The Annals of Intellectual Property Number 2

What is a Trade Secret?

Street in San Juan, Puerto Rico, Dec. 1941

Street in San Juan, Puerto Rico, Dec. 1941

In our blog, “What is Intellectual Property?”, we identified several kinds of intellectual property, i.e., products created through one’s creativity and intellect, that others may not use without permission. One of those is trade secrets. The most famous example is the Coca-Cola formula, maintained as a trade secret since its creation.

Each state, including California, enacts its own trade secret laws. California Civil Code sections 3426 – 3426.11 define a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process” which meets two criteria. First it must have “independent economic value” whether “actual or potential,” based on the fact that it is not “generally known to the public” or to people who would be able to make money or gain other economic value from using or disclosing the information. Second, its owner must take reasonable efforts to keep it secret from unauthorized persons.

If you have an invention, source code, a chemical formula that you are developing to create some product, an idea or prototype for some device, or anything with current or potential economic value, you can claim trade secret protection. An advantage over patents is that trade secrets are not filed with the government and thus not made public.

However, to claim trade secret protection, it is crucial that you comply with the second requirement by taking reasonable measures to safeguard the secrecy of the information that fit the situation. For example, you developed source code for a new computer app, but need funding to market it. If you give a potential funding source your source code to review without any confidentiality measures, you are not making reasonable efforts to keep the source code secret. On the other hand, if you have an attorney create a strong non-disclosure agreement (NDA) and require the potential funding source and its staff to sign that document in advance of disclosure, this could well be deemed a reasonable effort. In 2012, a small company, TechForward, won a $27 million verdict against Best Buy for misappropriating its trade secrets because it had done that.

If you left the papers containing such source code lying around the office conference room where unauthorized persons might be able to pick it up, you would not be taking reasonable efforts to keep it secret. Such material should be stored securely with access permitted only by people with a need to know and obligated to non-disclosure by an adequate, signed NDA. Your measures might also include non-disclosure of access passwords or encryption codes by otherwise authorized persons as well as other special technological procedures, such as required deletion or erasure by any employee who inadvertently receives trade secret data he or she is not permitted to hold.

What measures will be deemed reasonable under the trade secret law depends on various factors, such as the value of the trade secret, the size and income of your company, and the likelihood of industrial espionage in your industry aimed at the particular type of property. For the Coca-Cola Company, this meant specially constructing a large vault to protect its trade secret.

A downside to relying on trade secret protection is that if it does get out in spite of your efforts and becomes generally known to the public or to those who can profit from using it, that protection likely will be lost. A decision to treat information as a trade secret – as well as just what confidentiality measures are necessary to protect it – should be made deliberately with skilled attorney assistance.

For any questions concerning trade secrets, please contact attorney Helena Kobrin.

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The Annals of Copyright Number 7

Copyright Owners “Make Some Noise”
for Infringement of Their Songs

Portrait of Ray McKinley, Hotel Commodore, New York, N.Y., ca. Apr. 1946

Portrait of Ray McKinley, Hotel Commodore, New York, N.Y., ca. Apr. 1946

Protecting your own copyrights is of paramount importance. See “Annals of Copyright Number 2.” Vigilance in avoiding violations of others’ copyrights is equally necessary to prevent expensive legal disputes. See “The Annals of Copyright Number 3”. Monster Energy has learned this the hard way in a lawsuit brought by Beastie Boys. See Beastie Boys v. Monster Energy Co.

To promote its products, Monster Energy engages in so-called “lifestyle marketing.” As the Beastie Boys judge observed: “This entails sponsoring action-sport athletes and musicians, promoting concert and “festival-styled” tours, and hosting events. Monster’s advertising goal is to create an aggressive and fun “brand personality,” which will lead consumers to associate its beverages with music, action sports, video games, and attractive girls … (“Monster is a lifestyle in a can.”).

Monster strayed into the copyright infringement minefield when it made a four minute, six second video filled with Beastie Boys’ music and containing other, written references to the group. Beastie Boys “made some noise” when they sued Monster for copyright infringement and false endorsement under the federal Lanham Act. This law protects against trademark infringement and other actions that are “likely to cause confusion . . . as to the origin, sponsorship or approval” of a person’s distinct product or service.

Monster Energy admitted to copyright infringement but claimed its actions were not intentional. The Beastie Boys pressed on through a jury trial on the false endorsement claim and on whether some 15 instances of copyright infringement were willful. The jury found Monster Energy liable for 10 infringements, awarding damages at $120,000 per instance. It also awarded $500,000 for the false endorsement claim, for a total of $1,620,000.

So how did a large company like Monster Energy go wrong? Its first error was “recklessly disregarding” Beastie Boys’ rights by making a video with five songs by the group without seeking any permission. The court found Monster Energy’s infringement “derived from a gross lack of attention at corporate level to others’ intellectual property rights.” In contrast with protecting its own copyrights vigorously, it lacked any copyright licensing policy or training for its staff using others’ music for videos or other purposes.

These days, it is common for companies and organizations to use copyrighted music and other content that they do not own for a variety of purposes. For some uses, including playing music at an event, there are licensing agencies – primarily BMI, ASCAP and SESAC – that provide licenses permitting the action. For other uses, such as putting music in commercials, multiple types of licenses may be required. As Monster Energy learned, if you do not seek help to ensure you are covered with all the needed licenses, it may turn into an expensive mistake. While the Beastie Boys set-back will not put Monster Energy out of business, a similar judgment against a smaller company might have that result.
For help in obtaining the appropriate licenses, contact Helena Kobrin, a knowledgeable copyright attorney.

 

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Court Case Prevention Measure: The 2015 Changes to Model Employment Handbook

Well-Written Workplace Policy Is the Best Policy

Hay Court House

Hay Court House

We strongly suggest that all employers have a well-written, up-to-date employment handbook. A current, thorough employee policy manual (handbook) and complementary written internal procedures and forms covering all major aspects of the workplace relationship permit managers and rank-and-file workers alike to know where they stand. See “Why Written Policy is Good Policy” and “Promoting Workplace Productivity with a Sound Policy Handbook and Forms.”

The court dockets are full of employment-related lawsuits that defendant companies could have prevented with clearly written and uniformly applied policy in compliance with current law. For well-meaning businesses that lack written standards and which have “just always done it that way,” it’s a little like the drivers who routinely cruise the freeways 10-15 mph above posted limits. Eventually, it will be “your time” to be tapped.

Take a company that for years has granted paid vacation time to its workers on a case-by-case basis with no written policy setting the standards and rules. In California, vacation is an “accrued benefit,” meaning that it builds over a worker’s duration of employment, with any unused portion to be paid upon termination. That well-intentioned business lacking written policy on how it counts and pays for vacation time might well end up on court defending expensive claims for underpayment of wages at termination, plus substantial penalties and attorney fees.

An outdated handbook can cause its own set of problems. For example, in the 2012 watershed Brinker Restaurant Corp. v. Superior Court case (see Brinker Decision and Rest Periods), the California Supreme Court allowed class action certification for over 80,000 employees in part because the employer corporation (running Chili’s, Macaroni Grill and a host of other restaurants) omitted a simple phrase from its policy manuals concerning required rest periods. Every California employer should now have its meal and rest periods policies up-to-date to ensure it is not making the same or similar mistakes as the Brinker corporation.

Our 2015 model employment handbook contains significant revisions to keep pace with new laws and recent case decisions. These include:

• Changes to anti-discrimination and harassment protections to include unpaid interns and volunteers (California) (see “California Labor Laws 2015: Interns and Trainees Now Protected from Harassment and Discrimination”)
• Expanding the definition of prohibited “bullying” in the workplace (California)
• Explaining employee rights and obligations when “moonlighting”
• Modifying reimbursement policy to include reimbursement for necessary work-related use of personal cell phones (California) (see “Ain’t No Such Thing as a ‘Free Call'”)
• Establishing and enhancing prohibitions against working “off-the-clock”
• New language on the timing of paid rest periods, emphasizing the complaint mechanism if prevented from taking meal or rest breaks
• Providing new mandatory paid sick leave benefits policy with specific rules governing accrual, carry over and use of sick leave to comport with California’s Healthy Workplaces, Healthy Families Act and (see “Mandatory Paid Sick Leave For California Employees”)
• Expanding the definition of employee “resignation”
• Revising smoking policy to address use of e-cigarettes or other “vaping” devices (see “To Vape or Not To Vape”)

We offer versions of our 2015 employee handbook for California and for other states as well as for companies of any size. For more information, please contact one of our attorneys, Timothy Bowles, Cindy Bamforth or Helena Kobrin.

 

 

The Annals of Copyright Number 6

Should You Register Your Copyrighted Work?

Portrait of Mezz Mezzrow in his office, New York, N.Y., ca. Nov. 1946

Portrait of Mezz Mezzrow in his office, New York, N.Y., ca. Nov. 1946

A work that you create is copyrighted from the moment it is born. It need not be registered with the U.S. Copyright Office to be protected. See The Annals of Copyright Number 2 – You May Have a Copyrighted Work and Don’t Know It. So is there any real advantage to be gained from registering a copyright with that federal agency? The answer is “sometimes yes,” but not necessarily for every single thing you create.

Registration with the U.S. Copyright Office gives the copyright holder the right to file a lawsuit for infringement against an unauthorized user of that work. Title 17 United States Code section 411(a). It also enables the copyright holder to claim and possibly win actual or statutory damages (set amounts not requiring proof of actual loss) and attorney’s fees if the court confirms the infringement, section 412. A lot can be at stake. Statutory damages range from $200 for an innocent infringement to $150,000 for a willful one, for each violation.

Registration places the rest of the world on notice of the copyright and can thus deter a potential infringer.

Registration within the first five years after publication can add greater weight to the evidence that the work is original and protected.

Also, many registrations are easy and low cost, achievable online for as little as $35.00.

However, there are factors that might not favor registration. The number of copyrighted works one creates is a consideration. Whether the original work is central or incidental to one’s enterprise is another. For example, a performer who writes her or his own music might well be smart to register such creations. However, a band’s creation of throw-away promo for various live performances may not be worth the trouble because a lawsuit to protect those flyers might not ever be seriously considered.

Generally, the more valuable the copyright, i.e., the larger the audience for your work and the more you stand to profit from it, the more sense there is in prompt registration.

If you do choose to register any copyrights, it normally takes some time to receive confirmation. The Copyright Office currently advises that confirmation of online registration is taking up to eight months and up to 13 months for hard copy registrations. If you have any questions about copyright, including registration, fair use or other issues, contact our Of Counsel attorney, Helena Kobrin.

California Hospital Violence To Get Regulatory Injection

Health Care Worker Fatality Rate
Has Been Twice for All Other Industries Combined

One of the hospital wards at the Aleppo refugee barracks in Aleppo, Syria. 3,700 refugees in the barracks the day this picture was taken.

One of the hospital wards at the Aleppo refugee barracks in Aleppo, Syria. 3,700 refugees in the barracks the day this picture was taken in 1919-1920.

New Labor Code section 6401.8 requires state government, no later than July 1, 2016, to adopt required standards for acute general care and acute psychiatric hospitals plans to prevent workplace violence.

The new statute is from Senate Bill (SB) 1299, approved by Governor Brown September 29, 2014. According to Senator Alex Padilla, the bill’s sponsor, “violence in health care settings is a continuing national problem, and the risk of workplace violence is a serious occupational hazard for health care workers … In 2007, nearly 60% of all nonfatal assaults and violent acts occurred in the health care and social assistance industry… The fatal injury rate between 2003 and 2007 was twice the average rate for workers in all industries combined.”

The two April 20, 2014 stabbings of nurses in separate UCLA hospitals, Olive View and Harbor, likely gave further impetus to the bill.

Section 6401.8 directs Occupational Safety and Health Standards Board published rules on each affected hospital’s adoption of a workplace violence prevention plan “to protect health care workers and other facility personnel from aggressive and violent behavior.” Those standards are to include among other things:

● Plan Must Cover All Staff: A requirement that the prevention plan “be in effect at all times in all patient care units, including inpatient and outpatient settings and clinics on the hospital’s license”;

● Workplace Violence Definition: A minimum definition of “workplace violence” that includes the “use of physical force against a hospital employee by a patient or a person accompanying a patient that results in, or has a high likelihood of resulting in, injury, psychological trauma, or stress, regardless of whether the employee sustains an injury” and any incident involving the use of a firearm or other dangerous weapon (emphasis supplied).

● Training: Required violence prevention, procedure and reporting training for all staff, including provision of “critical incident stress debriefing or employee assistance programs”;

● Response: Incident response and investigation protocols;

● Documentation: Required hospital documentation of all violent incidents, to be retained for five years; and

● Reporting: Required hospital reporting to the state of all violent incidents. The report will be required within 24 hours if the incident resulted in injury, involved a firearm or other dangerous weapon or “presents an urgent or emergent threat to the welfare, health, or safety of hospital personnel.”

Web Posting Requirement: Section 6401.8 also requires Division of Occupational Safety and Health (DOSH or Cal OSHA), beginning January 1, 2017, to annually post a report on its Internet Web site containing information regarding violent incidents at hospitals. The Cal OSHA report is to include: ● the total number of reports from covered hospitals; ● which specific hospitals filed them; ● the outcome of any related inspection or investigation; ● the citations levied against a hospital based on a violent incident; and ● recommendations of the division on the prevention of violent incidents at hospitals.

The New Law’s Shortcomings: While the new law commendably emphasizes the importance of building adequate security for workers and will make public the statewide extent of incidents in covered facilities for the first time, it presumes the rate and severity violent attacks will continue. There is no direction to determine the actual sources of such violence in order to address reduction or elimination of these perils altogether.

Section 6401.8 also lacks any initiative to address the prospect of violence from co-workers or from intruders in covered facilities. It also specifically exempts required regulation of state-run hospitals altogether, including psychiatric and prison facilities, arguably the sites of the greatest levels of violent attacks against health care personnel.