A LEGAL TOOL KIT FOR RESPONDING TO RESULTING
INTELLECTUAL PROPERTY ISSUES
SEEMA A. KHAN A
In the last twenty years, new technologies and their resultant new intellectual
property (“IP”) issues have developed at such rapid pace that the law has struggled to
respond. Federal agencies, therefore, are reviewing the effect of intellectual property on
competition and innovation.1 At least one federal judge is calling for the creation of a
national law reform commission2, while academics are pondering the whys and
wherefores of intellectual property law in an effort to create new constructs.3
Practitioners though are the ones that are caught in the crosshairs of emerging
technologies and IP issues. At the forefront of the legal landscape because they actually
deal with the clients creating the new technologies, practitioners are left with the
unenviable task of having to apply uncertain law and new legal theories to clients who
have already moved to the next best thing. From electronic signatures,4 original business
content on web pages,5 hyperlinks/deep links/framing,6 virtual reality games on the
internet,7 reverse engineering encrypted technologies,8 to yourcompanysucks.com and
Ms. Khan is Of Counsel to Tradescape Corp., a corporate group that consists of securities, brokerage,
technology and ECN companies.
See (hptl) PTO, IP REPRESENTATIVES SEE NO NEED FOR LEGISLATIVE CURBS ON
INTERNET PATENTS, 61 PTCJ 573 (April 13, 2001); See also FOREWORD: BEYOND
MICROSOFT: ANTITRUST, TECHNOLOGY, AND INTELLECTUAL PROPERTY, Glasgow, Lara
J.; Vaz, Alicia N., 16 Berkeley Tech. L.J. 525 (Spring 2001)
See FEDERAL JUDGE CALL FOR PATENT REFORM COMMISSION, Sandburg, Brenda, The
Recorder, March 6, 2002, (hptl:Brenda Sandburg,The Recorder)
See DOES TECHNOLOGY REQUIRE NEW LAW?, Friedman, David, 25 Harv. J.L. & Pub. Pol'y 71
(Winter 2002), and see also INTELLECTUAL PROPERTY, ANTITRUST AND THE NEW ECONOMY,
Cohen, Linda R.; Noll, Roger G., 62 U. Pitt. L. Rev. 453 (Spring 2001).
See FEDERAL AND STATE ELECTRONIC SIGNATURE LAW IN THE UNITED STATES:
FROM THE E-SIGN ACT TO CLICK WRAP: A LEGAL GUIDE TO THE CREATION OF BINDING
TRANSACTIONS IN ELECTRONIC COMMERCE , Hillis, Bradley J. , 634 PLI/Pat 161, Practising
Law Institute PLI Order No. G0-00N1 (February 2001).
See COPYRIGHT AND THE INTERNET, Oratz, Lisa T.; Wagner, Matt, 3 NO. 8 E-Commerce L.
Rep. 2 (June 2001).
See E-COMMERCE DISPUTES: LEGISLATION AND LITIGATION ARE THE BRAVE NEW
WORLD, Lunseth II, John B., 68 Def. Couns. J. 280 (July 2001).
See THE NEW PATENT LANDSCAPE, Freed, Joel M.; Reynolds, Thomas C., Computer and Internet
Lawyer 1 (December 2001)
See Universal City Studios, Inc. v. Reimerdes, 111F. Supp. 2d 294 (S.D.N.Y. 2000).
other cybersquatting nightmares,9 emerging technologies are changing the way attorneys
advise their clients and handle their roles as in-house or outside counsel.
This paper seeks to provide practical guidance on counseling e-commerce
businesses on the intellectual property issues that face them when they generate new
technologies. To best deliver practical advice as to “what to do” versus just identifying
issues and then explaining the current state of the law, Part I recognizes the common
themes that run through the intellectual property issues in new technologies, and
examines the law’s response to such themes to date. Then, Part II delivers a legal tool
kit, similar to a programmer’s software tool kit, that a practitioner can take into any legal
role, to perform her job well. Part II also presents practitioners with a business and
interpersonal skills action plan that will increase the impact of their advice.
EMERGING TECHNOLOGIES IN E-COMMERCE BUSINESSES:
NEW INTELLECTUAL PROPERTY ISSUES WITH OLD THEMES
In the last sixty years, three major developments have blended to transform the
global economy – the invention of the computer,10 the creation of the Internet,11 and the
proliferation of the two within global society. Combined, the foregoing events have
ushered in the Information Age. This is a time in which easy access to information and
technology has created commerce based on data versus physical goods and services,
which has proven a catalyst for new inventions and revolutionized underlying methods of
doing business. Such “e-commerce” businesses, whether focused on business-to-
business models (B2B) or business-to-consumer models (B2C), have broken IP ground
and propelled IP into the virtual arena as well. Examining the four areas of IP law and
certain representative new technologies and their issues within them will help to identify
recognizable IP themes that run through these issues.
Intellectual Property Law and New Issues
New technologies have besieged all four main areas of IP: patents, copyrights,
trademarks, and trade secrets/confidential information. Patents have proliferated without
understanding of the technologies that seek patent protection. Technologies that once
protected copyrightable works even without copyright law have now led to technologies
that make copyright law powerless to protect even registered, copyrighted materials.
Trademarks have entered into a no-man’s land on the domain name system. For all
See Notes from the 3rd E-commerce Roundtable, 12-2 PM Tuesday, June 13, 2000, held at the US PIRG
Office, Washington, D.C.
The first computer utilizing electronic storage of data was invented in 1945. The first economically
attainable personal computers were sold in 1975. For a full history of the development of the computer, see
The military commissioned the first inter-computer communication network, based on a Defense
Department study that such a network would be most secure in the event of a nuclear attack. The physical
network was actually constructed in 1969, linking four nodes: University of California at Los Angeles, SRI
(in Stanford), University of California at Santa Barbara, and University of Utah. For an efficient timeline
of the Internet’s history, see www.davesite.com.
practical purposes, trade secrets & confidential information are only a click away from
general dissemination on the Internet.12
IP law has been unable to respond to these problems with the same efficiencies as
those created by the technologies it seeks to regulate or protect. Emerging technologies
impact the law in the following manner:
(1) they adjust the cost of violations, and enforcements, of existing legal rules;
(2) they alter the underlying facts that justify legal rules; or
(3) they change the underlying facts implicitly assumed by the law, making
existing legal concepts and categories obsolete, even meaningless.13
The law responds to such changes by selectively altering its rules legislatively or via
judicial interpretation. Rarely does the law select to transform itself anew. Because new
technologies have revolutionized existing industries or created new ones, they more often
than not fall into category 3 in terms of impact, but the law has only responded in its age
old fashion. However, this may be the only way that courts and the legislature may be
able to respond, as one Federal Circuit Court judge has stated. “Courts aren't equipped to
tinker with the patent system. We're backward-looking, interpretive. Congress also is
limited in its ability to modify the patent system. Every time Congress reforms patent
law it has to issue follow-on law for the next four or five years. . . .at which time the next
round of change is being advocated.”14 The judge has proposed establishing a Law
Reform Commission (consisting of members of academia, industry, and the legal
community), similar to one in Australia, which would have the running task of revising
intellectual property law.15 Until that occurs, however, the prospect facing practitioners is
one of wading through legal rules that result in strange consequences.
On the patent scene, the seminal case of State Street Bank & Trust Co. v.
Signature Financial Group, Inc.16 has in essence created a new category of patents
(business method patents, and their offshoot – Internet patents – usually based in the
software industry), but the United States Patent and Trademark Office (“USPTO”) has
been unable to apply it effectively because of the sharp increase in number of patent
applications being filed each year.17 Prior to State Street, conventional wisdom dictated
that patents that attempted to cover business methods were overly broad.18 The appellate
court reversed, and State Street has now been interpreted to define business methods
patents as patents for those methods for processing data (or performing calculation
operations) and uniquely designed for or used in practicing, administrating, or managing
For more examples of how new technologies have raised new intellectual property issues, see
SYMPOSIUM FOREWORD: INTELLECTUAL PROPERTY CHALLENGES IN THE NEXT
CENTURY, Kesan, Jay P.; Ulen, Thomas S., 2001 U. Ill. L. Rev. 57 (2001).
DOES TECHNOLOGY REQUIRE NEW LAW?, Friedman, David, 25 Harv. J.L. & Pub. Pol'y 71, 71
Supra Note 3, at 1 (Judge Paul Michel of the U.S. Court of Appeals for the Federal Circuit).
Id., at 2.
149 F.3d 1368 (Fed. Cir. 1998).
Reportedly, business method and Internet patent applications have exceeded 10,000 in the past three
years. See Supra Note 2, 61 PTCJ 573.
927 F. Supp. 502, 516 (D. Mass. 1996)
an enterprise; techniques used in athletics, instruction, or personal skill; and any
computer assisted implementations of such methods and techniques.19 Utilizing the State
Street logic, a recent bill considered by Congress defined a business method invention as
meaning any invention that is a business method (including software or other apparatus)
and any invention composed of any claim that is a business method.20 A sub-set of
business method patents - Internet patents - utilize the same logic.21
The problem with State Street is that it results in potentially any computerized
method of doing business becoming eligible for patenting. Congress has considered this
problem by introducing legislation that would create a more rigorous review for such
patent applications and improve upon the prior art available for consideration during the
review.22 Most interestingly, the proposed legislation has carved out the business/Internet
patents that are creating the greatest consternation: non- novel computer implementations
of a pre-existing invention, for the most rigorous review. Such review would include
opportunities for the general public to present prior art before issuance, require applicants
to disclose prior art search results, and implement an opposition proceeding for granted
business method patents (including appeal rights for opposers).23 Congress seems to be
attempting to yank the patent subject matter and patent process for business method and
Internet patents after State Street back into familiar territory so that it is in line with all
aspects of patent analysis – emphasizing again the novelty and unobvious nature of the
subject matter as a whole, versus novelty of process alone.
The Internet has led the entertainment industry into nightmare territory not even
envisioned by Clive Barker – free dissemination of entertainment industry products.
Recent litigations involving Napster, MP3.com, and DeCSS have changed the focus of
copyright law application to the problem of piracy. Whereas copyright law enforcement
appeared to be concentrated on large scale, organized pirating, now it focuses on the
technology that results in pirating.24 Such technology makes the individual, a previously
invisible actor in the piracy field, a real threat to entertainment industry economics
because the technology enables the individual to find and use all desired products for
free. The cost prohibitive nature of prosecuting each person who used the technology
forced the aggrieved parties to prosecute the technology providers themselves.25 The
result has been to open the legal analysis on copyright protection to concentrate on the
See Supra Note 8, at 2.
Id. at 2-3.
Id. at 3.
The technology at issue allows for de-encryption of any protective encryption code, and the ability to
download products such as songs from one personal computer to another.
See A&M Records v. Napster Inc., 239 F.3d 1004 (9th Cir. 2001) , aff'g in part, rev'g in part and
remanding, 114 F. Supp.2d 896 (N.D. Cal 2000); UMG Recordings Inc. v. MP3.com Inc., 92 F. Supp.2d
349 (S.D.N.Y. 2000); DVD Copy Control Association Inc. v. McLaughlin, 2000 WL 48512 (No. CV
786804, January 21, 2000, Superior Court, Santa Clara County, California, order granting preliminary
purpose of the technology at issue. If the technology serves no other legitimate purpose
than to circumvent copyright status, then it will be enjoined from use.26
However, practical problems are inherent in the judicial interpretation of
copyright law to allow for prosecution of technology providers or inventors as
contributory actors in copyright infringement actions. While federal copyright law has
pre-eminence in the United States, it does not have pre-eminence on the Internet.
Proliferation of banned technology can occur through virtual grass roots distribution
regardless of official sponsorship by a company. The cases cited above are too recent to
determine whether they will have a chilling effect on technological innovation (although
that is unlikely given the maverick mentality of Internet denizens). Because technology
has made it impractical to rely on copyright law alone, Congress has stepped in to offer
some respite in the form of the Digital Millennium Copyright Act27 and the No Electronic
Theft Act28 both of which deal primarily with copyright issues.29 In sum, the acts allow
owners of intellectual property to protect it by non-legal mechanisms, such as impeding
the spread of devices for subverting technological protection. A side benefit of the acts
could be advances in technologies that prevent de-encryption or improve firewall
protection, which may create a whole new host of IP issues. The reality is that
technology is leading the law, and probably will for some time to come.
Trademark law is no exception. A representative example of the tensions facing
trademark law in new technologies is the domain name disputes. Although Congress has
passed legislation proscribing “cybersquatting”,30 domain name systems do not yet
differentiate between applicants who hold trademarks in names, and those who may be
registering the names for financial gain. Instead, they still operate on a “first come, first
served” basis, even for top-level domain name addresses. Trademark owners must prove
bad faith on the part of a registrant to enjoin use of the domain name or regain ownership
of it.31 Judicial review of the issue has resulted in tests that balance trademark law and
rights against First Amendment rights.32 Regardless of prohibitively costly enforcement
actions, the domain name dispute can become a practical business and legal headache if
not handled appropriately at the outset as illustrated by the following
A Verizon representative discussed Bell Atlantic’s problems with cybersquatting
in a roundtable discussion on the issue. Because Bell Atlantic actively polices certain of
See supra Note 8.
17 U.S.C. §§1201-1204 (Supp. 2000).
105 P.L. 147; 111 Stat. 2678 (Dec. 16, 1997).
For an excellent summary of key provisions of both statutes, see supra Note 7.
The Anticybersquatting Consumer Protection Act, 15 U.S.C. §1125, see supra Note 7 for an excellent
See supra Note 9; see also Whose Name Is It Anyway? Arbitration Panels Favoring Trademark Holders
in Disputes Over Web Names, Flynn, Laurie J., N.Y. Times, Sept. 4, 2000, at C3; Suffix Expansion Starts
Address Grab; New Web Domains Provoke deja vu, Cha, Ariana Eunjung, Wash. Post, Nov. 11, 2000, at
its marks, most significantly the “Verizon” one, it has run across practical problems in
protecting its branding of the Verizon mark, including shutting down traffic that was
diverted to porn sites. Discovering hundreds of domain names with the word “verizon”
in them, Bell Atlantic investigated the sites by using the “Whois” database. One search
result indicated that a private individual owned the registration to
“verizonreallysucks.com”, but the site was not active and did not have any content. Bell
Atlantic sent the individual a “cease and desist” letter, after which the site became active.
To Bell Atlantic’s chagrin, the individual was also the editor of a popular Internet
“hacker” magazine. The magazine then registered the domain name,
began publishing articles on Bell Atlantic, the domain name controversy and other
content designed (from a corporate perspective) to get Bell Atlantic’s proverbial goat.33
Similar treatment has been afforded to other companies that have utilized a heavy-handed
approach in trademark enforcement, often creating greater public ill will, than that
associated with the original complained-of site. Because of the relative anonymity of
domain name registration, the exorbitant costs of enforcement, and the public relations
problems that may result, companies are now supporting the creation of top-level domain
name sites, such as “.sucks” that clearly indicate the registrant is utilizing the site for
legitimate purposes (e.g. exercising First Amendment rights to critique the company) and
prevent the owner from re-selling the site to the company being critiqued.34 The
controversies associated between domain name registrants and trademark owners are not
as fierce as they once were, but the inherent tensions remain, with solutions to those
tensions arising from practical business applications rather than the law.
Trade Secrets and Confidential Information
Owners of trade secrets, whether corporate or academic, are applying the same
principles of practical solutions to the problems associated with the Internet as trademark
owners are, instead of relying on the law. In a time when a vast quantity of information
can be stored on a tiny disc, and data can be sent with a click of a button, guarding a
business’s trade secrets and confidential information has become more difficult than ever
before. The rise of de-encryption technology has made even more difficult the task of
protecting trade secrets, which can no longer even be hidden in embedded code.
Although of not much practical use, courts have at least held that publication on the
Internet of a trade secret does not extinguish the protected status of the trade secret.35
Basic Themes and Underlying Policy Goals of IP Law
A review of the IP issues raised by new technologies, whether concerning patents,
copyrights, trademarks, or trade secrets, indicates that at the heart of every issue lie basic
themes that allow the IP issues to become approachable when inventing creative solutions
and responses. No matter how new the technology or how innovative the inventions, the
basic themes to IP analysis have remained the same: balancing ownership and rights
See supra Note 10, discussion with Beth Deutsch of Bell Atlantic.
See supra Note 10.
Religious Technology Center v. Netcom on-Line.com, 923 F. Supp. 1231 (N.D. Cal. 1995).
associated thereto with access to information and control of that information. The need
of the practitioner to provide cogent advice to her client in the face of uncertainties in the
law, is met by answering the questions to the foregoing themes:
-who owns the property in question?
-what rights are associated with the ownership, if any?
-who can use the property?
-how can the property be used?
-who has control of that use?
-how is that use controlled?
Furthermore, understanding that the underlying policy to IP law desires to foster social
welfare innovation and efficiencies in the market place, also helps to generate practical
responses to, and refines the analysis associated with answering, the questions above.
A LEGAL TOOL KIT FOR COUNSELING E-COMMERCE BUSINESSES
ON EMERGING TECHNOLOGIES AND NEW IP ISSUES
Appreciating the fundamental themes of, and policy reasoning for, IP law, makes
the new IP issues that surround emerging technologies less thorny, and more an
interesting puzzle whose key is just beyond reach. Finding that key becomes easier with
a well-equipped legal tool kit. Some essential documents, a few template policies, certain
guides to corporate behavior, and a personal plan of action, form the components of a
legal tool kit for managing, maintaining, and protecting an e-commerce business’ new
technologies. Like a software programmer’s tool kit, or a plumber’s favorite toolbox, the
legal tool kit should enable a practitioner to respond to any situation both pro-actively
and defensively. Because most e-commerce businesses develop at the same speed as the
technologies upon which they operate, a personal plan of action should be the first item
prepared, with IP policies following a close second. Finally, certain templates for
employment & consulting agreements, corporate transactions, and tax strategies should
round out the legal tool kit.
Essential Personal and Business Skill Sets
Whether in-house or outside counsel, the way in which lawyers counsel their
clients has to change. Simply having facts relayed is no longer sufficient because they do
not necessarily capture the reality of the new technologies. In-house counsel must
become more actively immersed in the business, and outside counsel should do the same
for those clients without in-house counsel.36 Understanding what the company does is
more important than ever now because of the general lack of understanding of what
emerging technologies actually do or how they impact the economy, other industry
participants, their particular field, etc. After all, if a client’s counsel does not understand
what the client does and how the client does it, how will the counsel defend the client or
explain its position in the event of a dispute?37 Therefore, the cornerstones of the client
relationship should be participation, education, and testing – a “PET Plan”.
Fee offerings of outside counsel need to become more competitive to respond to this type of time-
intensive preparation required for constant counseling and legal management.
“Participation” requires the practitioner to be available “24/7” in e-commerce
parlance, because those are the hours that these businesses operate. Attend business
strategy meetings or create them if none exist by requiring the senior executives to meet
at least once a month to discuss focus of products, development of the business, realizing
corporate opportunities etc. Meet with the company’s middle-management as they are
the employees entrusted with actually executing strategies. Understanding what they do
to effect the strategies is as important as understanding the strategies themselves. Go to
technology development meetings, or if no such regularly scheduled meetings exist
(which is often the case), drop in on the software programming team to chat. Technology
teams are notoriously silent with attorneys and do not often share progress except with
those whom they trust with the integrity of their thought processes and programming
discoveries. The more visible, approachable and part of the fabric of business life the
lawyer is, the more likely other employees will share information with her. The
foregoing is easier for the in-house counsel to practice, but outside counsel who fulfill an
in-house lawyer’s role for an e-commerce company, should make the time to
“Education” mandates that counsel inform her business team of developments of
the law and the effect of the IP policies that she drafts for the company. Organizing
seminars on different topics such as the effect of patent portfolios on a company’s
business, for example, creates a dynamic atmosphere for the business people and links
their work to the world outside the company’s walls. Inviting speakers from other
industries/companies to speak on such topics alleviates the burden of presenting on
counsel and also stresses to the business people that “their” counsel is not the only one
advocating certain conduct. While these are time consuming activities, educating the
unsophisticated entrepeneur or updating the seasoned executive, will foster greater
communication with counsel, and make her “Participation” more meaningful.
“Testing” necessitates that lawyers should use the products and/or the services
offered by their clients. The software experience, or following the route that information
travels, or taking the services gives an entirely different perspective to the attorney. The
lawyer obtains greater depth of understanding of her client’s business, and also is able to
spot intellectual property, and other issues, more clearly because she is not relying solely
on descriptive facts, but the product/conduct itself. New technologies, even if they have
only revolutionized an older method of doing business or improved upon an existing
product, are unique enough that simple descriptions do not always capture their essence.
Testing is therefore essential to rendering good counsel.
In fact, Judge Michel of the Federal Circuit has publicly lamented the lack of practical information
contained in most, if not all, briefs for cases that come before him – especially as judicial precedent is not
necessarily helpful in cases that concern novel issues. Supra Note 2, at 2.
Once a practitioner has prepared her PET Plan, she should have ready a portfolio
of IP policies to instill if none exist, and to review for updating if policies have already
been passed. Necessary IP policies for every e-commerce business are an IP
development policy, strategic partnership policy, and a trade secret/confidential
information policy, and an IP reward/employee participation program. All such policies
should be reviewed at least annually for compliance with law and alignment with
corporate purposes, and should be clearly communicated to all employees.
An IP development policy should contain a game plan for the development of
patents, copyrights, and trademarks/service marks. It should serve as the internal
blueprint as to why, when, and how a company should pursue IP development. The
policy should create an IP steering committee consisting of the following members:
counsel, a business executive responsible for overall corporate strategy, a
marketing/advertising/public relations strategist, and the chief technology officer – or
equivalent thereto, all of whom would be responsible for a running review of the
company’s IP portfolio and choosing which IP the company would develop. A template
policy can be tailored to a specific business by correlating the development to the
corporate purpose and general business progress. The products/services/business
methods not chosen for specific development that have been brought to the steering
committee or counsel’s attention, should be kept by counsel and relegated to trade secret
status. The items rejected by the steering committee can become part of a company’s
trade secret portfolio. The policy should provide for tracking of the company’s industry’s
A strategic partnership policy guides a company’s management in its use of the
company’s intellectual property in corporate relationships. In essence, it manages the
company’s alliances. Clearly setting forth such a policy early in an e-commerce
company’s development can help to focus the company in its goals and prevent it from
wasting valuable resources by chasing every pot of gold that appears. Because the
traditional merger and acquisition scenario is proving cost prohibitive for many e-
commerce businesses to leverage their technologies, a strategic partnership policy should
set forth what types of relationships in general a company will pursue. Licensing, joint
ventures, and marketing initiatives are the current, preferred methods for capitalizing on
symbiotic research and development and technologies. Counsel should have
standardized agreements prepared that can be used as the base from which a company
will negotiate. Such agreements at a minimum should have clauses dealing with the
following subject matter areas:
-ownership assignation of products created prior to the relationship, products
created independently after the relationship , and products jointly created;
-ownership and/or management of the customer relationship;
-royalties provision in the event of patent grant;
-designated/restricted use of trademarks, service marks, or other identifiable
marks to a company, including quality control;
-change in control/assignment/termination;
-limitation of liability;
-exit strategies in the event of bankruptcy, product death, etc.;
-time limitation for definitive agreements in the event that letters of intent are
entered into first (good faith/non-binding nature/exclusivity provisions).
If the relationship is a major strategic initiative in which your company’s IP or material
resources are at issue, conduct an IP due diligence inquiry on the other party similar to
that conducted in a merger/acquisition transaction.
As a special note, protecting intellectual property interests should be balanced
against anti-trust issues. Therefore, in drafting such agreements, care should be taken
that any contractual restrictions on the use of the company’s intellectual property do not
convey monopoly power or unnecessarily restrict competition. Such clauses may
constitute anti-competitive conduct, which may provide a competitor an independent
basis for complaint that no amount of IP preparation will be able to counter.38
A general trade secret and confidential information policy seeks to set forth
clearly the company’s views on protecting its confidential information. Restrictive
covenant agreements (discussed infra section on General Legal Documents), corporate
seminars on protection of confidential information and enforcement procedures for such
protection all comprise such a policy. Publicize the policy on the company’s intranet,
email it to all employees, and post it in the common areas.
An IP reward/employee participation policy ensures that you have the cooperation
of the business principals. After all, they are the source of the information you need. A
reward policy creates a remuneration scheme to encourage employee participation in the
IP development process, aligning their interests along with the company’s. It may grant
bonuses upon identification of patentable materials, to the inventors identified upon filing
of an application, or to the inventors upon the granting of an application. The policy
could provide for contests with cash or other prizes to the employee whose submission is
chosen for trade marking. A non-monetary, or recognition, component also works well in
such policies. While a practitioner may have a standardized template on hand for such a
policy, the corporate culture should drive the way the practitioner tailors the policy to
realize maximum benefit.
General Legal Document Templates
Certain agreements should be considered necessary for e-commerce businesses.
Every practitioner in this field should have them available to tailor her client’s needs.
These agreements are employment-related agreements, licensing agreements, marketing
agreements, and joint venture agreements (the latter three agreements are discussed
supra). Finally, the practitioner should be prepared to conduct an annual IP assets audit,
similar to a due diligence exercise in an acquisition scenario.
See GIVE THE SMALLER PLAYERS A CHANCE: SHAPING THE DIGITAL ECONOMY
THROUGH ANTITRUST AND COPYRIGHT LAW, Rogers, Douglas L., 5 Marq. Intell. Prop. L. Rev. 13
Employment related agreements, including consultant agreements, should contain
the following clauses:
-clear and broad IP assignment;
-agreement to cooperate on IP assignment after leaving the company for any
-prior invention disclosure;
-agreement not to use a previous employer’s confidential information;
-agreement to protect the company’s confidential information;
-agreement to return the company’s confidential information upon leaving
employment for any reason;
-where appropriate, a non-compete (for consideration)
Ensuring that all employees or consultants, especially those involved in software
development, have executed an appropriate agreement is a fundamental requirement in
counseling e-commerce businesses.
Annual IP Audit
Armed with the intellectual property portion of a general due diligence check
list, conduct an annual audit of a company’s intellectual property assets. Such an audit
is time-consuming but necessary, because the entire commercial value of a company may
depend upon the extent to which it holds intellectual property rights in its technology and
its relationships with the employees who develop or apply its technology. Therefore, a
careful examination of the development history of the technology or early use of the
name, the trail of legal ownership, and the steps taken to preserve such rights is
Assess the patent portfolio by considering the scope and validity of issued patents,
the status of pending applications, and the risk of infringement of third party rights.
Review all formal registrations including irregularities, pending applications and
examiner objections, and any licensing agreements that transfer rights to trademarks or
service marks. Determine all copyrightable works and follow their trail of creation,
taking particular care to review formal registrations, applications of common law
measures and proper notifications. Update the confidential information protection policy.
Conduct general searches of the United States Patent and Trademark Office and the
United States Copyright Office to determine if those databases confirm ownership the
company presumably has indicated as being registered and discover any conflicting
intellectual property that has been filed. Also conduct general searches by corporate
names to ensure that the company has scheduled all assets that it does own and has not
inadvertently misplaced some.
Checklists used in underwriter due diligence or in loan financings are often most rigorous because they
require actual tracing and research of state and federal databases to determine trail of ownership.
For a full analysis of what is required in such an audit, see ACQUIRING OR SELLING THE
PRIVATELY HELD COMPANY 2001 INTELLECTUAL PROPERTY ISSUES, Cicero, Anthony F. Lo;
Hirshman, Neil; Scoular, Robert F., 1256 PLI/Corp 831, Practising Law Institute PLI Order No. B0-00Z0
In addition to the foregoing reviews, an audit should also analyze all IP
assignment agreements, licenses, and any other corporate agreement concerning the
company’s IP rights. After conducting the audit, counsel should be prepared structure
what types of representations and warranties a company is prepared to make. An annual
IP audit will then ensure that a company is always prepared for a major corporate
transaction, and will minimize stress on corporate resources if such a transaction occurs.
The legal tool kit described above, ensures that counsel is pro-actively managing
a company’s technology – riding the wave that the technology creates instead of being
caught in its undertow. The various components of the tool kit are all designed to answer
emphatically the questions flowing through the themes underlying IP law. The IP
policies establish ownership, and methods of securing title, and the template agreements
regulate use. Where the law is unclear, and the subject matter under consideration is of
first impression, the conduct of the company itself may help establish what the potential
treatment of a dispute may be.41 In such a case, the legal tool kit helps to guarantee that
certain bases are covered, making the technologies approachable and the new issues
arising from them manageable.
See ANTITRUST AND INTELLECTUAL PROPERTY: UNRESOLVED ISSUES AT THE HEART
OF THE NEW ECONOMY, Pitofsky, Robert, 16 Berkley Tech. L.J. 535 (2001).