| Protecting Your Intellectual Property: Trade Secrets, Business Methods, and Domain Names Another in the Smart StartSM Series. (Originally printed in Priority Read - Business Law Update, May 26, 2000)  Your organization's intellectual property may be one of its truly irreplaceable assets, and you need to protect it. New rules and rulings from several sources can help. TRADE SECRETS If you've ever consulted an attorney about protecting your business's valuable know-how or technology, you've probably been told you have two options: keep it a trade secret under Michigan common law or seek patent protection. Now the situation has changed. Michigan recently adopted the Uniform Trade Secrets Act to protect trade secrets, prohibit their disclosure, and provide remedies for violations. So, where common law (case law) used to provide the only means for trade secret protection outside the federal patent process, now there is statutory law. The new Act creates a substantial change, sometimes clarifying existing common law and sometimes broadening the existing protection for trade secrets. Under the common law, Michigan courts held that a trade secret may consist of any formula, pattern, device, or compilation of information that is used in one's business and creates an opportunity to obtain an advantage over competitors who do not know or use it. The trade secret could have been a formula for a chemical compound, a process of manufacturing, treating, or preserving materials, a pattern for a machine or other device, or a list of customers. What was crucial was that the information was used in one's business. The Act provides a new definition of a trade secret and extends it to methods and techniques, including know-how. It does not require that the trade secret be used in one's business, only that it have "independent economic value." This means that negative information - the discovery, through research and development, that something will not work - can be protected, since it has significant economic value to one's competitors. The common law did not protect it, since it was not actually "used in one's business." The Act clarifies what is considered misappropriation and in certain situations extends liability to third parties. Further, the Act expands a court's ability to provide relief to an aggrieved party by authorizing awards of royalties, attorney fees, and extended injunction periods. Finally, it codifies certain defenses to an action for misappropriation and clarifies the running of the statute of limitations for causes of action related to trade secrets. BUSINESS METHODS Are your business methods original, innovative, valuable, even patentable? If that question has occurred to you, you should pay close attention to a recent federal court decision that examined the patentability issue and answered "yes." Signature Financial Group, an administrator and accounting agent for mutual funds, obtained a patent on a computerized accounting system that managed mutual fund investment structures. The software allowed Signature to pool the investments of several mutual funds into a single portfolio, gaining the benefits of economies of scale while maintaining the form of a partnership with its associated tax advantages. It allocated the pooled assets, income, expenses, and net realized and unrealized gains and losses among all the mutual funds in the partnership on a daily basis. State Street Bank & Trust Co., the plaintiff in the lawsuit, was in the same business. When its efforts to negotiate a license to use the software failed, it sued Signature, asking the court to invalidate Signature's patent based on the well-accepted principle that methods of doing business are unpatentable. However, the Federal Circuit disagreed, stating that Signature's software performed operations that constituted a practical application of a mathematical algorithm, formula, or calculation, which produced a useful, concrete, and tangible result - and thus was patentable. This decision opened the door to patenting of all sorts of innovations - one judge on the panel characterized it as rendering virtually anything patentable. To be patentable, a business method must satisfy the usual statutory requirements. The method - though not the principles underlying it - must be novel and not obvious to persons skilled in the relevant field or occupation. The basic accounting methods used by Signature were widely known, as were the tax advantages of partnerships, but its system was patentable because it assembled known principles in a novel manner and produced a useful result. Business method patents can produce impressive profits from both licensing fees and infringement recoveries. They can also be used as a shield to protect the essence of a business. DOMAIN NAMES In the last five years, e-commerce has been the fastest growing area of business in our society. One result is that Internet domain name extensions are rapidly being exhausted, requiring the development of many new suffixes to handle the demand. Many domain names have acquired trademark status, and the owners are registering them with the United States Patent and Trademark Office at record rates. For that reason, the Patent and Trademark Office recently issued new guidelines for listing top-level domains on the federal registry. One rule worth noting is that using a domain name on letterhead or business cards does not confer trademark status on it. The Patent and Trademark Office states that if the proposed mark is used as nothing more than the applicant's address, it will not be registered. Ads that urge customers to "visit us on the web at www.xyz.com" will not earn trademark status for their domain names. The Office pointed out that actual services connected to a domain, such as providing information about a particular field, could still make it eligible for trademark registration. Another important domain name issue is cyber squatting, or warehousing the practice of registering domain names without linking the names to active Web sites. The International Trademark Association has recently argued that Internet Corporation for Assigned Names and Numbers should adopt a policy that identifies warehousing as an example of bad faith domain registration. Other experts oppose this change. GET THE ADVICE YOU NEED The rules and laws that govern intellectual property are complicated, and they're changing rapidly. If you have questions on issues like trade secrets, business methods, or domain names, please contact the author. For more information on this subject or to speak with one of our attorneys, please contact us. | 
