant, whose chefs for have worked together to create a very unique and unusual menu for their customers. After several months, one chef leaves to start a new restaurant – and publishes a cookbook that contains many of the recipes he co-developed with his former co-owner.

Is this infringement?

Early last year, a federal court in Ohio considered this very fact pattern and concluded that while a collection of articles (i.e., a published cookbook) was perhaps copyrightable as a compilation, the individual recipes did not have several similar protections.

In Tomaydo-Tomahhdo, LLC v. Vozary, No.: 1:14-cv-00469, 2015 BL 22110, 113 U.S.P.Q.2d 1695 (N.D. Ohio Jan. 29, 2015), the district court concluded:

“To the extent plaintiffs have a valid copyright in the recipe book, the copyright protection extends to the layout and creative expression contained in the book. It does not extend to the recipes themselves.”

Id. at *3. Concluding that the defendant had not copied the layout “or other creative expression contained in the recipe book”, there was no infringement. Id. Creating menu items for the new restaurant based on the recipes contained in the book were not infringing either. Id.

The Sixth Circuit Court of Appeals later overruled the lower court’s conclusion that the recipe book was copyrightable in the first instance. The Sixth Circuit held that the plaintiff failed to point to any actually creative or original content, instead making only conclusory assertions that the selections and order of the recipes were “creative” and thus copyrightable. Tomaydo-Tomahhdo, LLC, v. Vozary, Civ. A. No. 15-3179, 629 Fed.Appx. 658, 661-62 (6th Circuit Oct. 20, 2015) (“As a matter of law, Tomaydo has not shown that any aspect of their recipe book is original and would therefore enjoy copyright protection.”).

Previous courts have denied copyright protection to recipes generally, noting that the copyright claimant simply failed to demonstrate any creative components in the recipes sought to be protected. For instance, the Seventh Circuit held that while compilations could obtain copyright protection, such protection did not automatically extend to each component of that compilation. Publications Int’l, Ltd. v. Meredith Corp., 88 F.3d 473, 480 (7th Cir. 1996) (“A compilation copyright protects the order and manner of the presentation of the compilation’s elements, but does not necessarily embrace those elements.”) (emphasis in original). Specifically, the Seventh Circuit then held that the individual recipes in the subject recipe book were not individually protectable:

The recipes involved in this case comprise the lists of required ingredients and the directions for combining them to achieve the final products. The recipes contain no expressive elaboration upon either of these functional components, as opposed to recipes that might spice up functional directives by weaving in creative narrative. . . . There is no expressive element in each listing; in other words, the author who wrote down the ingredients for ‘Curried Turkey and Peanut Salad’ was not giving literary expression to his individual creative labors. Instead, he was writing down an idea, namely, the ingredients necessary to the preparation of a particular dish.

Id. (explaining, however, that they could not conclude that no recipe could ever qualify as copyrightable and confirming that such decisions are dependent upon specific facts presented).

So, how do you keep others from copying your recipes?

Consider protecting them as trade secrets – and don’t publish them. Think of the Coca-Cola Company’s reputed success in protecting the flavoring packet for its flagship sodas as a trade secret. Perhaps it could have sought patent protection for the chemical composition embodied in the recipe, but doing so would have required that it publish the formula in a patent application (which is later embodied in the issued patent) so that when the patent protection expired, a competitor could have legitimately manufactured and sold an identical generic version.

But, if recipes are flagship assets of a company’s business, the company may obtain longer-lasting protection of its proprietary rights if it keeps these secret and protected against public disclosure. Trade secrets can have nearly permanent protections, provided that the owner maintains the secret and maintains its diligence in preventing unauthorized or unexpected disclosure.

Common Questions: What’s the Difference Between a Trademark and a Service Mark?

This is actually a trick question – the answer is, “not much”. Generally, trademarks refer to source-identifying marks used in connection with goods (products) and service marks are used for the same purpose, but in connection with services.  The associated rights – to be able to preclude others from using a confusingly similar mark in connection with similar goods or services – are the same.

But one important way in which they are different is the way in which an applicant for registration of a mark with the U.S. Patent & Trademark Office (“PTO”) demonstrates that it is using the mark in commerce. Whether an applicant applies for registration of a mark based on actual use in commerce (§ 1(a)) or based upon a bona fide intent to use the mark in commerce (“ITU” – § 1(b)), each applicant must at some point during the prosecution of its application submit an example (“Specimen”) of how the mark is used in commerce in connection with the specific goods or services.  (For more about the trademark application process, see Common Questions: What’s Involved in Registering a U.S. Trademark.)

Acceptable Specimens for Trademarks

Simply put, if an applicant seeks to demonstrate use of its mark in connection with goods, it must show the mark as used in the process of selling or offering to sell those goods to the purchasing public. Examples of such use include:

  • Affixing the mark to the goods themselves (such as by imprinting the mark on it to the product or applying a sticker with the mark printed onto the product);
  • Affixing the mark to a label or tag attached to the goods;
  • Printing the mark on the outside of shipping containers delivering the goods to the store;
  • Displaying the mark prominently on product packaging that the ultimate purchaser sees;
  • Displaying the mark prominently on point of sale displays (such as shelf talkers, dedicated shelving in the store, a special display unit in the grocery aisle, etc.); and
  • Sometimes on websites, provided that the website has a point of sale system. (In other words, if an applicant relies on a page from a website to demonstrate use, that page must not only show the product and the mark but also give a purchaser the ability to order the product – it cannot be mere advertising.)

PTO Trademark Manual of Examining Procedure (TMEP) § 904.03.  Not acceptable to demonstrate use of a trademark in connection with goods are items like drawings conceptualizing the goods, business stationery, business cards, blank invoices, advertising, price lists, and promotions conducted on social media. See the (TMEP) § 904.04 for more examples of unacceptable specimens.  (If these types of items provide a point of sale system, they may be found to be acceptable.)

Acceptable Specimens for Service Marks

Similarly, if an applicant seeks to demonstrate use of its mark in connection with services, it is likely not in a position to simply affix the mark to the services, as one can do with goods. There is no product packaging that encases a service – as a result, other specimens will satisfy this requirement, including certain types of advertising of the services.  Note that acceptable advertising must show the use of the mark in connection with the services and the mark must function as a service mark in that it connects the services to the source.  In addition, the advertising cannot be merely a printer’s proof or a proposed design of the advertising – it must the final version as distributed into the marketplace.

In contrast to trademark specimens, “[l]etterhead stationery, business cards, or invoices bearing the mark may be accepted if they create an association between the mark and the services.” TMEP § 1301.04(h)(i).  Pages from websites may also qualify as acceptable advertising provided that the specimen must demonstrate an association in the mind of the purchaser between the services and the source of the services.

For more examples of acceptable specimens to submit in connection with service mark applications, see TMEP § 1301.04 (Specimens of Use for Service Marks).

Final Notes

Regardless of which type of specimen an application calls for, an applicant should ensure that the mark as shown on the specimen matches both the mark itself and the drawing of the exact mark, as submitted with the application (the “drawing page”) as submitted with the initial application. (For more about drawing pages, see Common Questions: What’s Involved in Registering a U.S. Trademark.)  As a result, be careful when submitting the initial application that you match the actual mark with what is shown on the drawing page – and that both match the way that the mark is actually used (or will be used) in interstate commerce.  Drawing pages cannot be amended after the application has been filed, with limited exceptions.

Picking the right specimen to support an application is sometimes an art. Applicants who have questions or concerns about this process should consult with an experienced trademark attorney to help decide which specimens are the most appropriate to submit in support of their application(s).

TEMPORARY HIATUS

Dear Readers:

I am pleased to announce that I have joined the IP practice of the law firm, Eckert Seamans Cherin & Mellott, LLC, in its Philadelphia Office. While I’m getting settled, I will not be in a position to post updates to this blog. However, this interruption will only be temporary and I hope to resume posting on new developments in the IP world again shortly – either here or on a blog to be created within the firm. Please stay tuned. If you need to reach me in the meantime, please email me directly.

Best,
Christina Frangiosa
Privacy and IP Law Blog

Business Owners & the New Federal Claim for Trade Secret Misappropriation

On May 11, 2016, Pres. Obama signed into law the Defend Trade Secrets Act of 2016, S. 1890, 114th Congr. (2d Sess. 2016) (“DTSA“), which provides for the first time a federal private right of action to litigants for trade secrets violations. Most states – except for Massachusetts and New York – have enacted versions of the Uniform Trade Secrets Act (“UTSA“) but the DTSA provides additional remedies without preempting state laws or eliminating any of the protections offered by them. Business owners will need to take some actions in the short term in order to take advantage of some of the more powerful remedies created by the DTSA.

A Summary of the New Law:

The DTSA is a substantial revision to the Economic Espionage Act (18 U.S.C. §§ 1831-1839 and 18 U.S.C. § 1961), which previously only provided criminal penalties and was only enforceable by federal prosecutors. An individual trade secret owner’s right to sue for trade secret misappropriation related to a product or service used (or intended for use) in interstate commerce in federal court is, therefore, new. So are many of the remedies available to trade secret owners. Below is a summary of key provisions:

  1. Who Can Sue?
  2. Owners of trade secrets may file an action against those who “misappropriate” their trade secrets, provided that the trade secrets relate to products or services that are used in (or are intended for use in) interstate or foreign commerce. This means that trade secrets associated with products or services that only travel within a single state could not be enforced under this Act.

  3. What is “Misappropriation”?
  4. “Misappropriation” includes either (1) acquisition of a trade secret by someone who knew or should have known that the secret was obtained by “improper means” or (2) disclosure of such a secret by one who did not have express or implied consent to do so and knew or should have known that it was a secret or acquired by “improper means”.

  5. What Counts as “Improper Means”?
  6. “Improper means” includes theft, bribery, misappropriation, breach or inducement of breach of a duty to maintain secrecy or espionage through electronic or other means. More importantly, however, “improper means” expressly does not include reverse engineering, independent derivation or any other lawful means of acquisition.

  7. Available Remedies.
  8. Potential remedies include: (A) injunctions to prevent the actual or threatened misappropriation, (B) monetary damages for actual loss and for unjust enrichment, and, (C) if all other remedies are insufficient to make the trade secret owner whole, then the owner can recover a reasonable royalty. A reasonable royalty is not the preferred remedy, but instead should be a remedy of last resort. (See Senate Rep. 114-220 (Mar. 7, 2016) and House Rep. 114-529 (Apr. 26, 2016)).

  9. Enhanced Damages for Willful Misconduct.
  10. If a trade secret owner can prove that the trade secret thief misappropriated the trade secret “willfully and maliciously”, then the court may award exemplary damages (not more than two times the monetary damages awarded); and award attorney fees to the prevailing party. Such an award is within the sound discretion of the district court.

  11. Narrow Ex Parte Seizure Order.
  12. A trade secret owner’s ability to obtain an ex parte seizure order (which allows law enforcement officers to seize allegedly misappropriated trade secrets from a specific target without providing advanced notice to the target or permitting the target to be heard in opposition to an order prior to its issuance) is new under this law.

    Seizure is an extremely powerful tool, but has several potent limitations: (a) it is only available if the trade secret owner can demonstrate that a regular Rule 65 injunction would not be effective against this target because the target “would evade, avoid or otherwise not comply” with an injunction order, or “would destroy, move, hide or otherwise make such a matter inaccessible to the court”; (b) a seizure order will not be issued if the trade secret owner has publicized in any way that it is pursuing seizure; (c) the trade secret owner may not participate in the seizure (instead, this is handled by appropriate law enforcement personnel); (d) the trade secret owner does not receive the alleged trade secrets once they are seized from the target (instead, these are held in the custody of the court); (e) the trade secret owner must provide security (i.e., post a bond with the court) against the possibility of unlawful seizure; and (f) any seizure MUST minimize any interruption in the lawful business operations of the target.

  13. Sanctions for Bad Faith Claims or Wrongful Seizure.
  14. If the target proves by circumstantial evidence that the claim of misappropriation was made in bad faith, the court may award attorney’s fees to the target as a prevailing party.

    Further, if a trade secret owner wrongfully seizes materials that are later determined not to have been misappropriated, or if the owner sought an excessive seizure, the target may be entitled to the following: (1) “relief as may be appropriate” (which includes damages for lost profits, cost of materials, loss of good will and punitive damages); (2) reasonable attorney’s fee unless the court finds extenuating circumstances; and (3) prejudgment interest on any recovery (beginning on the date the trade secret owner applied for the seizure owner). In this case, the bond posted by the trade secret owner shall not constitute a cap on the available recovery.

  15. Federal Jurisdiction
  16. Trade secret owners are permitted to bring DTSA claims in federal district court, but they are not required to. Federal courts have original, but not exclusive, jurisdiction over these claims.

  17. Statute of Limitations
  18. Trade secret owners have three (3) years after the misappropriation was discovered (or through exercise of reasonable diligence should have been discovered) to commence a civil action asserting a claim of misappropriation under the DTSA.

    However, continuing misappropriation is considered a single act – not individual acts of misappropriation that could re-start the clock for purposes of the statute of limitations.

  19. Limitations on Claims against Employees (a.k.a. Employee Immunities)
  20. Employers can only obtain enhanced damages and attorneys’ fees from any employee who discloses its trade secrets IF the employer notified the employee in advance (either through an agreement or in certain employment policies if appropriately cross-referenced) of his/her immunity for liability under certain whistleblowing circumstances. “Employees” for these purposes include contractors and consultants.

  21. Effective Date
  22. This Act applies immediately to any misappropriation for which any action happens on or after the date of enactment (May 11, 2016).

What Should Business Owners Do Now?

First and foremost – employers should revise their form agreements to be used with any employee, contractor or consultant who will have access to the employer’s confidential information to provide the requisite notice of whistleblower rights. Without this notice, an employer cannot seek exemplary damages (up to twice the amount of actual damages awarded) or attorney’s fees if it proves the misappropriation was willful or malicious.

Second, trade secret owners need to take stock and identify clearly what their trade secrets are. In particular, if a trade secret owner pursues an ex parte seizure order against a competitor or an ex-employee’s new employer, the trade secret owner will have to articulate with some clarity what the trade secrets are that are alleged to have be misappropriated. This identification is intended to aid the law enforcement officers charged with executing the seizure order to know what to take, but also allows a trade secret owner to position itself better to avoid an allegation of wrongful seizure or a bad faith claim of misappropriation as the litigation develops. This identification will also aid businesses overall by necessitating the creation of tighter controls over those assets that are truly trade secrets to keep them from being unlawfully disseminated.

Finally, if a business becomes the target of an ex parte seizure order, know that a hearing must occur no later than seven (7) days after the seizure order was issued. Be prepared to argue that other injunction options may have been reasonably available to support the argument that a wrongful seizure occurred, entitling the target to damages. Even if the business only receives a threat of an ex parte seizure, consider whether the exceptional circumstances justifying an ex parte seizure were actually present in your case. Take any such threats seriously, and contact your attorney immediately if you receive a demand letter making this claim or if a seizure order is executed against you — because your time to respond in either case will be very short.

Copyright © 2016, Christina D. Frangiosa. All rights reserved.

Five Simple Things Businesses Can Do to Better Secure Their Data

News of data security breaches at one company or another has become so common that perhaps we are becoming immune to the significant impact these breaches can have on those whose information are affected. Not only can identity theft destroy an affected individual’s credit and limit his/her future buying choices, but also it is becoming clear that, philosophically, perhaps our private data really aren’t private anymore. Think of how easy it is to search public records online and find out personal details about a person well beyond what the phone book would have listed in days past. It is harder and harder to keep secrets when the Internet is involved.

Notwithstanding such developing immunity to the shock of a data breach at any particular company, data breaches are very serious events for a company – of any size. In the aftermath, it is not unusual to hear business executives announce that they “never want to go through that again.”

So, what can you do to minimize your company’s risk for data breach? Here are my top five recommendations:

  1. Hire the right people. Whether you rely on internal IT support staff or if you outsource to a third-party vendor, make sure you have the right resources in place to accomplish your goals. Discuss your expectations (particularly about data security) with these personnel at the beginning of the relationship and set realistic goals for achieving a secure system.
  2. Conduct the necessary due diligence. Before you hire that new IT security director internally or engage that new third-party vendor, be sure that they actually have the skills in place to accomplish the levels of data security you envision. Interview your candidates (whether individual or vendor) to determine that their services match your needs. Make sure you know what services you are signing up for. If you want a company to be actively testing your network for potential weaknesses, make sure that such services are covered by the fees you are paying; typically, they are more expensive than services that simply patch your existing software with newly-released security updates from the manufacturer.
  3. Pay Attention to Suspicious Conditions. Watch for signs that someone else may be making changes to your network. (For instance, user names and passwords suddenly not working, the appearance of new administrator accounts, system unavailability particularly for remote access, significant slowdown of processing speed during periods of regular use, etc.). Just like we are all being warned in public transportation venues that “if you see something, say something”, if you suspect that your data may not be secure, do not ignore that suspicion. Involve your IT personnel and be sure that you are effectively maintaining the security of your network.
  4. Update all Software as Recommended by the Manufacturer. Security patches are rolled out all the time, particularly after the manufacturer learns of potential weaknesses in security. If you keep your software updated with these patches as part of your regular routine, you decrease your risk of exposure. Same with anti-virus and anti-malware software: they are only as secure as that last update that was applied. Keep the virus and malware definitions up to date to reduce your risk of intrusion by known entities.
  5. Only Collect Information that You Absolutely Need. If you do not need access to customers’ credit card numbers, don’t ask for it. And, if you do need access, do not retain it any longer than necessary to complete the transaction. In particular, where credit card numbers are concerned, there are other regulations, standards and guidelines about what you can keep and for how long. See Payment Card Information Data Security Standards (“PCI DSS“) for more details. With respect to the data you decide to keep, maintain your sensitive data in encrypted form as much as you can to reduce the risk of third-party access. Once you decide not to maintain certain sensitive information any longer, be sure that you comply with federal, state and local laws governing the safe destruction of documents or electronic data that embody personally identifiable information (“PII”) or competitively sensitive data, such as trade secrets.

In general, businesses who are proactive about putting in place and maintaining effective data security protocols have a much better chance of avoiding the exposure that results from a data breach. Of course, there’s no guarantee that you might not be targeted by a malicious and very determined third party, but consider a thief’s potential options: (1) hack that network that is protected by multi-layer and multi-factor data security; or (2) walk through that open door provided by another company who is not managing their IT security effectively. If you were the thief presented with these options, wouldn’t you take the path that presents the least resistance? Don’t be the “open door.”