By Jill M. Goldman, Esq.
New products can help make a bank more competitive and improve its bottom line. If the first step is coming up with a great idea, the second one has to be working through the legal considerations of bringing it to market. To develop, implement, and market your idea, you need a business plan that’s not only fiscally, but also legally responsible.
Great idea! But can you really use it?
Sometimes that moment of inspiration is followed by a letdown. Maybe someone else owns the intellectual property you need. Or maybe there are other legal issues such as privacy, confidentiality or exclusivity. Here’s a rundown of the legal questions you need to consider when bringing a new product to market.
1. What copyrights are involved?
Copyright law provides the creators of “original works of authorship” the exclusive right to reproduce, adapt, publicly distribute, publicly perform and display their original work. Covered items may include computer codes, pamphlets, magazines, books, websites and other products such as audio, video, or artistic creations. Copyright attaches when the work is created, regardless of whether the work is published or remains unpublished, whether it is a paid subscription or distributed freely without charge. Consequently, infringement is any unauthorized use of a party’s original work.
Upon completion of a new work or project, authorized bank staff should visit the Library of Congress or www.loc.gov e-filing to properly file a claim for registration of the work and once registered, send a copy of the registration certificate to the bank’s counsel, whether internal or external. The bank is responsible for applying for copyright protection of any of the above mentioned types of works within three months of creation if the bank wants to be eligible for statutory damages in case of an infringement suit. Although there are legal defenses to claims of copyright infringement, such as fair use, the failures to obtain written permission or a license to use a third party’s copyright could subject your staff and/or your bank to liability.
If you use any materials, images or artwork developed by any third person, business or corporation, you need to obtain a written agreement—or license—with that person or party, which should be reviewed by counsel. Even a simple act of using someone’s picture or likeness without permission is a violation of that person’s rights. If a third party is creating a work specifically for the bank to use and own, there must be an explicitly written agreement that states that the work is deemed a “work for hire.” Under copyright law, all works specially commissioned by a third party to create a new work must be in writing and designate the ownership of the work. For all works created by employees within the scope of their employment, the employer (the bank) becomes the owner of the work.
2. What about trademarks and service marks?
A trademark is any name, logo, symbol, word or phrase used by its owner in commerce to indicate the source of the goods/products and to distinguish them from others in the marketplace. A service mark is the same as a trademark, except it indicates the source of services rather than goods/products. Trademarks/service marks are often a company’s most valuable assets and therefore need to be protected before use in the marketplace.
Not protecting your marks may limit your future licensing opportunities and revenue, and not enforcing your rights to your registered marks may cost the bank its legal protection.
Registration establishes ownership, an exclusive right of use throughout the United States, and enables the bank to preclude others from using their marks in an unauthorized manner. Marks may also be registered outside the United States for international protection in the registered country.
Creation and registration of a new mark starts with clearance and approval by counsel, bank marketing, and executive leadership, in that order. The process is expensive, and you need to factor in a budget for the search, development, maintenance, registration and enforcement of the new mark.
If you are considering creating a new catch phrase, symbol/logo or other word mark, take the following steps:
- Select several alternatives that would create a distinctive, not descriptive, mark (e.g., “Apple” for computers is distinctive but deemed descriptive for fruit). Consider also marks that are fanciful (“Google”) or arbitrary (“Snickers” for chocolate or “Amazon” for online retailer).
- Before you invest in a new mark, conduct a thorough search to eliminate marks used by other entities that market similar products or services.
- Research the possible marks pending and registered with the United States Patent and Trademark Office (USPTO) at www.USPTO.gov. You’ll need a formal clearance search for protection in case of future litigation, and that means consulting trademark counsel.
- Have your internal bank marketing department validate the look and feel of the mark.
- Have your counsel file for registration with the USPTO. The registration process can take as long as 8–13 months for a simple mark with no objections. If there are any issues, it can last years.
- The federal registration symbol ® can only be used to protect marks that have been successfully registered with the USPTO. The TM and SM superscript symbols are allowed for use while the mark is pending examination at the USPTO.
- Use the mark and be prepared to show proof of use. If the mark is not being used, or you fail to renew on schedule, the registration will be cancelled.
3. How do patents apply?
Patent law protects inventions through a government grant of a limited “monopoly” to make, use or sell/license the invention for a fixed number of years.
Patent law plays a large (behind the scenes) role in social media and the Internet. All social media platforms are supported by technology owned by a third-party company or individual that was granted this monopoly, which enables the patent holder to control how and if this technology may be licensed for use. There are several sticking points with patent law, but there are two things to keep on your radar if your product contains a social media component:
- If you rely on “click-through” for customers to agree to the terms of use when signing up for social media, you will need to understand what that means for your customers and for the bank. This type of license agreement will obligate customer to a specific set of terms and responsibilities set by the bank. What your customers are obtaining for that click is permission to use a bundle of intellectual property rights, including patents (the underlying technology), trademarks and copyright. It is important that the bank have the right to grant/use such underlying technology with its customers.
- Keep in mind that there has been an uptick in patent litigation. Even though many websites (and users) pass around “freeware” and other technology for use, the bank’s use of that technology on its systems could potentially subject the bank to patent liability if there hasn’t been forethought and research conducted before the use of such technology.
4. Are we revealing any trade secrets?
A trade secret is confidential business information developed and used by a company to gain an economic, market, or commercial advantage over its competitors. Trade secrets can include formulas, recipes, processes, methods, consumer profiles, advertising strategies, client lists, and sales methods. While this list is not all inclusive, it is important to note that trade secrets are protected only while they remain a secret.
Once a secret is made available to the public, anyone may access or use it for their benefit. Trade secrets are typically protected through contractual arrangements that require confidentiality and a higher level of care and diligence by the receiving party. This higher level of care is necessary because trade secret holders are not entitled to the same exclusive rights vis-a-vis third parties as patent owners. An owner of trade secrets can obtain an injunction or sue to protect them. Due to their nature, trade secrets, if owned by the bank, should not be posted online by the bank, its employees, or its customers. In fact, posting trade secrets in any social networking forum or website will render them unprotected and worthless.
5. Any other legal considerations?
When developing a new product, don’t forget to consider confidentiality, non-compete/exclusivity, and privacy concerns.
- Confidentiality – The purpose of a confidentiality clause in a contract is that it protects the party’s confidential material, knowledge, or information that the party may wish to share with another party for certain purposes, but wish to restrict access by and disclosure to third parties. Even the terms of the deal can be deemed confidential if agreed to by the parties in the contract. This can also be seen if the parties have signed non-disclosure agreements.
- Non-Compete and Exclusivity – A non-compete or exclusivity clause can limit how, where, when, and with whom you may conduct business.
- Privacy – The use of personal information for marketing or other business related activities requires specific disclosure and rules before it can be legally used. Other laws are triggered if the product is going to share this personal information.
Jill Goldman is Vice President, Senior Counsel II with the American Bankers Association.
This article is for informational and educational purposes only. It is not offered as and does not constitute legal advice or legal opinions. The information contained in the article should not be used as a substitute for seeking professional legal advice. If legal or other expert assistance is required, the services of a competent professional should be sought.
