IP in Hospitality

1. IP in Hospitality Intellectual “Properties” in HRIM Trademark & Franchising Tech Transfer

2. IP Overview • Patents • Trade Secrets • Copyrights • Unfair Competition • Trademarks & Trade Dress • Sui Generis Protections: • Semiconductor chips, asexual plants, designs, petty patents, Databases, boat hull design

3. Recurring HRIM IP ?s • What is intellectual property and what does it all mean to the entrepreneur? • Can I patent a recipe? • How do I go about establishing a trademark? • Is a brand , like McDonalds protected under any type of IP? • How do I establish a franchise and protect it?

4. Distinguishing IP from Tangibles • Tangible Property • Physical substance • Only one copy exists, totally exhaustible • Intangible Property • No physical substance • Often only represented by something of substance • Apparent inexhaustibility

5. IP Theory & Economics • Incentive Theory • Investment likely when exclusivity assured • Suboptimal investment w/o ownership & control • Lockean theory of initiative: innovation forthcoming w/ rewards of private property • Contract Theory • Maximize the public domain • Ltd. monopoly exchanged for disclosure

6. Patentable Subject Matter New, Useful & Human-made • Process • Machine • Manufacture • Composition of Matter

7. Novelty • Not in The Public Domain • Statutory Bars:“Known or Used...Patented or Published” • Diligence • Not abandon, suppressed or concealed • The U.S. One Year Grace Period • No Public Use or Sale • US: no use or sale • World: no patent or publication

8. Non-Obviousness • Patent should not grant if the advancement is small, merely minor improvements over prior art • Not obvious at the time of invention to one skilled in the art • Graham v. John Deere: 1. Determine scope and content of the prior art 2. Determine differences between prior art and the claim(s) at issue; and 3. Determine the level of ordinary skill in the pertinent art

9. Confidentiality of Application Materials • Trade Secrets Maintained? • Most nations - confidential only for 18 mos after filing • U.S. law changed to Int’l Standard: • Confidential only for 18 months if application is also filed in country that publishes files after 18 months • Otherwise, confidential until patent issues, then publicly available unless national security matter

10. Trade Secret Under Uniform Act • information (formula, pattern, compilation, program, device, method, technique or process) • derives independent economic value from secrecy or by proper means discovery by potential competitors, and • subject of efforts, reasonable under the circumstances, to maintain secrecy.

11. Eligible Information: pattern, device, engineering data, formulas, customer lists or preferences, raw materials, manufacturing processes, design manuals, operating & pricing policies, price codes, bid information, method, technique, bookkeeping methods, market studies/research, sales data, marketing plans/strategies, new product information, business plans, equipment & machinery, program, software, flow charts, drawings, blueprints, negative results, unique compilation or combination of public domain info, know-how

12. Duty of Secrecy • Implied Confidentiality Duty • Fiduciary duty of loyalty • Express Confidentiality Agreements NDA • Employment contract; covenant not to compete • independent contract, consulting contract, certain distribution contracts, franchise agreement, prior assignment of innovations,

13. Employee Confidentiality Agreements (NDA) • Provision or addendum to employment contract imposing confidentiality • Continuously updated list of specified documents, projects, corporate functions, etc. • Establish ownership of particular innovations • Define theft of IP, custody or removal of documents, files, computer disks, E-Mail

14. What are Databases under Law? • Systematic data accumulation/ordering • Collections of works, data or other materials arranged in a systematic or methodical way for retrieval or access by manual or electronic means • Used for learning, research, science, governing & control, commerce • File composed of records, each with fields, operations search, sort &/or recombine for useful report

15. Elements of Copyrightability • Must be original • Must be fixed in a tangible medium of expression • Must be directly or indirectly perceivable by humans

16. Types of Copyrightable Works Literary works Pictorials, graphics, and sculptures Musical works Motion pictures and A/V works Dramatic works Sound recordings Pantomimes and choreography Architectural works

17. Non-copyrightable Material • Ideas are not copyrightable – only the expression of ideas. • Includes ideas, procedures, processes, systems, methods of operation, concepts, principles, or discoveries. • The idea-expression dichotomy rule states that creators can maintain control over ideas only if they qualify as patentable or remain as trade secrets.

18. Trademark Protection • Word, Name Symbol, Device • Recently: color, sound, smell • Identifies Source of Goods or Services • Distinguishes from competitors • Protection Schemes: • State C/L, misappropriation, unfair competition • Federal registration under the Lanham Act • Int’l: Paris Conv, Madrid Arrange, Pan-Am

19. Fundamental Purposes of Trademarks • Trademarks differ conceptually from patents, trade secrets, or copyrights. • Promote business ethics • Prevent palming off • Symbol or device identifies source • Knowledge about prior use • Likelihood of confusion • Protect investments in goodwill • Promote Distributional Efficiency • Consumer search costssavings outweigh costs of regulation & forgone competitor opportunities • Identifiers are often suggestive

20. Distinctiveness • Capacity to distinguish owners goods or services • Protectability Scale • Ranges from Descriptive to Distinctive • Spectrum of Distinctiveness – a Scale of Decreasing Protectability • Arbitrary or Fanciful • Suggestive • Descriptive • Generic

21. Trade Dress • Configuration of package, product &/or premises • 3D design, ornamentation, color scheme, sound, smell, ambience, look & feel • Not merely decoration; must serve to distinguish & make a commercial impression • Must be distinctive & not primarily functional • Separate protection & consumers impression • EX: • Website, homepage distinctive graphics • Pole lamp • Taco Cabana patio Mexican restaurant • http://www.tacocabana.com/

22. Words Titles Numerals Abbreviations Product package design Slogans Colors Smells Sounds Manufacturer’s premises Trademark Subject Matter The Coca Cola trademark is an example of a product in which the recipe, bottle design, and brand name are all trademarks.

23. Two Pesos v. Taco Cabana Facts: Family restaurant split, 2 Pesos used Taco Cabana “motif” Issue: Is trade dress protectable w/o proof of secondary meaning? Rationale: Difficulties of determining inherent distinctiveness; restaurant motif, look & feel protectable

24. Legal Tools for Technology Transfer • Assignments • Licensing: scope, duration, fields of use, compensation, geographic limits, etc. (e.g., software “sales,” terms & conditions of website use) • Shop Rights • Work Made for Hire; Hired to Invent; M-S & S/E • Confidentiality Duties • Non Disclosure Agreements (NDA) • Non-Competition Agreements (non-competes) • Emerging Inevitable Disclosure Doctrine • Leasing, Franchising

25. Common License Terms • Scope & Exclusivity • Duration & Termination • Geographic Limitations • Confidentiality & Non-Competition • Establishes & Perpetuates Trade Secrets • Limits on Improvements & Sub-Licensing • Warranties of IP Ownership • Infringement indemnity

26. Principe v. McDonald’s (1980) • Facts: McDonald’s denied Principe another franchise; Principe sued claiming tying: franchise to premises lease • Issue: Is franchise illegal tying? NO • Rationale: Lease is not separate from franchise due to importance of site selection & other factors improving quality & potential success for franchisees.

27. Franchises • Franchise Definition • Business Organization, Network • Franchisor Exerts Control/Provides Assistance • Business Methods; ™ • Franchise Trademarks & the Lanham Act • Control: Must Police ™ Use! • Required Fees & Payments • Franchise Agreements • Franchise Marketing Disclosures as Business Opportunity Investment (security, FTC) • Maintaining Limited Liability F’or – F’ee • McDonalds Scalding Coffee