USPTO Increases Fees for Trademarks

The United States Patent and Trademark Office (USPTO) will be increasing fees for various trademark matters. The USPTO’s website provides the full rundown.

Key Changes to Know

• Initial Application Fees: The cost of filing a trademark application will be increasing, especially if you use a custom description of your goods/services or if the description exceeds 1000 characters.

• Renewal Fees: It will cost more to renew an existing federal trademark registration, with significant increases for most maintenance filings.

• Letter of Protest: The fee for filing a letter of protest will triple to $150. This tool helps challenge other people’s trademark applications and can be a cost-effective way to defend your own trademark.

When Will the New Fees Start?

• These new fees are expected to take effect sometime during the 2025 fiscal year, which began on October 1, 2024. However, the exact start date is not yet finalized.

• The USPTO released its proposed fee changes in March 2024, and we expect a gap of several months between finalizing the rules and implementing the new fees.

Impact on Trademark Filing Costs

• Custom Descriptions: If you don’t use the standard pre-approved descriptions (from the ID Manual), you will pay a $200 surcharge per class. This can raise the cost of filing to $550 per class.

• Lengthy Descriptions: If your description exceeds 1000 characters per class, expect to pay an additional $200 for every 1000-character block. A long description could cost you up to $1350 per class.

Other Fee Increases

• Proof of Use: The cost to prove you are using your trademark after filing will increase. Filing a Statement of Use or an Amendment to Allege Use will rise to $150 per class, making Intent-to-Use applications more expensive.

• Maintenance Costs: The cost to maintain your trademark (such as Section 8 and Section 9 filings) will rise significantly. The combined cost for 10-year renewals will be $650 per class, up from $525.

The USPTO filing system with its various fees and surcharges tends to get more complicated, not simpler, every year.

Business and Brand Identity: Trademark, Assumed Business Name, and Legal Corporate Name

When starting and operating a business, there are three distinct legal names that can shape a company’s identity: trademark, assumed business name, and legal corporate name.  Each has a different purpose.  Understanding the difference is essential for businesses to protect their brand, comply with the law, and thrive in a dynamic market.

The Legal Corporate Name: A Business’ Legal Identity

The Legal Corporate Name is the official name registered with the state and serves as the company’s legal identity. It is the name under which the entity operates its business affairs and interacts with government authorities.  If you consider an assumed business name like someone’s nickname, then the legal corporate name is what’s printed on the business’ official ID and birth certificate (in this case, the Articles of Organization for a limited liability company or Articles of Incorporation for a corporation).

Changes to this name require careful consideration.  If you change your business’ name, you should consult with a lawyer because there are formal processes and checklists to follow.  Bank accounts, contracts, signage, insurance policies, website accounts and a host of other things might be affected.  For this reason it is important to be careful when selecting or changing a name, just like changing individual name.

Assumed Business Name: A Legal Requirement for Businesses With Nicknames

The government wants people to be able to identify who they are doing business with.  So if a person or business entity uses any name aside from their legal individual or legal corporate name, it must be registered as an assumed business name under Oregon law. This may be called a “dba” (for “doing business as”) or a “trade name” in other jurisdictions. 

If you operate under a different name and fail to register the assumed business name in Oregon, technically you are breaking Oregon law and could be subject to damages or modest fines.  So assumed business names are fundamentally a legal requirement for a business that adopts a nickname.

On the flip side, registering an Assumed Business Name essentially allows companies to operate under an alias. This legal alias provides flexibility in branding and market presence, acting as a practical tool for experimenting with different business identities. 

A company formed with “NewCo Venture Partners Incorporated” as its legal corporate name doesn’t have to hold itself out and advertise as that impersonal mouthful. They could register NewCo Venture Partners Incorporated with the assumed business name “Bill’s Corner Hardware” (assuming that’s available) and hold themselves out to the public as that instead.

Choosing an alternative Assumed Business Name can sometimes be a strategic decision, offering a path for businesses to test market responses without committing to a formal name change.

To select a new assumed business name in Oregon, the business name must be available in the Oregon Secretary of State’s database. That means that no other business with exactly the same name has an active (up to date) registration. If you do not renew your business registration, your name becomes available to be registered by another business.

However, registering your name does not imply you can legally use it – mere name registration is not the same as a trademark right from use in commerce. For example, you might be able to register “Starbucks Coffee and Tea” with the Corporation Division, but the real Starbucks could still sue you for trademark infringement. Another business can likewise register an assumed business name that’s like yours, but not exactly the same. You can, however, assert trademark rights against the other business if there is likelihood that consumers will confuse your two businesses (talk to a trademark lawyer about this first).

Trademark: An Exclusive Right

Think of a trademark as a proprietary right that the business can own if it is the first to use that name in its particular channels of commerce.  A trademark is a source identifier, that sets products or services apart from the crowd. 

If the name is already in use or diluted by similar users, then you don’t have strong trademark rights (and you might actually be infringing on someone else’s trademark rights).  But if the name sufficiently distinguishes the business’ goods or services from others’, then it can be owned as an asset. This includes the right to exclusive use within the owner’s geographic and market territory.  Federal and state trademark registrations can amplify and solidify these rights.

Registering a trademark (at the state or federal level) results in exclusive rights to use that mark in connection with specific goods or services. This protection is vital for brand recognition and safeguards against potential infringement. The scope of trademark rights is limited by the territory, goods, services, and first use date.  A trademark does not exist in the abstract, covering words alone.  Trademarks only exist when used in commerce with goods or services, in some identifiable territory.

Generally speaking, you can enforce trademark rights against a third party if the third party is using a similar trademark that is likely to cause consumers to be confused within your market and geographic territory.  The standard for trademark infringement is multifaceted and complex (so consult with a trademark lawyer before assuming whether something does or does not infringe).  But key factors to assess trademark infringement include: how similar are the trademarks and how similar are the goods and services.

Conclusion: Cementing A Meaningful Business Identity

Each business identifier plays a distinct role.  Whether starting a new business, operating an ongoing business, entering contracts, buying, or selling a business, consider the unique role each identifier plays in shaping the business and its presence for customers and vendors. By understanding the differences and leveraging the strengths of each, you can cement a valuable and meaningful identity for your business in Oregon.  Or at least cross “name” and “brand” off your to-do list.

Understanding the Role of Intellectual Property in Startups

Intellectual property (IP) refers to intangible assets that are the result of human ingenuity and creativity. These can include inventions, literary or artistic works, software code, trade secrets, and more. In the world of startups where innovation is key, IP plays a crucial role in protecting and promoting the growth of companies.

In this guide, we will explore the different types of intellectual property, their significance to startups, and how they can be effectively managed.

Understanding Intellectual Property

Intellectual property encompasses a broad range of valuable assets that can be categorized into four main types: patents, trademarks, copyrights, and trade secrets. Patents, for instance, offer legal protection for inventions and technical solutions, safeguarding the unique features and functionalities that set them apart. Similarly, trademarks play a critical role in protecting the branding and identity of a business or its products, ensuring that consumers can easily identify and distinguish them from others in the market.

Copyrights, on the other hand, extend their protective umbrella over original creative works, including literature, music, and artistic expressions, preserving the rights of their creators and preventing unauthorized use or reproduction. Finally, trade secrets play a pivotal role in preserving confidential information that provides a business with a competitive edge, encompassing proprietary formulas, manufacturing processes, customer lists, and other confidential data that, if disclosed, could compromise the business’s success.

By understanding and effectively managing these different types of intellectual property, many businesses can safeguard their innovations, brand identity, creative works, and confidential information, ensuring their long-term success and competitive advantage.

The Importance of Intellectual Property for Startups

Intellectual property (IP) refers to the intangible assets that arise from the ingenuity and inventiveness of individuals or organizations. These valuable assets encompass a wide range of creations, including groundbreaking inventions, visually stunning designs, captivating artistic works, and distinctive symbols that serve as business identifiers. In our ever-evolving knowledge-based economy, the significance of IP cannot be overstated, particularly for startups seeking to carve their path to success.

By safeguarding their innovations through IP protection mechanisms, startups can fortify their position in the market, attract investment, and solidify their business value. Moreover, intellectual property empowers startups to cultivate a competitive edge, allowing them to differentiate themselves from rivals and establish a unique market presence.

With the ever-growing importance of intellectual property in today’s entrepreneurial landscape, entrepreneurs and innovators must recognize its potential and harness it to propel their ventures toward prosperity.

Types of Intellectual Property

There are four primary types of intellectual property that businesses and individuals need to be cognizant of:

Patents

Legal patent protection that safeguards inventions and innovative ideas, ensuring that the person who does patent search has exclusive rights to produce, use, and sell them. This exclusive right is granted for a predetermined period, usually 20 years from the filing date, giving inventors ample time to capitalize on their creations and prevent others from exploiting their ideas without permission or proper compensation. By providing inventors with a secure framework, patents encourage continued innovation and foster a thriving ecosystem of creativity and progress.

Trademarks

A trademark is a distinctive symbol, word, or phrase that sets apart a company’s goods or services from others in the market. By safeguarding a brand’s identity, trademarks prevent consumers from being misled by products or services that bear confusing similarities.

Trademarks play a crucial role in building brand recognition and consumer trust. They provide legal protection to businesses, allowing them to establish a unique market presence and differentiate themselves from competitors. This exclusivity ensures that customers can confidently identify and choose products or services associated with a particular brand, fostering loyalty and enabling businesses to thrive in a competitive marketplace.

Copyrights

Copyright laws, a crucial aspect of intellectual property rights, safeguard original artistic and literary works. These laws grant creators exclusive rights to reproduce, distribute, display, and perform their masterpieces. It’s fascinating to note that this legal protection extends even to digital reproductions. Moreover, these rights endure for the entire lifespan of the creator, plus an additional 70 years, ensuring the preservation and appreciation of their work for generations to come.

Trade Secrets

Trade secrets are valuable and confidential pieces of information that provide a business with a distinct competitive edge. They encompass a wide range of proprietary processes, formulas, strategies, or client lists carefully guarded by companies. Unlike other forms of intellectual property, trade secrets remain protected indefinitely, as long as their confidentiality is meticulously maintained. This protection allows businesses to maintain their unique advantages and stay ahead in the ever-evolving marketplace, fostering innovation and fostering sustained success.

Role of Intellectual Property in Startups

The role of intellectual property for startups goes beyond just legal protection. It also serves as a valuable asset that can increase the value of a company. By protecting their innovations and brand, startups can attract investors and potential buyers, and build a strong reputation in the market. Additionally, having a strong IP portfolio can give startups a competitive advantage over their competitors.

Legal Protection

Intellectual property, which refers to the legal protection of a startup’s innovations and inventions, plays an absolutely vital role in safeguarding the fruits of their creativity. This invaluable shield prevents competitors from engaging in unauthorized activities such as copying, selling, or utilizing the startup’s intellectual assets without explicit permission. By providing this comprehensive protection, startups can confidently nurture and capitalize on their ideas, ensuring that their hard work and ingenuity remain exclusive to their endeavors.

Market Differentiation

Intellectual property plays a crucial role in enabling startups to differentiate themselves in a highly competitive marketplace. It encompasses a wide range of unique assets, including innovative products, exceptional services, and distinctive branding strategies. By securing intellectual property rights, startups establish these assets as exclusive identifiers that consumers readily associate with their brand and offerings. This protection not only safeguards their innovations but also enhances their market position, fostering trust and loyalty among customers.

Attracting Investments

A strong intellectual property portfolio can be an incredibly appealing factor for investors. By showcasing a startup’s unique value proposition and potential for growth and profitability, it not only highlights the innovative edge of the company but also provides a solid foundation for long-term success. This comprehensive portfolio encompasses patents, trademarks, copyrights, and trade secrets, creating a robust safeguard for the company’s ideas, products, and services. With such a strong IP foundation, the startup not only gains a competitive advantage in the market but also becomes an attractive investment opportunity for those seeking both innovation and financial rewards. Thus, establishing and nurturing an intellectual property portfolio is a strategic move that can significantly enhance a startup’s credibility, market position, and potential for long-term success.

Increasing Business Valuation

Intellectual property, such as patented technology, copyrighted material, or trademarked branding, plays a crucial role in enhancing a startup’s valuation. These valuable intangible assets not only provide legal protection but also serve as a competitive advantage, distinguishing the startup from its competitors.

By safeguarding innovative ideas, creative works, and distinct brand identities, startups can attract potential investors and buyers who recognize the long-term value and market potential associated with a strong intellectual property portfolio. As a result, the presence of well-protected intellectual property can significantly bolster a startup’s worth and contribute to its overall success in the ever-evolving business landscape.

Creating Revenue Streams

Licensing intellectual property can create additional revenue streams for startups, offering them a strategic advantage in the market. By granting permission to other entities to use their valuable IP assets, startups not only generate income but also establish collaborative partnerships and expand their reach. This diversification of revenue sources further secures their financial position, providing stability and room for innovation and growth.

Enforcing Rights

Intellectual property (IP) plays a crucial role in empowering startups to assert their rights and safeguard their innovations. By obtaining legal protection for their IP assets, startups gain the ability to take legal action against competitors who infringe on their rights, thereby ensuring that their market position remains secure. In the event of infringement, startups can seek appropriate legal remedies and pursue damages, which serves as a powerful deterrent and reinforces their standing in the marketplace.

Fostering Innovation

By protecting and rewarding creativity, intellectual property plays a crucial role in fostering innovation. It provides a safe space for startups to nurture and develop new and unique ideas, knowing that their efforts will be safeguarded by the power of the law. This assurance enables entrepreneurs to push the boundaries of innovation, explore uncharted territories, and drive the progress of industries forward.

With the knowledge that their intellectual property rights are respected, startups can confidently invest in patent search and development, attracting both talent and investment to further fuel their innovative pursuits. Thus, intellectual property serves as a catalyst for growth, incentivizing the continuous creation of groundbreaking solutions that shape our world.

Common Intellectual Property Mistakes Made By Startups

In the fast-paced and highly competitive realm of startups, the oversight of intellectual property rights can be a costly misstep. Some of the common errors made by startups include:

Not Prioritizing IP Protection Early

In their quest for success or fundraising, numerous startups tend to delay securing their intellectual property rights. However, this postponement can unknowingly expose their valuable creations to potential exploitation by competitors, leaving them vulnerable and defenseless. It is imperative for startups to acknowledge the significance of early protection in safeguarding their innovative ideas and maintaining a competitive edge in the market.

Inadequate Research

In their pursuit of innovation, startups sometimes overlook the crucial step of conducting comprehensive patent searches or trademarks. This lack of thoroughness can unintentionally lead to potential infringement issues. If left unaddressed, these issues may escalate into complex and time-consuming legal disputes. Not only do such disputes drain valuable resources, but they also divert precious time and attention away from the core operations of the startup. Therefore, startups need to prioritize diligent research and due diligence to mitigate the risks associated with unintentional infringement.

Lack of Confidentiality Agreements

Startups, in their eagerness to share innovative ideas and business plans, often overlook the importance of ensuring proper confidentiality agreements. This can inadvertently expose their unique concepts or carefully crafted business strategies to potential misuse, putting their competitive advantage at risk. By prioritizing the implementation of robust confidentiality measures, startups can safeguard their intellectual property and maintain a secure environment for nurturing their entrepreneurial vision.

Neglecting International IP Protections

While startups may secure intellectual property (IP) rights in their home country, such as patents, trademarks, and copyrights, they often overlook the importance of obtaining international protections. This can prove to be a detrimental oversight if they decide to expand their operations globally and encounter legal challenges or infringement issues in foreign markets. Therefore, startups must consider the potential risks and benefits of securing IP rights on an international scale to safeguard their innovations and maintain a competitive edge in the ever-evolving global business landscape.

Not Maintaining Proper Records

Startups, in their fast-paced nature, often overlook the importance of maintaining proper records of their intellectual property. This negligence can result in significant challenges when it comes to enforcing their rights or establishing ownership. By prioritizing the establishment and maintenance of comprehensive records, startups can safeguard their valuable intellectual assets and strengthen their position in the competitive landscape.

Lacking comprehension of tax considerations.

Intellectual property can have significant tax implications for startups, and it is crucial to have a comprehensive understanding of these factors. Failing to grasp the complexities of taxation can result in substantial financial burdens or missed opportunities for startups. Therefore, it is imperative for startups to proactively seek professional advice from tax experts who specialize in the complexities of IP assets. By doing this, startups can effectively manage franchise taxes, and sales taxes, and accurately calculate payroll taxes. Additionally, it helps determine the employment status of individuals working within the business, distinguishing between employees and freelancers.

Managing Intellectual Property

Effective management of intellectual property (IP) is crucial for startups to fully capitalize on its benefits. This entails developing a comprehensive IP strategy that aligns with the startup’s goals, meticulously navigating the complex landscape of IP registration and laws, and implementing robust measures to monitor and enforce IP rights.

By strategically safeguarding their innovations and creations, startups can not only secure a competitive advantage but also foster a culture of innovation and creativity within their organizations. With a well-crafted IP management framework in place, startups can confidently navigate the ever-evolving business landscape and unlock the full potential of their intellectual capital.

Conclusion

Intellectual property plays a critical role in the success of startups. It not only provides legal protection but also serves as a valuable asset that can increase business value and give a competitive advantage. As technology continues to evolve, startups need to have a strong understanding of IP and effectively manage their IP assets.

The future of IP management for startups is also expected to evolve, with emerging trends such as open innovation and collaborative licensing. In the end, it’s safe to say that intellectual property will continue to be a critical asset for startup success. So, startups must prioritize their IP strategy from the beginning stages of development.

By doing so, they can position themselves for long-term success in the ever-evolving business landscape. So, whether you are a startup founder or an aspiring entrepreneur, understanding and managing intellectual property should be a top priority. Let your innovative ideas be protected and amplified through effective IP management.

Frequently Asked Questions (FAQs)

1. What is Intellectual Property (IP) and why is it important for startups?

Intellectual Property (IP) refers to creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce. For startups, IP serves as a cornerstone for building competitive advantage, safeguarding innovations, and fostering a culture of creativity.

2. What are the common mistakes startups make regarding IP management?

Common mistakes include neglecting confidentiality measures, overlooking international IP protections, failing to maintain proper records, and lacking comprehension of tax considerations related to IP.

3. How can startups effectively manage their Intellectual Property?

Startups can manage IP effectively by devising a comprehensive IP strategy, maintaining proper records, securing international IP protections, comprehending tax implications, and seeking professional advice when needed.

Oregon Psilocybin – Should Potency Regulations Extend Beyond Psilocybin Analyte?

Psilocybin mushrooms contain both psilocin and psilocybin. Psilocin is the active compound that induces mind-altering effects. Psilocybin (“psilocybin analyte” under OHA rules), although  biologically inactive, rapidly converts into psilocin in the body. Concerns have been raised because the current OHA rules only mandate the labeling of psilocybin analyte. This omission of psilocin from labeling requirements raises concerns that facilitators and clients may not fully understand the potency of the products.

This has triggered growing discussions about the current Oregon Health Authority (OHA) rules for psilocybin analyte testing, labeling, and potency regulation. Complications have emerged because the Oregon Psilocybin Services Act defined “psilocybin” as “psilocybin or psilocin,” consistent with the language in Oregon’s controlled substances act.

During OHA rules advisory committee (RAC) meetings, it was pointed out that a regulatory definition distinguishing between psilocybin and psilocin was necessary because the statutory definition of “psilocybin” includes both compounds. Without clarity on exactly which compounds need testing and labeling, confusion could arise about how to comply with testing and labeling rules (in addition to other rules related to potency calculations, such as session duration and group size). In response, the OHA created the regulatory definition of “psilocybin analyte” to refer specifically to psilocybin alone (not psilocin), thereby making it the sole requirement for labeling under the rules, and the reference point for psilocybin product potency.

Oregon Environmental Laboratory Accreditation Program (ORELAP) rules require testing for psilocybin analyte and “Total Potential Psilocin” which means “the sum of the psilocin analyte concentration and 0.719 times the psilocybin analyte concentration. This number is the maximum theoretical concentration of psilocin in the sample.” One accredited lab, Rose City Labs, already tests for both psilocybin analyte and psilocin, as well as related compounds: baeocystin, norpsilocin, and norbaeocystin. These additional compounds have been found in psilocybin mushrooms and may contribute to the overall potency. Some studies suggest that norpsilocin may be even more potent than psilocin itself. Further complicating the issue, reports suggest that psilocin degrades faster than psilocybin, potentially impacting the accuracy of test results over time.

The existence of these compounds raises the intriguing possibility of an “entourage effect,” similar to the discussions surrounding various cannabis compounds.  The discussion surrounding psilocin testing and labeling also draws attention to the significance of whole fruit mushrooms compared to synthetically derived psilocybin. Some argue that the presence of a diverse range of compounds in whole mushrooms might contribute to a more profound and well-rounded psychedelic experience.

The ongoing discussion about whether psilocin should be included alongside psilocybin analyte in product labeling highlights the need for comprehensive and accurate information for clients. Further research and discussions will be necessary to determine the best practices for testing and labeling within the evolving landscape of psilocybin services.

In a recent letter to licensees, OHA had this to say:

We continue to learn as we move forward with implementation of the Oregon Psilocybin Services Act. We are challenged by being the nation’s first regulated framework for psilocybin services and having limited access to research on natural psilocybin products. Receiving feedback from the regulated community and sharing this feedback with the Oregon Psilocybin Advisory Board is an important part of this process. Beginning in July, OPS will host a monthly series of forums for licensees to convene in a casual dialogue about what is working, what is challenging, and what improvements can be made as we move forward together. Your input is essential and may be reflected in technical revisions to rules in 2023 or more substantive rule revisions that will be considered in 2024.

Copyright Office Guidance Regarding Artificial Intelligence

Understanding copyright law in the age of artificial intelligence can be complex and confusing.  And it will continue to be complex and confusing.  But on March 16, 2023, the United States Copyright Office (the “Office”) published some guidance regarding its plans to handle copyright registration for works containing AI-generated materials.  The Office also intends to seek public input this year on additional topics, including how the law should apply to the use of copyrighted works in AI training.

The Office has identified three main questions to consider: (1) Is the output protectable under copyright? (2) Are generative works with human authorship elements eligible for registration? (3) What information should be disclosed to the Office when registering?

It is well-established that copyright can protect only material that is the product of human creativity. Most fundamentally, the term “author,” which is used in both the Constitution and the Copyright Act, excludes non-humans.

While the Office will examine works with AI-generated materials on a case-by-case basis, they have emphasized that the traditional human authorship requirement still stands. If a work’s authorship elements were produced entirely by a machine, without any human creative input, then the Office will not register it. However, if a human had creative control over the work’s expression and actually formed the traditional elements for an original work of creative authorship, then the work may be eligible for registration.

In the case of works containing AI-generated material, the Office will consider whether the AI contributions are the result of “mechanical reproduction” or if the human author gave visible form to their “own original mental conception.” In other words,  the extent of human creative control over the work’s expression will be a determining factor.  The Office provides this example:

[W]hen an AI technology receives solely a prompt from a human and produces complex written, visual, or musical works in response, the “traditional elements of authorship” are determined and executed by the technology—not the human user. Based on the Office’s understanding of the generative AI technologies currently available, users do not exercise ultimate creative control over how such systems interpret prompts and generate material. Instead, these prompts function more like instructions to a commissioned artist—they identify what the prompter wishes to have depicted, but the machine determines how those instructions are implemented in its output. […] When an AI technology determines the expressive elements of its output, the generated material is not the product of human authorship. As a result, that material is not protected by copyright and must be disclaimed in a registration application.

The Office also stresses that applicants have a duty to disclose any AI-generated content contained within their work. They advise applicants to use the “Limitation of Claim” section to exclude AI-generated content that is significant, more than “de minimis.” If an applicant is unsure, they can disclose as a general statement and the Office will contact them for more information.

Notably, previously registered works with AI-generated content must be updated. If a registration is found to contain AI-generated materials that were not previously disclosed, it may be cancelled.

*The author generated this text in part with Chat-GPT, OpenAI’s large-scale language-generation model. Upon generating draft language, the author reviewed, edited, and revised the language to conform to his own preferences and style and takes ultimate responsibility for the content of this publication

Critical Terms for Intellectual Property License Agreements (Part 2)

An audit provision is a clause in an intellectual property license agreement that provides the right for the licensee (the party receiving the license) or the licensor (the party granting the license) to inspect the records of the other party to verify compliance with the terms of the agreement. This provision is included in intellectual property license agreements to ensure that both parties are complying with the terms of the agreement.

One common reason for an audit is to ensure that the licensee is paying the correct royalty fee. The license agreement will typically specify the amount of royalties that the licensee must pay for the use of the intellectual property. An audit provision gives the licensor the right to inspect the licensee’s records to ensure that the correct royalty fees are being paid. This helps to prevent the licensee from underreporting the amount of royalties owed, which would be a breach of the agreement.

Another reason for an audit is to ensure that the licensee is using the intellectual property in accordance with the terms of the license agreement. For example, if the license agreement restricts the use of the intellectual property to a certain geographic area or market segment, an audit provision can help to ensure that the licensee is not using the intellectual property outside that area. This helps to prevent unauthorized use of the intellectual property.

In addition to protecting the interests of both parties, an audit provision can also help to avoid disputes that may arise under the license agreement. For example, if the licensee disputes the amount of royalties owed, an audit provides a legal right for licensee to review royalty reporting without resorting to a lawsuit. Similarly, if the licensor believes that the licensee is using the intellectual property outside the terms of the agreement, an audit can provide evidence about whether or not a violation is occurring.

It is also important to consider limitations on the use of the audit provision. For example, the audit provision may specify that audits can only be conducted during business hours and with reasonable advance notice. Additionally, the frequency of audits may be limited to prevent excessive intrusion into the licensee’s business.

An audit provision is another critical component of an intellectual property license agreement. It provides a means for verifying compliance with the terms of the agreement, resolving disputes, and preventing unauthorized use of the intellectual property. The inclusion of an audit provision in an intellectual property license agreement helps to protect the interests of both parties and ensures that the license agreement is properly enforced.

Trademark applicants – beware spoofed calls that impersonate the USPTO

Scammers have recently started calling trademark customers and falsely claiming to be an employee with the United States Patent and Trademark Office (USPTO). The scammers use a tactic called “spoofing,” where they trick phone networks into displaying a fraudulent name, number, and location. They’re trying to trick you into believing you’re talking to the USPTO, so they can steal money or personal information from you.

If you receive a call from someone you suspect is a scammer, do not give them any personal identifying or payment information. The USPTO will never ask for your personal or payment information over the phone.

Critical Terms for Intellectual Property License Agreements (Part 1)

Intellectual property (“IP”) license agreements come in many shapes and flavors.  But all IP licenses boil down to one party giving another party permission to use some IP.

IP may include patents, trademarks, copyrights, trade secrets, and rights of publicity.  Some license agreements cover one type of IP like a single trademark, or copyrights for a single song, or maybe a single valuable data set.  But often a single license agreement covers multiple types of IP.

Because each type of intellectual property differs from other types, agreements covering multiple types of IP require different contract provisions.  A trade secret license requires airtight confidentiality terms, for example, while a typical copyright license may not.  So it’s a good idea to hire an experienced IP lawyer to make sure the contract handles each type of IP correctly.  Regardless of the subject IP, well-drafted IP license agreements address certain critical terms.  This series of blog posts will discuss critical considerations for all IP license agreements.

First, all IP license agreements must identify the correct parties.

Although this might seem obvious, it is worth confirming that key parties are correctly identified, consistent with the purpose of the license.  Licensor grants the rights — so does the identified licensor really own or have the right to license all the IP in the agreement?  Or is some of the IP legally owned by someone else?  Should a subsidiary or other party be licensing this IP instead?  It is critical to confirm the IP owner and understand licensor’s chain of title before entering the agreement.  If a licensor cannot legally license the intended IP, the entire deal could collapse.

Conversely, is the licensee (the one receiving the rights) the correct party to be granted the license?  Or should there be a different licensee?  Sometimes additional parties need to use the licensed IP, beyond the initial licensee, to realize the economic benefit of the deal.  But the parties negotiating the deal might not identify all those additional parties at the outset.  If the licensee has a family of related entities, subsidiaries, or key contractors, are they allowed to exercise the licensed rights too?

Typically, the licensee wants open sublicense rights, meaning the licensee can share the IP rights with other parties.  But the licensor wants control over parties who use the IP.  If the licensee and licensor are sharing profits, both parties may benefit from allowing other entities to use the rights, balancing licensor control with licensee’s right to easily sublicense.

If the parties don’t know all the entities that will need to use the rights, they can specify groups of acceptable sublicensees in advance, define what makes a sublicensee acceptable, or list other pre-approval criteria to qualify additional sublicensees.

Unless the agreement specifically prohibits it, basic contract law presumes that the parties can assign a contract to a third party.  Licensors typically want control over assignments, so they aren’t surprised by some new third party using their IP.  At the same time a licensee will want flexible assignability provisions to account for the possibility of reorganization, merger, or other transfers.

For more on IP licensing agreements, stay tuned for Part 2.

Federal Trademarks for CBD: “No CBD2GO” Says Trademark Trial and Appeal Board

The recent case of In re Blue Water Wellness, LLC (Serial No. 87893655) presents a useful summary of the legal status of CBD trademarks (and the USPTO’s “lawful commerce” requirements in general).

The USPTO only allows trademark registration for federally lawful commercial activity.  This gets tricky when someone files a trademark application based upon future “intent” to sell products that have uncertain legal status at the time of filing, but the legal status changes while the application is reviewed by the USPTO.

In this case, the applicant applied for the mark CBD2GO for “dietary beverage supplements for human consumption in liquid and dry mix form for therapeutic purposes; all of the foregoing containing CBD.”

The application was filed on April 28, 2018, and initially refused for being unlawful under the Controlled Substances Act.  That refusal was withdrawn after the passage of the 2018 Farm Bill and, instead, the USPTO newly refused the application for being unlawful under the Food Drug & Cosmetics Act.

Footnote 2, in this case, explains the Trademark Trial and Appeal Board’s logic: following the 2018 Farm Bill and USPTO Examination Guide 1-19, the Controlled Substances Act is no longer a basis to refuse hemp-derived CBD but the Food Drug & Cosmetics Act is a separate basis for unlawfulness and refusal.  As a result, hemp products with ingestible CBD are still generally not an acceptable lawful basis for federal trademark registration.

The Trademark Trial and Appeal Board also clarifies at the end of this case that “1(b) bona fide intent to use” in commerce cannot exist on a trademark application filing date if the applied-for goods are not lawful on that date.  You cannot file “hoping it will become legal.”

That said, with Examination Guide 1-19 the USPTO created an unusual exception for goods that became lawful after the 2018 Farm Bill.  If someone applied for hemp plant biomass-based upon future intent to use when it was unlawful, before the Farm Bill was signed into law on December 18, 2018, 1-19 created an exception for those applicants to amend their earlier filing date to December 18, 2018.  As a result of this exception, applicants who filed earlier (when the goods were unlawful) were rewarded by being able to amend and claim lawful bona fide intent starting from the date the law effectively changed.

Although federal trademark protection for CBD remains challenging (and for cannabis, or any unlawful controlled substance) it may still be advisable to evaluate creative application strategies, file early, and seek extensions in case the USPTO creates similar exceptions for goods that may become lawful in the near future.

Writing Requirements for Copyright Transfers

By default, the author of an original work of creative authorship owns the copyright to that work upon creation.  And under Section 204 of the Copyright Act a transfer of copyright ownership is not valid unless it’s in writing.

That means, with some specific exceptions, an independent contractor who creates an original work of creative authorship fixed in any tangible medium of expression (e.g. written words, musical works, dramatic works, graphic works, pictures, designs, architectural drawings, sculptures, websites, software or computer code etc.) owns the copyright to that work unless a transfer of ownership has been agreed upon in writing.

If you’re an independent contractor, this can create substantial negotiating leverage during (or after) the course of a project because you own the copyright to the work until you sign it away.

If you’re hiring independent contractors, you probably want to ensure that your contractors have signed off to transfer copyright ownership. Otherwise you might find that you don’t actually own the creative work you thought you paid for.

We have seen both sides of it, even among sophisticated people: both contractors and businesses that hire them sometimes neglect the fundamental issue of copyright ownership when they agree to work together.  Clients have showed us invoices, email correspondence, text messages, detailed scopes of work, and even formal contracts with assertive language about payment timing, recordkeeping, portfolio rights, warranties, indemnification, and limitations of liability.  Yet they sometimes overlook the critical concept of copyright ownership of the work product.  It doesn’t need to be complicated — a simple one page contract (or a single boilerplate phrase) identifying and transferring the work can do the trick.

A few important notes and caveats:

A well-known exception to this writing requirement applies to copyrightable works prepared by an employee “within the scope of his or her employment” (not acting as an independent contractor).  Copyright ownership for such work automatically vests with the employer as “works made for hire.”  Critically, this exception requires (a) employment status and (b) acting within the scope of employment.  Employment status is often (but not always) fairly clear (think W-2, payroll).  But sometimes an employee’s scope of employment is not clear if it isn’t written down in their job description or employment contract.  Software code from a salaried computer programmer or an employee manual from a human resources director are clearly works within the scope of their employment — but what if those employees took photos for their employer’s website while on the clock?  Created logo designs?  It isn’t always clear whether or not creative works fall within an employee’s job description.  Whenever there’s doubt, it is safest to have a signed contract.

And we’re talking about copyright ownership here, which is different from permission to use the copyright (also known as a license).  Oregon sits within the 9th Circuit where courts can find an implied license under the right circumstance, where permission to use the materials is understood although ownership does not transfer.  But relying on such implied licenses is risky and uncertain because the parameters of implied licenses aren’t always clear.  How long does the license last?  Does it cover all types of uses of the work?  Is it transferrable?  Can the license be terminated?  Without a clear written understanding, material disagreements can develop later.  So despite the possibility of implied licenses, it is best to have a written document in place, even a short one, to ensure that everyone understands who owns the copyright.

USPTO Issues New Guidance for Cannabis-Related Trademark Applications

On May 2, 2019 the United States Patent and Trademark Office (USPTO) issued new guidance regarding cannabis-related trademark applications following the 2018 Farm Bill.  Although it’s not the best news for cannabis businesses, it’s not the worst news either, and it adds some welcome clarity to an otherwise muddy, inconsistent area of trademark practice before the USPTO.

The USPTO will continue its standing policy of refusing to register marks for cannabis-related goods and/or services that violate federal law (…although I still contend that this policy is wrong-headed, inconsistent with the USPTO granting cannabis patents, and contrary to the purposes and plain language of the Lanham Trademark Act which provides for registration of marks used in commerce, defined as “all commerce which may lawfully be regulated by Congress” i.e. all commerce that can be regulated and/or prohibited under Congress’ lawful powers, not merely commerce that is deemed lawful — but that’s a tirade for a different blog post or perhaps an appeal to the United States Court of Appeals for the Federal Circuit…).

Pursuant to the new guidance, the USPTO will continue evaluating whether goods or services identified in trademark applications are lawful under federal law including the Controlled Substances Act, 21 U.S.C. §§801 et seq. (CSA) in addition to the Federal Food Drug and Cosmetic Act, 21 U.S.C. §§301 et seq. (FDCA), and the Agriculture Improvement Act of 2018, Pub. L. 115-334 (the 2018 Farm Bill).  This much remains the same, so applicants can still expect to be denied trademark registrations for goods or services that are obviously unlawful (*cough* through Congress’ lawful regulating *cough*) under those statutes.

The new guidance now explicitly recognizes the status of hemp under the 2018 Farm Bill.  The 2018 Farm Bill removed “hemp” from the CSA, where hemp is defined as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids [like CBD], isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol [THC] concentration of not more than 0.3 percent on a dry weight basis.”  As a result, cannabis and derivatives such as CBD, from hemp plants that contain no more than 0.3% delta-9 THC on a dry-weight basis are no longer controlled substances and therefore cannot be refused trademark registration on the basis of violating the CSA.

However, even if hemp-derived goods are legal under the CSA, not all CBD or hemp-derived products are lawful under the 2018 Farm Bill.  The use in foods or dietary supplements of a substance undergoing clinical investigations without approval of the U.S. Food and Drug Administration (FDA) violates the FDCA.  The 2018 Farm Bill explicitly preserved FDA’s authority to regulate products containing cannabis or cannabis-derived compounds under the FDCA.  CBD is an active ingredient in FDA-approved drugs and is a substance undergoing clinical investigations.  So the USPTO will be skeptical and likely deny applications for foods and dietary supplements touting CBD as an ingredient.

For applications involving “hemp,” the guidance reminds everyone that the USPTO examining attorney has authority to issue inquiries concerning the applicant’s commerce, and will specifically require information about the applicant’s authorization to produce hemp.  Applicants will be required to provide additional statements for the record to confirm that their activities meet the requirements of the 2018 Farm Bill.  Notably, the trademark office doesn’t issue inquiries about complex regulatory compliance in other highly regulated industries.  The USPTO doesn’t ask whether SHELL or MARLBORO, for example, comply with all applicable laws and regulations when they apply for trademarks.

Furthermore, the CSA still makes marijuana illegal, including “all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin.”  So, under this guidance we can expect the USPTO to refuse registration when an application identifies goods encompassing CBD or other extracts that originate from marijuana (rather than hemp) because such goods remain unlawful under the CSA.

Despite the USPTO’s never-ending efforts to foster consistency among USPTO examiners, practicing trademark lawyers commonly complain about how different USPTO examiners review applications with different levels of scrutiny and care.  I like to cut the examiners some slack because they have enormous caseloads and their job is to be an expert on trademark law, not criminal law, FDA regulations, or agriculture.  But given the complicated, evolving status of cannabis’ legality, cannabis-related trademark applications have received particularly inconsistent treatment depending upon the USPTO examiners assigned to them.  Some cannabis-related applications would be rejected (for identifying unlawful “drug paraphernalia” for example) while others would not.  Because of that inconsistency, many astute cannabis businesses have successfully followed a “spaghetti strategy” tossing applications at the wall to see what sticks.

What’s new and helpful with the May 2nd guidance is the USPTO’s specific guidance about the lawfulness of cannabis, its byproducts, and related goods or services with an emphasis on clarifying the legal status of hemp and CBD.  This will help overworked USPTO examiners understand current cannabis laws so they can more consistently determine the lawfulness of goods or services listed in cannabis-related applications.

Options for cannabis businesses seeking brand protection at the federal level remain limited and complex.  And I expect that inconsistent results will continue, especially for goods or services that make more creative uses of cannabis and cannabinoids.  But at least the trademark office has taken a closer look at these issues and examiners should be granting more registrations more easily for lawful cannabis-related trademark applications.