Management Guide to Intellectual Property for State Departments of Transportation (2015)

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26 This chapter describes the key forms of IP available to a state DOT. It is important to under- stand what types of creations and inventions are protectable by which forms of IP protection, and how IP protection is established. 5.1 IP Protection Considerations In deciding whether to pursue IP protection and ownership, a few critical factors should be considered. These factors include whether and to what extent the state DOT wants to: • Exclude others from use. • Control future use. • Ensure that the IP remains in the public domain. • Avoid potential future license fees. • Control the commercialization process. • Establish a revenue stream. 5.1.1 Exclude Others from Use When faced with the decision to protect IP, the state DOT must ask itself whether it needs the rights to exclude others from using the IP. In most efforts performed by or on behalf of a state DOT, the goal is to transfer any outcome (new technology, invention, or creative expression) for public use and widespread adoption. Overwhelmingly, state DOTs will not desire to exclude others from practicing an invention or using a creative work. 5.1.2 Control Future Use A state DOT may wish to protect IP created from work it has funded in order to prevent others from claiming ownership. It is recommended that the state DOT perform a technology assessment to gather information on the market and competitors that may be developing any similar technologies. If private companies are developing similar and substitute technologies and products, it may be desirable to pursue a patent. This is especially important if the IP is a core technology or invention for anticipated future projects and activities. As an initial step in the case of an invention, the state DOT may need to file a provisional pat- ent application after the screening and reviewing process if an invention looks promising and there are known threats from other entities that may wish to claim ownership of the technology. A provisional patent application gives the applicant 1 year to decide if pursuing a nonprovisional application will have any value. Filing of a provisional application reduces the risk that others may claim title and ownership. C H A P T E R 5 Forms of IP Protection and Registration

Forms of IP Protection and Registration 27 5.1.3 Ensure the IP Remains in the Public Domain A state DOT may pursue protection on an invention or creative work to ensure that it remains in the public domain. It may seem somewhat paradoxical that a state DOT might apply for a patent to make sure that a patent remains in the public domain. Moreover, this approach would not work in all cases, as state laws or policies may prohibit devoting state assets such as patents to the public domain. However, if technology developed through state DOT–funded research is very similar to technologies being developed by private companies, the private organizations will most likely consider their technologies and products highly proprietary and may be very aggressive in their patenting strategy. Defensive patenting by the state DOT may be a strategic way to protect the DOT’s investment in its own R&D. Alternatively, a state DOT may decide to pursue a defensive publishing strategy. In this case, the state DOT would disclose an enabling description of a technology to the public. The enabling description provides sufficient information for someone in the field to be able to make or use the technology. This would establish the invention as prior art in the public domain. This strategy eliminates any organization—including the state DOT—from being able to obtain a patent on the technology or invention. 5.1.4 Avoid Potential Future License Fees A state DOT may pursue IP protection to avoid potential future license fees. This is especially important for technologies, inventions, or creative works developed by employee-inventors or employee-authors, and those developed by contractors. Taxpayers should not have to pay for the invention twice (once to develop it, then again for the state DOT to use it or to have it used on behalf of the state DOT). It is recommended that the state DOT specify in employment agree- ments and contracts that the state DOT will take, at a minimum, a nonexclusive, nontransferable, paid-up license for its use of IP developed in performance of state employment or a state DOT contract. 5.1.5 Control the Commercialization Process If the state DOT wants to control the commercialization process, it will typically have to estab- lish its IP rights, or at least establish march-in rights (the right to acquire title if the IP holder is not satisfying certain criteria for commercialization). For example, the state DOT might pursue a patent for an invention but then license the patent to commercial partners to bring competing products to the market. If the state DOT has march-in rights to the invention, if the commercial partner fails to bring the products to market, the state DOT may assert its march-in rights, take title to the invention, and, potentially, pursue commercialization on its own or with other partners. In some cases, too much state DOT control can inhibit the commercialization process, and it might be more effective for the DOT to relinquish title (or at least grant a broad license) to a private-sector partner. Different commercialization approaches may be more effective in differ- ent cases, depending on the specific details of the IP and the market. These details can be better teased out through a technology assessment. 5.1.6 Establish a Revenue Stream Typically, a state DOT must own title to IP in order to collect a royalty or licensing fee. How- ever, where a state DOT has funded a project that results in a protectable asset, a revenue stream may be established in the initial agreement between the state DOT and an employee-inventor/ author or contractor that will take ownership of the IP. Such an agreement can mandate the

28 Management Guide to Intellectual Property for State Departments of Transportation percentage of total revenue that would be given to the state DOT. The risk in this model is that the state DOT’s revenue stream is completely dependent on the marketing and commercializa- tion efforts of the IP title holder. It is recommended that, if the state DOT intends to establish a royalty stream, the state DOT should take title in order to control the process. For example, the Texas DOT has registered the trademarked phrase, “Don’t Mess with Texas®” and receives revenue from this IP. In summary, when a state DOT is making important decisions about IP ownership, the state DOT should evaluate the six critical factors cited in Sections 5.1.1 through 5.1.6 of this chapter. The end result of this evaluation may be a decision to pursue one or more forms of IP protection, keeping in mind that aspects of a single state DOT work product may be subject to more than one form of IP protection. The balance of this chapter presents the primary forms of IP protection to be considered, and special considerations for the state DOT with respect to each form. 5.2 Patents A state DOT may find itself facing patent issues in any of its operational units, but especially in the research unit, where there is the likelihood of inventing machines, test methods, processes, and various other useful devices. When a state DOT has to decide whether to file for patent protection, allow others the right to use a patent controlled by the DOT, pursue rights to a patented technology owned by a third party, or establish rights in relation to a contractor or a state DOT employee-inventor, it’s best to start by considering the bundle of rights included. • Does the state DOT need the right to exclude others? • Does the state DOT need the right to practice the invention, maybe for a limited time or in limited circumstances? • Are there issues of freedom to operate without potential patent challenges? • Is it consistent with the state DOT’s interests and mission to allow an outside party to exclude others, as long as the state DOT retains the right to practice the patent? A state DOT typically will need to establish policies and strategies for handling situations involving the following types of key stakeholders: • State DOT employee-inventors. • State DOT contractors. • Third-party owners of patented technology. • Third parties that want to use state DOT technology. Understanding how to manage relationships with these stakeholders is very important. Cer- tain strategies and critical factors should be considered, depending on the type of stakeholder. Before addressing these particulars, however, the state DOT takes some critical steps to develop an overall strategy. The state DOT will: • Learn the definition of a patent. • Learn the rights that are afforded by a patent. • Learn how to acquire patent rights. • Understand the issues and challenges that typically arise regarding patent rights. This chapter highlights some recommendations for state DOTs in addressing issues and challenges regarding patentable assets. Appendix A provides key resources for searching patent data.

Forms of IP Protection and Registration 29 5.2.1 What Is a Patent? A patent is a property right granted by the government to the inventor for a limited time in exchange for public disclosure of the invention. These rights allow the inventor to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing a claimed invention into the United States or other country where the asset is protected. In the United States, there are three basic types of patents: utility, design, and plant: • A utility patent covers the functionality aspects of machines, processes, compositions of matter, and/or articles of manufacture. This type of patent is the most common and usually provides the most value and protection for a given invention. • A design patent covers the ornamental design of manufactured artifacts, not the process or methods of manufacture. • A plant patent covers new varieties of asexual reproducing plants, either invented or discovered. A single invention may be covered by more than one type of patent. For example, a utility patent may cover the functionality of an invention, and a design patent may cover the unique ornamental design of the same invention. One product that may be familiar to most people is the iPod. Patents cover both the ornamental design of the device (design patent) and the operational aspects of functionality (utility patent). Certain requirements must be satisfied to be granted a patent. The invention must be new (35 U.S.C. § 102), useful (35 U.S.C. § 101), non-obvious (35 U.S.C. § 103), and fully disclosed (35 U.S.C. § 112). Reviewing these criteria in more detail, the invention must be: • New. The present invention cannot be covered in any prior art. Prior art pertains to information that (a) may inform the claim that the invention is original, and (b) was available to the public before the filing of the patent application. The invention must not be published, be on sale, or be in use more than 1 year before the patent application filing date (35 U.S.C. § 102). • Useful. The present invention must explicitly show that it will achieve a particular benefit. The invention must not be immoral or contrary to public policy (35 U.S.C. § 101). • Non-obvious. The present invention must be creative or distinct enough that an individual of ordinary skill in the relevant subject-matter field would not be able to readily deduce the invention from publicly available resources (35 U.S.C. § 103 and 28). • Fully disclosed. The inventor must provide a description of the invention, the manner and process of making and using the invention, and the best manner of practicing the invention that is known to the inventor. These criteria must be met in such a way that someone of ordinary skill in the field can comprehend (35 U.S.C. § 112). Figure 4 shows a simple flowchart for assessing the patentability of an invention (29). 5.2.2 Acquiring a Patent For inventions, a patent is available to “[whoever] invents or discovers any new and useful process, machine, manufacture, or composition of matter, design, plant, or any new and useful improvement thereof” (30). A patent does not arise automatically upon invention—the inventor must disclose the invention in an application for patent to the USPTO. An examiner will consider the application in light of the prior art and may reject the application (based on obviousness, or lack of novelty or utility), requiring amendments by the applicant. A patent will issue only after the examiner is convinced that the application describes a new and truly useful invention (31). The typical costs associated with filing a nonprovisional patent application include the USPTO fees (e.g., application fees, office action fees, issuance fees) and legal fees. Other fees also Patentable inventions may be: • Machines. • Processes. • Methods. • Compositions of matter. • Articles of manufacture. • A utility patent covers the functionality aspects of machines, processes, composi- tions of matter, and/or articles of manufacture. This is the most common type of patent and typically provides the most value and protection for a given invention. • A design patent covers the ornamental design of manufac- tured artifacts, not the process or methods of manufacture. • A plant patent covers new varieties of asexual reproducing plants, either invented or discovered.

30 Management Guide to Intellectual Property for State Departments of Transportation may apply. For example, if the patent is granted, there are additional maintenance fees or sub- sequent continuation fees will accrue, and possibly litigation fees over the lifetime of the patent. Costs vary across organizations. University technology management directors and some private enterprises IP directors indicated that their costs typically ranged from $20,000 to $30,000 per patent application for patent prosecution, although the cost can vary widely depending on the circumstances of a given application. Because patents rights extend for a limited amount of time, it is important to know the duration of each type of patent. Utility and plant patents are granted for a term that begins with the date of the grant and usually ends 20 years from the date on which a person/organization first applied for the patent. The duration of the patent is subject to the payment of the required maintenance fees. Information regarding maintenance fees can be found at the USPTO website (www.uspto.org). Design patents extend for 14 years from the date the patent is granted. The six standard types of patent applications are: • Provisional application. • Nonprovisional application. • Divisional application. • Continuation application. • “Continuation-in-part” application. • Abandonment application. Appendix A addresses the various types of patent applications in greater detail. Figure 4. Patentability assessment (29).

Forms of IP Protection and Registration 31 5.2.3 Special Cases for Patents In three areas—software, biotechnology, and business methods—patents may be granted that may extend the requirements of utility, design, or plant patents (32). • A patent for software may be granted for a program containing a mathematical algorithm that: – Controls something external to the computational processes (a useful process). – Manipulates numbers representing real values (e.g., electrocardiograph signals). – Is claimed in relation to an identifiable product, machine, or process. • A patent for biotechnology inventions is granted in consideration of naturally versus un- naturally occurring organisms. Living organisms often are patented as products or meth- ods. For example, there are at least 281 patents on mice and more than 442 patented living organisms (33). • A patent for business methods generally relates to data processing operations and technologies such as point-of-sale systems or financial transactions support systems. 5.2.4 Infringement and Protection of Patent Rights Unauthorized use of a patented invention is known as infringement. Lack of knowledge is not a defense against charges of infringement. Also, there is no statute of limitation on filing an infringe- ment suit. However, past damages in the infringement suit may be capped at the previous 6 years of infringement. Future use of the invention in the case of an infringement can be negotiated between parties. In the case of an infringement, the patent owner may seek: • Damages. • Injunctions of infringing product. • Impounding of infringing product. • Destruction of infringing product. • Negotiation of a licensing agreement (contract). A state DOT that learns an entity is infringing has several options for recourse. These options may range from litigation, arbitration, mediation, negotiation, or to do nothing. Significantly, these options are not exclusive of one another. More than one approach may be necessary, and taken, to resolve a given dispute. Litigation will probably be the most expensive approach. Some statistics on patent litiga- tion are: • Legal fees and expenses for litigation through trial for cases where $500,000 to $1 million is at stake average about $500,000 for each side. • Legal fees and expenses for litigation through trial for cases where $1 million to $10 million is at stake average about $1.3 million for each side. • The average time to resolution of patent suits is 1.1 years. • Of patent suits, 76 percent settle, whereas 17 percent are transferred or dismissed on pretrial motion. • Patentees prevail 58 percent of the time at trial. Factoring in pretrial losses, patentees’ overall success in litigation is only about 49 percent. • Patentees win 68 percent of the time before a jury if they file suit first, whereas they win only 38 percent of the time before a jury if the accused infringer files first. • Judges dismiss 15 percent of cases before trial, and roughly half of the cases are an attempt to invalidate a patent. • At trial, patentees face a 33 percent chance that their patents will be invalidated.

32 Management Guide to Intellectual Property for State Departments of Transportation • Of published decisions that validate a patent, 44 percent are appealed. • Of infringement-related verdicts, 37 percent are appealed, and the U.S. Court of Appeals for the Federal Circuit overturns 20 percent of them (34). These statistics are included for information purposes only. A decision to litigate a given pat- ent dispute should be made in consultation with the state DOT counsel, and should be based on the circumstances of that dispute and the strength of the claim. The state DOT must be proactive in monitoring and protecting its patents from infringement. Regardless of the dispute resolution approach that the DOT may choose (litigation, arbitration, mediation, negotiation, or some other option), it is important to take action. Failure to confront patent infringers (the “do nothing” alternative) can result in the patent protection being lost. This will negate all the early effort and expense of applying for protection in the first place. State DOTs pursuing patent protection on inventions need to understand the funding source that supported the work that resulted in the invention. If any of the work used federal funding or a mix of federal and state funds, Bayh-Dole provisions will apply. On the other hand, if only state funds are used, the state DOT has more control over next steps regarding an invention. 5.3 The America Invents Act: Significant Change to the Patent System Recently, the patent system has undergone significant reform with the passage of the America Invents Act (PL 112-29, the Leahy-Smith America Invents Act, or AIA) in 2011. This law will have a significant impact on managing patentable inventions and creations in the future. The balance of this section discusses these changes and new requirements. Historically, the United States has had what is known as a first-to-invent patent system. Applicants were entitled to patents as long as they actually invented the subject matter and the invention was not previously known or used by others in this country before it was invented by the applicants (35, 36). On September 16, 2011, President Barack Obama signed the AIA into law (37). The most comprehensive restructuring of United States patent law in some time, the AIA implements what is known as a first-inventor-to-file system for patent registration, covering patent applica- tions received on or after March 16, 2013. Recognizing that an invention could be developed independently by different individuals close in time, the AIA provides that the first patent application describing the invention that is either filed by or authorized by an inventor is entitled to the patent (38). Prior knowledge or use of the invention by other inventors is no longer an absolute bar to the patent if the other inventors have failed to file a patent application in a timely fashion. Under the AIA, however, applicants are not entitled to a patent if it is determined that the supposed inventors named in the application actually learned (or derived) the subject matter from the true inventors (39). In that case, it is the true inventors who are entitled to the patent even if the derivers were the first to apply for the patent. Historically, because only the first inventor was entitled to a patent in the United States, any prior art that proved that the subject matter was known or used in this country by others before its “invention” by the applicant would disqualify the applicant from obtaining a patent (40). If the invention was privately known or used by others before its invention by the applicants, then the applicants were not considered the original inventors and, thus, were not entitled to a patent.

Forms of IP Protection and Registration 33 Furthermore, applicants could lose their right to patent the invention if the subject matter was published anywhere in the world, or if the invention was otherwise disclosed (by public use or sale) in the United States more than 1 year before the application for the patent was filed—even if such prior disclosure was made by the applicants themselves (41). As a way of countering the risk of having an application blocked by public disclosures during the 1-year grace period immediately preceding the application, inventors could file a declaration showing that they had invented the subject matter before any such disclosures—a practice called swearing behind, or swearing behind the reference. Having filed such a declaration, it would be presumed that the applicants’ invention predated any recent disclosures. Under the AIA first-inventor-to-file system, private use or knowledge of the subject matter by others before its invention by patent applicants is no longer an absolute bar to a patent. However, public disclosure (in the form of publication, public use, or sale) before the filing of a patent application will bar the patent, unless such public disclosure was made by the inventor named in the application in the year immediately preceding the application (42). Therefore, the 1-year grace period now only applies only to public disclosures by the inventor named in the application, which eliminates the applicant’s ability to swear behind public disclosure by other inventors. An applicant has no means to swear behind another inventor who files a prior patent application. A prior patent application by other inventors will bar a patent to applicants who file later in time, even if the later applicants invented the subject matter first. In effect, the AIA both reduces and expands the scope of prior art that may be used to deny a patent application. Prior invention by others no longer bars an applicant from obtaining a patent, but prior public disclosure by others does. Therefore, the AIA may encourage inventors to publicly disclose an invention (by publication, public use, or sale) as soon as they decide to pursue a patent for the invention, in order to preclude a patent by others. The AIA expands the types of administrative options available to third parties seeking to invalidate patents or patent applications filed by others. The AIA also thus expands the role of the USPTO’s Patent Trial and Appeal Board (PTAB) in considering disputes, which are likely in situations with multiple independent inventors. The AIA provides for preissuance submissions (also called third-party submissions) by which any person who is not the patent applicant may submit other patent applications or publications that disclosed the subject matter prior to the patent application (43). (Historically, third parties have only been permitted to submit pertinent patents and publications after a patent has been issued [44].) Furthermore, under the AIA, the person filing a preissuance submission is allowed (actually, required) to include a statement explaining why the submitted materials are relevant to the patentability of the application. Generally, preissuance submissions must be made within 6 months of the publication of the patent application that is being contested. The AIA also creates a derivation proceeding by which an applicant for a patent can petition the PTAB to rule that an earlier patent application for the same subject matter was actually derived from the petitioner’s invention (45). The purpose of the derivation proceeding is to ensure that the first applicant (to whom the patent will ultimately be issued) is truly an inventor (or someone authorized by an inventor), and not merely someone who has learned (or derived) the subject matter from the true inventor. The derivation proceeding replaces the historical interference proceeding that had been established to resolve disputes among patent applicants as to who invented the subject matter first (46). Historically, the purpose of the interference proceeding was to ensure issuance of the patent to the first inventors. Under the AIA, however, the patent need not be issued to the first inventors; rather, it is issued to the first inventors to apply. Therefore, the derivation proceeding is concerned with ensuring that the first applicant was truly the inventor.

34 Management Guide to Intellectual Property for State Departments of Transportation The AIA creates a new post-grant review procedure by which any person who is not the patent owner can challenge the validity of a patent (47). The petition for a post-grant review must be filed within 9 months after the patent is issued. The AIA also creates a new inter partes review procedure by which any person who is not the patent owner can contest the validity of a patent on the basis of select prior art (either printed publications or other patent applications that predate the applicant’s filing date) (48). A challenger may petition for an inter partes review of a patent either (a) after the conclusion of a post-grant review or (b) 9 months (or later) after the issuance of the patent. Because a patent need not be issued to the first inventor under the AIA, the scope of the new inter partes review is a very limited array of prior art; even prior sales by other inventors are insufficient to invalidate a patent at the inter partes review stage. The AIA also retains a limited form of the historical inter partes reexamination procedure (49, 50). Historically, any person who was not the patent owner could use the inter partes reexamination procedure to contest the validity of a patent on the basis of any prior art. Under the AIA, inter partes reexamination can be used by any person to contest the validity of an issued patent on the basis of select prior art (either printed publications or other patents). If the petition raises a substantial new question of patentability, then the patent will be reexamined and some claims may be invalidated. If that happens, the patent owner’s recourse is to appeal to the PTAB. Although the basic ex parte reexamination process was not affected by the AIA, the AIA clari- fies that, henceforth, any party wishing to appeal the final decision of the PTAB in any post-grant review, inter partes review, ex parte reexamination, or derivation proceeding must appeal to the U.S. Court of Appeals for the Federal Circuit (51). (Historically, the patent owner who lost patent rights as a result of an ex parte reexamination was also able to appeal to the U.S. District Court for the District of Columbia (52) which, as a trial court, was able to hear new evidence presented by the patent owner.) Because the Federal Circuit is an appellate court, it must afford certain deference to the decision of the PTAB (53), making it less likely that the patent owner can have an unfavorable decision overturned. In summary, the AIA primarily changes the U.S. patent system from a first-to-invent to a first- inventor-to-file system, so that the USPTO can be less concerned with whether the patent applicant was the original inventor. Other changes (primarily to the bearing of prior art and to administra- tive proceedings) were introduced to help the USPTO determine (and other inventors prove) whether the patent applicant actually invented the subject matter or merely derived it from the work of the true inventor(s). 5.4 Copyrights Given the types of content covered by a copyright, many works created by state DOT employees and contractors are copyrightable. Appendix B provides key resources for searching copyright data. 5.4.1 What Is a Copyright? The U.S. Constitution authorizes Congress to “secur[e] for limited Times to Authors . . . the exclusive Right to their respective writings” (54). Federal copyright protection is therefore avail- able for “original works of authorship fixed in any tangible medium of expression” (55). Copyright protection includes the exclusive right to reproduce, distribute, and/or perform the original works, and to prepare derivative works. However, copyright protection does not “extend to any idea, procedure, process, systems, method of operation, concept, principle, or discovery” (56). A copyright is a statutory privilege that grants a limited or mini-monopoly to a creator or author(s) of an original work fixed in a tangible or permanent means of expression. There are no registration requirements to lay claim to copyright authorship. A copyright may arise automatically without the need for a notice, publication, or registration. However, in the event of an infringe- ment action, registration with the U.S. Copyright Office is required.

Forms of IP Protection and Registration 35 A copyright is a statutory privilege that grants a limited or mini-monopoly to a creator or author(s) of an original work of authorship fixed in a tangible or permanent means of expression. Copyright law is federal law. There are no state copyright laws. The current law is set forth in Title 17 of the United States Code and is referred to as the Copyright Act of 1976 (or simply the Copyright Act) even though it has been amended several times. Registration is not required to lay claim to copyright authorship. A copyright may arise auto- matically without the need for a notice, publication, or registration. To be eligible for a copy- right, a work must: • Meet a minimum level of creativity. No definitive rule exists by which to judge an acceptable, or minimum, level of creativeness. Although mere facts and even ideas are not copyrightable, their expression, arrangement, or compilation generally may be copyrighted as long as the work contains at least a “modicum of creativity”—some “creative spark” (57). • Be fixed in a “tangible medium of expression,” that can be perceived by the “lay” observer. • Be an original. The work must be unique, but copyright does not require novelty, ingenuity, usefulness, or aesthetic value. The threshold for originality is thus lower for copyrights than for patents. Obviously, the work is not original if it is an outright copy of the pre-existing work of another author. To satisfy the originality requirement, the new work must have some “substantial” or “distinguishable variation” (i.e., more than a trivial variation) over the pre- existing work. The new work also must have “more than a modicum of originality” (58). For example, original compilations of existing non-original works may be eligible for a copyright (i.e., the preexisting materials must be arranged in a new or novel format). In this example, previous works that are contained within the compilation are not covered by the compiler’s copyright, and the compiler may need to license the pre-existing works to include them in the compilation, if the included works themselves constitute copyrighted material. Copyrights are available for a wide range of works that involve artistic expression and/or written words. Examples of protected works include: • Literary works (which include computer software and electronic databases). • Training materials. • Public service announcements, including any accompanying music. • Building documents. • State maps. • Architectural works. In 1988, Congress enacted copyright legislation by which the United States joined the Berne Convention for the Protection of Literary and Artistic Works (the Berne Convention) (59). Originally an attempt to create a universal, international copyright law, the Berne Convention has evolved into a set of minimum protections that copyright holders in one participating country are entitled to receive in other participating countries. The central feature of the Berne Convention was to prohibit participating countries from using formalities to deny protection to works copyrighted in other participating countries (60). As a result of the U.S. adopting the Berne Convention, the use of a copyright notice is no longer required under federal law. In addition, the use of a notice does not require advance permission from the U.S. Copyright Office. Typically, a notice of copyright appears at the beginning of the work and provides the word “Copyright” and/or the copyright symbol © (known as the copyright bug), followed by the year of first publication and the name of the copyright owner or an alternate name by which that copy- right owner is generally recognized. The copyright symbol for sound recordings is P . Although the copyright notice is no longer required, it is still advisable to include it because it overcomes Copyrightable works are: • Articles, novels, works of non-fiction. • Training materials. • Public service announcements. • Building and engineer- ing documents. • State maps. • Architectural works.

36 Management Guide to Intellectual Property for State Departments of Transportation any legal defense by an infringing party that he or she was unaware of the copyright (61). It is also advisable to include the phrase, “All Rights Reserved” to reaffirm the bundle of rights accorded a copyright owner (see Figure 5). Notices can be updated when new material is added to a work. The common practice is to include multiple years in the copyright notice. For example, if a work was published in 2000 and new content was added in 2002, the notice would designate: “2000, 2002.” Also, given that the current law protects both published and unpublished works, the author of an unpublished work can include a notice by inserting the word “unpublished” before the traditional copyright symbol. 5.4.1.1 Rights Accorded to Copyright Owner Similar to a patent, a copyright gives the author and/or owner of a copyrighted work certain exclusive rights: • To reproduce the work. • To distribute the work to the public. • To prepare derivative works. • To perform the work publicly. • To display the work publicly. To practice these rights may, however, require licensing and adhering to the rights of other owners/authors of copyrighted material that may be a part of a work. Several categories of copyrightable works merit additional discussion: derivative works, joint works, and collective works. 5.4.1.2 Derivative Works One of the most important rights accorded the copyright owner is the right to prepare deriva- tive works. A derivative work is based on pre-existing work(s) but incorporates substantially new original work that allows it to be viewed as original authorship. An example of a derivative work may be a public service announcement or educational animation for public broadcast that has been based on a state DOT public safety training manual. 5.4.1.3 Joint Works Joint works are prepared by two or more authors. The intent of a joint work is that the authors’ contributions are merged into inseparable or interdependent parts of a unitary whole. The authors of joint works are co-owners of the copyright, with all rights and privileges conferred with the copyright. Figure 5. Copyright notice example (62).

Forms of IP Protection and Registration 37 5.4.1.4 Collective Works Collective works also are prepared by two or more authors. The intent of a collective work is that the authors’ contributions are separable assets. The authors/contributors to collective works own only their specific contributions. 5.4.2 Acquiring a Copyright For creative works, copyrights are available for “original works of authorship fixed in any tangible medium of expression” (63). In the United States, copyright ownership for the author arises immediately upon fixation (not publication). That is, subject to certain limitations, as a matter of federal law the author has the exclusive right to reproduce, distribute, display, and perform the work. A copyright confers the right to exclude others from reproducing works or preparing derivative works and distributing those copies or derivations to the public, or even to exclude others from viewing public performances or displays of the copyrighted work (64). Formal registration is not mandated by the Copyright Act. Until the author registers his or her title in (creation/ownership of) the work with the U.S. Copyright Office, however, the author has limited ability to prevent others from infringing the work (i.e., from reproducing, distributing, displaying, and/or performing the work in violation of the author’s exclusive right to do so). After registering the work, the author can maintain an action for infringement against others (i.e., exclude others from reproducing or distributing copies of the work) (65). An author or copyright owner may assign his or her title to the copyright to another party by virtue of a signed agreement (66). Upon execution of the assignment agreement, the assignee obtains the rights of the author or previous owner, including the right to maintain suit for copy- right infringement (provided the work is registered with the Copyright Office) (67). The signed assignment agreement may also be recorded with the Copyright Office, and such recordation is effective to provide legal notice of the assignment of rights provided (1) the work itself is reg- istered with the Copyright Office and (2) the assignment agreement clearly identifies the work (e.g., by registration number) (68, 69). Although registration is not required to obtain a copyright, there are reasons to register a work and to proactively manage copyrights: • Registration allows the owner to maintain control over the use of the work. • Registration is a prerequisite to filing a copyright infringement claim against a third party. • If a work is infringed, the registered copyright owner is entitled to statutory damages if the work was registered within 3 months after the work was first published or distributed to the public. As a general rule, since passage of the Copyright Term Extension Act (CTEA) of 1998, the duration of a copyright in the United States has been set as the lifetime of the author plus 70 years. If a corporation is the author of a work (including works made for hire), the duration is either 95 years from first publication or 120 years from creation, whichever is earlier. Generally, the terms of copyrights may be extended for an additional 20 years. The extension legislation, however, does not restore copyright protection to any works already in the public domain. Additional information on renewal and duration of copyright may be found in Circular 15 and Circular 15a, available at http://copyright.gov/circs/. The costs for registering and managing copyrights may vary. Consult the copyright fee tables at www.copyright.gov. 5.4.3 Special Cases in Copyrights A few scenarios exist in copyright protection in which some limitations and special conditions apply. These scenarios include works made for hire, fair use, and first sale.

38 Management Guide to Intellectual Property for State Departments of Transportation 5.4.3.1 Works Made for Hire The general rule of copyright law is that the copyright owner is the individual who authored or created the original work. Only the author or any individual or entity deriving rights through the author can lay claim to copyright ownership. In the case of a work made for hire (sometimes simply work for hire), however, the copyright belongs to the party who commissioned it or—when the work is created by an employee in the course of performing work for his or her employer—to the employer. The employer could be a firm, an organization, or an individual. The Copyright Act defines works for hire as follows: • Works prepared by an employee within the scope of employment. • Commissioned works (works created by an independent contractor) that fall within the following categories set forth in the Copyright Act and that are the subject of a written agreement: – Contributions to a collective work. – Parts of a motion picture or other audiovisual work such as a screenplay. – Translations. – Supplementary works prepared as an adjunct to a work prepared by another person, such as a foreword, index, appendix, chart, illustration, and/or map. – Compilations. – Instructional texts. – Tests or answer keys. – Atlases. – Sound recordings. Whether a particular work is a work for hire depends on the relationship between the par- ties. The closer an employment relationship comes to resemble regular, salaried employment, the more likely it is that a work is created within the scope of that employment and would be deemed to be a work made for hire. To ensure protection, when dealing with a non-employee independent contractor, the entity commissioning the work should enter into a legally binding agreement before the work is created, expressly providing that the work is a “work made for hire” and that the commissioning entity shall be the author of the work entitled to copyright in the work (70). By definition, a work made for hire is limited to the types of works enumerated above. If the commissioning entity wants to take title to a work created by an independent contractor that does not fall under the enumerated categories, the creating party must expressly consent to assign the copyright to the commissioning entity. Therefore, any entity that wishes to own a work developed by an independent contractor that does not fall into one or more of the categories listed needs to obtain an assignment of the copyright from that contractor. 5.4.3.2 Fair Use Doctrine Section 107 of the Copyright Act establishes that certain publicly beneficial, noncommercial, and minimal uses of copyrighted material are fair uses and not infringement, even without the consent of the IP owner (71). Because fair use is not infringement, it is an affirmative defense to an infringement claim. Fair uses include “uses for purposes of ” criticism, comment, news report- ing, teaching, scholarship, or research. Other purposes may also qualify for the fair use defense to infringement, although whether the purpose actually constitutes fair use is fact-specific and sub- ject to evaluation on a case-by-case basis. Given an infringement claim, the affirmative defense of fair use will be evaluated on the following factors: • The purpose and nature of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes. In works for hire, the copyright belongs to the party that commissioned the work. When the work is created by the employee in the course of performing work for the employer, the copyright belongs to the employer. Fair uses: • Certain publicly benefi- cial, non-commercial, and minimal uses of copyrighted material are “fair uses” and not infringement, even without consent of the copyright owner. • Fair use should not be assumed. • Factors that impact fair use: – The purpose and nature of the use. – The nature of the copyright. – The amount and substantiality of the portion used in relation to the copyrighted work as a whole. – The effect of the use on the potential market for or value of the copyrighted work.

Forms of IP Protection and Registration 39 • The nature of the copyrighted work. This factor considers whether the work is informational or entertaining. • The amount and substantiality of the portion used in relation to the copyrighted work as a whole. This factor focuses on whether the heart or true intent of the work has been copied. • The effect of the use on the potential market for or value of the copyrighted work. This factor focuses on the effect on the actual and potential market for the copyrighted work and assesses whether the new work is actually competing with the existing one and appeals to the same audience as the original. State DOT employees may inadvertently run counter to the fair use doctrine if they obtain a single paid subscription to a newsletter or journal and disseminate copies of the publication, or parts of the publication, to colleagues. To the extent that it is made for commercial advantage or to avoid obtaining multiple subscriptions, much business-related photocopying could con- stitute an infringement of copyright and claims of infringement would apply to the government sector as well as in the private sector. 5.4.3.3 Challenges Related to Digital Technologies The evolution of digital technologies has added significant complexity to copyright issues. Some challenges include retaining control over the distribution chain, tracking the IP in the digi- tal ecosystem, and unauthorized distribution through file sharing. Additionally, digital material can be obtained from multiple jurisdictions, each with its own IP laws. Rights and privileges in one jurisdiction may not hold in another. One such example is the European Union Database Directive. This directive grants the database creator (a) the right to prevent unauthorized use of the database and (b) the right to prevent unauthorized acts of extraction and reutilization of the contents of a database. A database is protected for 15 years from date of creation. Although facts that are available in the public domain cannot be copyrighted, charts, figures, graphs, maps, and other original creations that use these facts may be copyrighted (72). Professionals engaged in the management of copyrightable materials must be diligent in under- standing who owns what, who can use what, and how it can be used. It is critical to understand any licensing agreement and what rights are available to both the licensee and the licensors. The Uni- form Computer Information Transaction Act (UCITA) has rules for licensing digital information. 5.4.3.4 Obtaining Permission to Use Copyrighted Material Obtaining permission to use copyrighted material typically requires structuring an agreement with the owner of the rights to that material. Questions that need to be considered when making a decision on copyright use agreements include: • What is the risk of not seeking permission? Is the material in the public domain? Could fair use apply? It can be risky to assume that material is in the public domain. In fact, materials that are commonly assumed to be in the public domain (e.g., materials from U.S. government pub- lications or old publications) often are not. Interpretations of fair use also can prove tricky. Generally, the safest approach is to request permission for use of all reproduced materials. • Who owns the copyright? The owner may be the author or an organization or individual to which the rights have been assigned. • What specific rights are needed? Taking the steps to identify the rights needed can help streamline negotiations and manage the cost for using the copyrighted material, unless the material is royalty-free for use. • Will the rights be exclusive or nonexclusive? • What are the terms of use? For example, is it necessary to obtain (and will the copyright holder grant) rights worldwide, in all media, in more than one language, and in printed, electronic, and/or alternative formats (as may be needed to meet requirements for accessibility)?

40 Management Guide to Intellectual Property for State Departments of Transportation 5.4.3.5 First Sale Doctrine The first sale doctrine, spelled out in Section 109 of the Copyright Act, limits the rights of a copyrighted work’s owner when the work was lawfully acquired. The purchaser of a copy of the work generally has the right to lend, sell, dispose, or destroy the work as desired (73). For example, if an entity legally purchases state maps that are copyrighted by a state DOT, this entity has the right to resell these maps to other interested parties. A different legal framework exists for digital media. In the case of purchases of computer software and sound recordings, for example, the purchaser is not generally entitled to resell or otherwise dispose of the media for commercial advantage (74). The law thus effectively pre- sumes that the purchaser of software or recorded music is really purchasing a limited-purpose, nontransferable license for the purchaser’s private use. There are on-going legal debates centered on the first sale doctrine. It is important to keep in mind, however, that Section 109 only establishes the default rules regarding the resale of copy- righted materials, and the seller and purchaser can agree by contract to different terms. For example, the purchaser of digital media will regularly negotiate licenses that provide for the duplication and distribution of some number of copies (e.g., so that several employees can have installations of the same software program) (75). Likewise, in the sale of print media (such as maps), the copyright owner and purchaser could agree by contract that the media may be used by the purchaser only for specified purposes. In that case, the purchaser is effectively purchasing only a nontransferable license to use the media, and might not be able to freely resell it. 5.4.4 Infringement and Protection of Copyright Copyrights are important to the state DOT. Many of a DOT’s day-to-day work product deliv- erables are copyrightable (e.g., pamphlets, training materials, designs, blueprints.) In general, most copyrightable material generated within a state DOT is never registered or formally recog- nized as copyrightable material, largely because, historically, the state DOT has not intended to commercialize its copyrightable work products. Even if this trend continues, it is recommended that a state DOT at minimum use a notice of copyright on key documents even if the material is freely distributed to the public (as long as the state DOT is not proscribed by state law from taking a copyright). By taking a copyright, the state DOT can retain the right to control how the material is to be distributed (e.g., prevent commercial actors from duplicating and distributing the state DOT work product for commercial advantage). In regard to employees, work-for-hire rules should cover creative works developed as a product of employment. Additionally, employ- ees should be educated on copyright clearance when using third-party materials if the agency is unsure that they have rights or unsure if the information is in the public domain. When working with contractors, it is important to obtain a signed agreement clarifying that the work is a work made for hire and that the contractor assigns all rights to the material (including copyrights) to the state DOT. 5.4.5 Open-Source Software and Berkeley Software Distribution (BSD) Licenses Because open-source software continues to be widely adopted for use in both the private sector and the public sector, understanding its governance and how its governance may impact freedom to use is very important. As a state DOT seeks to efficiently manage taxpayer resources, implementing open-source systems may be a potentially cost-effective strategy. Free open-source software typically refers to software for which the source code is made freely available for use, for further development, and for adapting or updating by many

Forms of IP Protection and Registration 41 different users. In general, open-source software has minimal restrictions. A user is allowed to manipulate the software as much as possible or desired without any anticipated legal or financial restriction. The Free Software Foundation provides four primary tenets for free software users—users can: • Run the program, for any purpose. • Study how the program works and change it to perform a desired behavior. • Redistribute copies of programs. • Redistribute copies of their modified versions of the programs. The foundation has created the GNU General Public License (GNU GPL). Developers can use this license in the distribution of the software they develop based on open-source code. Use of the license signals that the software is free and the developer has the intent that it will remain that way. Although the perceived intent of free open-source software is for the software to remain free, some classifications of licensing provide some proprietary-like software options. These license classifications are important because they may relate to IP management. One such classification is the permissive free software license. This class of license has minimal requirements regarding the distribution of adapted or updated software based on the origi- nal open-source material. These licenses make no guarantee and set no expectation that future generations of the software will remain free. This is a very significant departure from standard clauses or tenets of free open-source software for which copies, modifications, and adaptations of the code can be freely distributed. The Berkeley Software Distribution (BSD) license is a type of permissive free software license. A BSD license allows users to retain an option of commercializing with minimal legal cost and restrictions (76). Code distributed with this license can be sold or included in proprietary products without any restriction to make the proprietary code available. The general structure of a BSD license is shown in Figure 6. The BSD license is considered very synergistic for transferring research results with the intent to facilitate wide adoption and deployment. Research-funding organizations, which would include state DOTs, are encouraged to use the BSD license in many research endeavors. Unlike the GPL, the BSD license places minimum restrictions on open-source development. Multiple future options are available, which could provide flexibility to a state DOT and reduce the unexpected need to pay high fees for use of some proprietary software technologies. Additionally, a BSD license could provide potential commercialization opportunities in the future, which could be value-adding for the taxpayers. 5.5 Trademark A trademark may be useful in validating services and products offered and developed by or on behalf of a state DOT. Protecting the value and reputation embodied by the trademark should be important to a state DOT. 5.5.1 What Is a Trademark? A trademark identifies the source of a product or service without being descriptive of the product’s function or the type of product. Unlike copyrights and patents, trademarks have no express authorization in the U.S. Constitution. Instead, the rights associated with trademarks Trademarks: • Prevent competitors from stealing the goodwill that a com- pany has established based on the quality and reputation of its products and services. • Ensure that consumers are not confused by products or services that would have similar-sounding names or other similar attributes.

42 Management Guide to Intellectual Property for State Departments of Transportation derive from the common law. State legislatures have enacted statutes that codify, and in some cases modify, the common law of trademarks within their states. Also, Congress has periodically enacted federal legislation in attempts to codify and unify the common law of trademarks across the country, and (to a lesser extent) to enact new substantive law strengthening trademark rights (78). Because Congress is not expressly authorized by the Constitution to regulate trademarks, the federal legislation is enacted under Congress’ authority to regulate interstate commerce. Unlike federal law regarding copyrights and patents, therefore, federal trademark law does not preempt state trademark law, and federal legislation may be wholly inapplicable to cases not involving interstate commerce or federal registration. Trademarks are thus governed by both state and federal law, and by both statutes and common law. Both state and federal law may prevent another provider from marketing a competing product using the same or similar trademark, where doing so would confuse the consuming public as to whose product is being purchased. In essence, the trademark serves two main purposes: • Prevent competitors from stealing the goodwill that a company has established based on its qualities and reputations of its products. • Ensure that consumers are not confused by products or services that would have similar- sounding names or other similarity in attributes (79). In 1946, via the Lanham Act, Congress established a national registration system for trade- marks that are actually used in commerce (80). Once a trademark is nationally registered, its The BSD License Copyright (c) <YEAR>, <OWNER> All rights reserved. Redistribution and use in source and binary forms, with or without modification. 1. Redistributions of source code must retain the above copyright notice, this list of conditions and the following disclaimer. 2. Redistributions in binary form must reproduce the above copyright notice, this list of conditions and the following disclaimer in the documentation and/or other materials provided with the distribution. 3. [OPTIONAL] Neither the name of the <ORGANIZATION> nor the names of its contributors may be used to endorse or promote products derived from this software without specific prior written permission. THIS SOFTWARE IS PROVIDED BY THE COPYRIGHT HOLDERS AND CONTRIBUTORS “AS IS” AND ANY EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE DISCLAIMED. IN NO EVENT SHALL THE COPYRIGHT OWNER OR CONTRIBUTORS BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO, PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES; LOSS OF USE, DATA, OR PROFITS; OR BUSINESS INTERRUPTION) HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER IN CONTRACT, STRICT LIABILITY, OR TORT (INCLUDING NEGLIGENCE OR OTHERWISE) ARISING IN ANY WAY OUT OF THE USE OF THIS SOFTWARE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. Figure 6. General structure of a BSD license (77).

Forms of IP Protection and Registration 43 owner can hold competitors liable for economic damages for using a similar trademark in commerce to market a competing product in such a way that is likely to create confusion in the marketplace (81). Once the mark has become associated with the owner’s product on a national level, the trademark owner can legally prevent others from using the trademark with respect to certain classes of goods or service, even if there is no evidence that the other’s use of the trade- mark is likely to create marketplace confusion or to cause economic damage to the trademark owner (82). A trademark may take the form of a specific word, slogan, picture, or other symbol that is used to identify and distinguish one seller’s goods from another’s. Trademarks may also encompass other identifying marks, such as: • Service marks. A service mark identifies a service (as opposed to a product, or goods). It func- tions the same way as a trademark. • Collective marks. A collective mark is used by member or a cooperative, an association, or other collective group or organization. It indicates membership in that organization. • Certification marks. A certification mark is used by an entity other than the creator/owner of the goods and/or services to certify material, mode of manufacture, quality, accuracy, or other characteristics of the goods and services. A certification mark may be canceled if the certifying party engages in production or marketing, permits use of the mark for purposes other than to certify, or discriminately refuses to certify any person who maintains the standards or conditions which such mark certifies. • Trade names. A trade name is the name under which a business operates. A trade name can also function as an identifying mark where goods and/or services are sold under or provided in connection with the same words. • Trade dress. Trade dress has to do with the unique appearance and image of the product. It can include features such as size, shape, color, color combinations, textures, or graphics. • Nontraditional trademarks. Nontraditional trademarks may include sounds, such as the three chimes for NBC or the five-tone progression used by Intel. These marks may even include a unique aroma (83). A mark must be distinctive. The four basic categories of trademark distinctiveness are: • Arbitrary or fanciful. An arbitrary or fanciful mark bears no logical relationship to the under- lying product. Arbitrary marks are the most distinctive and therefore typically the easiest to register. • Suggestive. This mark evokes or suggests a characteristic of the underlying good. The mark may contain clues or hints about the nature of the product without actually describing the product or its function. Suggestive marks are less distinctive than completely arbitrary marks, but still are presumptively registrable. • Descriptive. This mark directly describes a characteristic or quality of the underlying product. Although descriptive marks are useful for educating the consumer about the product or its function, they are less useful for distinguishing the product from the competitor’s product (which is the primary purpose of trademark protection). Because descriptive marks are less distinctive, they can only be registered if they have acquired a secondary meaning. The consumers must associate this mark with a particular producer rather than the underlying product in order to acquire a secondary meaning. • Generic. This identifier describes the general category to which an underlying product belongs. In other words, a generic mark would describe most or all products in the general category, and is not at all distinctive. A generic mark is unregistrable as a trademark (84). Table 6 summarizes important qualities of various types of trademarks.

44 Management Guide to Intellectual Property for State Departments of Transportation 5.5.2 Acquiring a Trademark Trademark protection arises when a mark is actually used in commerce to brand or market a product, and the trademark becomes associated in the public mind with that product or its source. Trademarks make it easier for consumers to quickly identify the source of a good or service. The trademark laws govern the property rights associated with trademarks. In the United States, the primary federal statute is the Lanham Act (15 U.S.C. § 1051 et seq.), but protection also is afforded through state laws. Trademarks are administered by the USPTO. A mark shall be deemed to be in use in commerce when it is affixed in any manner on goods or their containers or the displays associated therewith or on the tags or labels affixed thereto or, if the nature of the good makes such placement impracticable, then on docu- ments associated with the goods or their sale. With regard to trademarked services, the mark is considered to be in use in commerce when it is used or displayed in the sale or advertising of the services. Use of a mark in promotion or advertising before the release of a product or service is pro- vided does not qualify as use in commerce for purposes of obtaining trademark rights. Unregistered trademarks may include a ™ or SM after the name or logo on the artifact that is used in commerce. Only marks fully registered (not pending) with the USPTO may use the ® symbol. Although the symbol carries some significance, it is important to note that the use of the mark itself, not the use of the symbol, confers the rights of the mark. However, lack of use of the ® may limit the damages that can be recovered in an infringement suit. Trademark rights can be lost if the mark becomes too generic as a result of abandonment, improper licensing, or improper assignment of the mark. A trademark may be considered aban- doned when its use is discontinued with no intent to re-establish use. Lack of use for 3 consecutive years is considered evidence of abandonment. Furthermore, as the quality associated with a mark diminishes—meaning that licensed or assigned uses of the mark have diminished its effec- tiveness as a distinctive identifier—there is increasing likelihood that the trademark protection will be canceled out. Finally, if a mark becomes more generic in terms of coming to represent a category of products (as opposed to being associated with a specific good, product, or service from a specific provider), then the trademark rights can be lost (86). Although unregistered marks are protected under common law in the United States, registra- tion represents a nationwide notice to others that a mark is taken. An application for a mark is typically based on two conditions: • The mark is already in use in commerce. • There is the “intent to use” the mark in commerce. Type Generic Descriptive Suggestive Arbitrary/ Fanciful Legal status Unregistrable Distinctive only with secondary meaning Distinctive Inherently distinctive Trademark strength Nonexistent Weak Strong Strongest Example Deodorant Ultra-Dry™ Degree™ Ban™ Table 6. Trademark examples (85).

Forms of IP Protection and Registration 45 A successfully registered mark will appear on one of two federal registers, as follows: • The Principal Register. Registration of a mark on the Principal Register conveys the impor- tant substantive rights associated with federal registration and, therefore, is the preferred method of federal trademark protection. Someone who later initiates use of the same or a confusingly similar trademark may be presumed by the courts to be a “willful infringer” and therefore liable for money damages. • The Supplemental Register. The Supplemental Register is for marks capable of identifying the source of goods or services that do not meet the requirements for registration on the Principal Register. Registration of a mark on the Supplemental Register is not evidence of the owner’s exclusive right to use the mark in connection with the goods or services, and the owner of a mark on the Supplemental Register cannot use the power of the Customs services to stop importation of infringing goods. State DOTs may register their identifying marks and those that identify their products; how- ever, federal registration provides little protection for most state DOT uses because trademark protection is available only for marks that are “used in commerce.” In general, although state DOTs have a tremendous influence on the marketplace, they are not traditional market par- ticipants (i.e., commercial actors) and have not traditionally been in the position of marketing products or services in competition with commercial providers. Even where state DOTs par- ticipate in commerce (e.g., toll facilities), the government is typically the only service provider, so a trademark does not serve to distinguish it from marketplace competitors. Although state DOTs clearly have an interest in preventing private parties from confusing the general public into believing that they are government representatives, that sort of confusion or misrepresenta- tion is generally handled by state statutes and common law, and trademark registration may be unnecessary. Furthermore, as is the case with copyright, trademark protection is not available for functional capabilities. State DOTs are typically concerned with providing functional performance at the lowest cost to the public, and in cases where two potential contractors have similar functional capabilities but one has superior trademark recognition, state DOTs are free to hire the lower bid- ding contractor without paying a premium royalty to the contractor with the superior trademark. This situation is illustrated by TrafFix Devices, Inc. v. Marketing Displays, Inc., in which a manu- facturer of temporary highway signs (e.g., “Road Work Ahead” or “Left Shoulder Closed”) sued a competitor for trademark infringement (87). Originally marketed under the name WindMaster, the signs included a spring mechanism for which the patent had expired, and the competitor was selling similarly functional signs to highway departments under the name WindBuster. The name WindBuster was held to infringe the WindMaster trademark, due to the likelihood of marketplace confusion. Although the WindMaster trademark owner contended that its competitor should not be able to market the sign under any name—arguing that its spring mechanism gave its signs a distinctive appearance that had become a trademark unto itself, serving to identify the manufac- turer of the signs—the U.S. Supreme Court held that the spring mechanism served a functional purpose and was not subject to trademark protection. Where the unique features of a product or service consist of patentable subject matter, they are presumed to be functional, and the burden is on the party seeking trademark protection to establish that the feature serves marketing purposes rather than functional purposes. Because state DOTs are generally concerned with functionality (whether in R&D or in providing transportation services), they do not often have to be concerned with trademark infringement. A contractor can practically always (by definition) satisfy functional specifica- tions without infringing the proprietary trademarks of another. However, state DOTs are not immune from state court lawsuits for trademark infringement (88). Therefore, some caution must be taken when devising trademarks for technology developed with state DOT funding, to

46 Management Guide to Intellectual Property for State Departments of Transportation ensure that the marks are not likely to cause confusion with other products in the commercial marketplace. Use of trademarks by state DOTs will vary widely depending on the individual state’s statutes regarding state ownership of IP. Trademarks are intended to help the commercial consumer identify the source of a product or technology. If technology was developed with state funding, it may be misleading for a private contractor to affix its trademark to the technology because the state DOT was also a source of the technology. On the other hand, it may be inappropriate for a state DOT to affix its own trademark to the technology because doing so might create the appear- ance of the state government endorsing a product in the commercial marketplace. In the end, the ability of a state DOT to transfer technology to the commercial marketplace and the process by which it does so will depend heavily on its ability to participate in the marketplace under existing state legislation. 5.5.3 Infringement and Protection of Trademarks Infringement is the unauthorized use or imitation of a protected mark. As with other types of IP, lack of knowledge by an infringing party is not a defense. However, in some instances fair use may be used as a defense in regard to trademarks (89). In considering whether trademark infringement has occurred, the standard is “likelihood of confusion” to the consuming public. This standard for infringement is judged on a number of factors, including: • The strength of the mark. • The proximity of competing goods. • The similarity in marks of competing goods. • Evidence of actual confusion by the consuming public. • The intent of the alleged infringer. For example, is the infringer attempting to pass off its product or service as the product or service of the mark’s owner? It is important to note that using the same term on a completely unrelated product is not likely to be considered infringement. 5.6 Trade Secrets Use of trade secrets within a state DOT presents a unique challenge. The critical importance of trade secrets for the state DOT may come into play when maintaining the secrecy of information provided by a contractor in the performance of a state DOT contract, or perhaps in the develop- ment of transportation technologies that are important to national security. 5.6.1 What Is a Trade Secret? Patent protection allows an inventor to establish a monopoly on an invention or discovery for a limited time in exchange for disclosing the invention or discovery to the public (and thus contributing to public knowledge and advancing the state of practice). In some cases, an inventor may feel that the trade-off is not worth the required disclosure and may elect to forego the other forms of IP protection and instead protect the invention as a trade secret. Doing this has the advantage of allowing the inventor to potentially maintain the monop- oly for a longer time than the term of a patent, provided the invention or discovery can be maintained as a trade secret. However, if the trade secret can be discovered by another party through fair means, such as by independent invention or by reverse engineering of a product A trade secret constitutes confidential information that confers an economic advantage. Its value is derived from its secrecy.

Forms of IP Protection and Registration 47 obtained through the marketplace, the original inventor loses the right to exclude others from using the invention. Trade secrets encompass a large array of assets that may be covered (e.g., drawings, methods, business methods, technical data, vendor lists, and schematics). Unlike patents or copyrights, a trade secret is not a limited-life monopoly. A trade secret can be enforced as long as it remains secret. The value of a trade secret is in the fact that the IP is not widely known or cannot be easily ascertained. To be protected by law, the trade secret must be identified and treated as confidential by all persons who are permitted access to it. Trade secret information should be: • Marked as secret, restricted, confidential, or using any word or phrase that signals that the information is meant to be kept private. • Kept locked in a secure place or restricted area, by either physical or digital means, whichever is most applicable. • Disposed of in a very controlled manner (90). In addition, all employees, collaborators, partners, contractors, and so forth should be put on notice regarding the intent for secrecy. If the holder of a trade secret believes that his or her valuable information has been com- promised and stolen, the holder must prove that the information was acquired illegally. There may be no legal recourse if the secret information is independently obtained or reverse engineered. 5.6.2 Acquiring and Protecting a Trade Secret Trade secret protection is largely governed by individual state laws, and the vast majority of states have adopted statutes modeled after the Uniform Trade Secret Act (UTSA) drafted by the Uniform Law Commission. The UTSA essentially codifies the state common law as it relates to trade secrets, consistent with federal court decisions (91). These state statutes typi- cally formalize the liability and penalties that accrue when a company’s employee or business partner discloses the company’s trade secrets to a competitor in violation of a nondisclosure agreement or other contract. To enforce state trade secret protection, the company typically must demonstrate that it took steps to actually protect the trade secret from disclosure, so that its competitor could not have discovered the trade secret but for the breach of contract by the company’s (former) employee or business partner. Because each state defines the scope of its trade secret protection differently, however, court decisions differ regarding what con- stitutes a trade secret and what constitutes sufficient measures to protect the trade secret from disclosure. U.S. courts are proactive in enforcing trade secret protection. However, some cases are highly scrutinized, such as if a noncompete agreement with an employee is so strict as to bar and restrict the employee’s right to work in a chosen industry, or to limit the use of information in a particu- lar industry. The expectation of the courts is to balance the desire for a company to protect its confidential information with the rights of an individual to use his or her experience that may have been gained over many years of working in a particular industry. In the case of trade secret litigation, the trade secret owner must demonstrate five key factors: • Notice regarding the trade secret was provided to the defendant. • The defendant had access to the trade secret content. • The secret information is not readily ascertainable.

48 Management Guide to Intellectual Property for State Departments of Transportation • Reasonable secrecy measures were taken. • Evidence exists of economic value of the secret information (92). Given these hurdles, the owner of a trade secret faces a key question: When should maintain- ing a trade secret be considered, as opposed to a filing for a patent? Some factors to consider in making this decision are: • Can the subject matter be easily reverse engineered? Can it be easily developed by another entity? • What is the economic value of the trade secret? Given the subject matter, can its value be sustained longer than the 20-year duration of a patent? • How easy will it be to demonstrate that the trade secret has been misappropriated? Once a nonprovisional patent application has been filed, the contents of the application will be made public even if the patent is subsequently denied. It is important to think strategically about possibly using patents and trade secrets conjointly. For example, if a state DOT has a product invention and has optimized a way of producing the product, a potential strategy may be to patent the product but maintain the optimal production process as a trade secret. In this case, if a competitor develops and introduces a similar product that does not infringe on the state DOT’s patent, the state DOT could potentially maintain a comparative advantage using the trade secret–protected production process. When it comes to deciding whether or not to maintain a trade secret, it is important to note that, because there is no registration process, trade secret protection can be obtained without delay or undue cost of registration. Many other forms of IP protection come with registration fees and other expenses (e.g., legal fees) because of the challenges of registration. This does not mean that trade secret protection is inexpensive, however; a trade secret must be proactively protected, which means the organization must invest in measures to protect the secret. Further- more, even with measures in place to protect the secret, there is always the risk of independent creation of the trade secret by others. 5.6.3 Crafting a Trade Secret Policy Regarding trade secrets and the internal policy that governs this form of IP protection, the devil is in the details. Failure to develop proper policy can expose an organization to the loss of very valuable IP. At a minimum, policies governing trade secrets should cover these four areas: • New and existing employees. It is imperative that the state DOT discuss what should and should not be distributed and/or discussed externally (and even, in some cases, internally) with both existing employees and new hires. When hiring competitors’ former employees, the state DOT also must be proactive to ensure that they protect the trade secrets of competitors, contractors, and others. • Material screening. Materials that are to be discussed, transmitted, or disclosed to the public or to a third party should be screened for confidential information. • Security. The state DOT should be diligent in controlling access to trade secret information. It is important that information that should remain secret be clearly marked and that employees be aware of the intent to maintain secrecy. • Licensing policy. The state DOT needs to ensure that third-party trade secret information is being protected and that such information is protected in any request for proposal notice and during contract negotiations (93).

Forms of IP Protection and Registration 49 Copyright Patent Trademark Trade Secret What is protected Original works Processes, machines Business identiiers Processes, methods Symbols ©, patented... TM, SM, ® None Registration Copyright Ofice USPTO U.S. Patent and Trademark Ofice (USPTO) Not applicable Tests Originality (implicit) Unique, novel, non-obvious Use in commerce, avoidance of confusion Actual protection as a secret How obtained Publication and ixation (registration available) Examination and registration by USPTO Use in commerce (registration) Maintain secret Duration life + 70 years; 95 years (1998 changes) 20 years (utility and plant patent); 14 years (design patent) While in use While secret Law of Federal (mostly civil) Federal (civil) State, federal (civil) State (civil & criminal) Table 7. Principal forms of IP protection. 5.7 Summary: Types of IP When reviewing disclosures and the different types of creative outcomes or inventions result- ing from state DOT internal activities or contract work, it is important to understand what is being covered/protected and what will be the best form of IP protection to use. Table 7 recaps the principal forms of IP; however, it is important to keep in mind that aspects of a single work may be protected by different forms of IP.