The Delta Model was proposed by Arnoldo Hax (MIT Sloan) (Hax.03). As a unified strategic framework developed after the mainstream adoption of Internet, it provides specific strategic options beyond the “Best Product Strategy" (i.e. differentiation or low cost) such as the “Total Customer Solution" and “System Lock." Within the wide range of potential strategies the Delta model points out the potential strategic value of IS/IT as enabling technologies to promote boding (with customers, complementors, partners, etc) and leading to a range of potential strategies such as “redefining the customer experience" (e.g. Saturn, Barnes & Noble, Startbucks iTunes), “customer integration" (Dell, Mathworks), “dominant exchange" (Google, YouTube, Wikipedia, iTunes), “system lock" (Intel, Microsoft). According to the Delta Model strategies based on best product are the most difficult to sustain; strategies based on customer integration, customer boding are a better strategic position, and dominant exchanges and system lock are the most sustainable since they affect the whole system and complementors. Schwab's current position of leadership does not seem to achieve dominant exchange status or system lock. Dominant exchange is achieved when a critical mass of collaborating users has been reached and each new user makes the service more useful (e.g. youTube, Wikipedia). System Lock represent the strongest form of bonding and integration among complete industries around a product (e.g. all the software companies developing Windows specific solutions). It focuses in the entire system economics instead of product-centered economics. The firm success is due primarily to the complementors that create solutions based on the firm's architecture. According to this post-internet strategic framework, Schwab has not achieved a strategic positioning that gives them a significant competitive advantage over its competitors. Consequently, Schwab historical success is not necessarily sustainable, it must rely on continuous innovation, customer bonding, as well as other intangible assets to continue to outperform competitors in the current hypercompetitive changing environment.

Note: This is the last posting in the series of 7 blog entries designed to examine the relationship between Charles Schwab’s Business and IS/IT strategy.

Schwab initially achieved its leadership position as a discount brokerage firm due to their superior technological capability, IS/IT know-how, and the scalability of their original IS/IT infrastructure. As explained earlier, social factors such as the alignment between the firms competitive strategy and IS/IT strategy, capability for rapid prototyping an product development, and agility also played a significant role in their earlier success. In fact, Schwab's investment in IT hardware and software back in 1995 was moderate.

As we have already pointed out in a previous post ... In the specific context of achieving sustainable competitive advantage using IS/IT, Carr has made the argument that while information technology has become the backbone of commerce, the importance of IT and information systems (IS) as a strategic resource capable of gaining sustainable competitive advantage has diminished (Carr.03). He acknowledges that IT is critical to today's competitive environment. However, he makes the point that because IT/IS has become so essential to competition it is inconsequential to strategy. This conclusion is based on the assumption that what makes a resource a source of sustainable competitive advantage is not its ubiquity but its scarcity, that is, a company gains an edge over its competitors by doing something that they can't do or have. Since IS have become commonplace (i.e. data storage, data processing, data transport, CRM, etc), standardized, and available to all competitors as common adopted technologies, its potential as a source of differentiation has diminished. In summary, IS are becoming a commodity and an expense of doing business. According to Carr, given that the value of IS as a strategy resource has been vanishing, he recommends firms nowdays to 1) spend less (research shows that companies with the biggest IT investment do not post the best financial results), 2) follow, don't lead (Moore's law guarantees that the longer you wait to make an IT purchase, the more you will get for your money, and you will be investing in IT capabilities that become more homogenized as opposed to proprietary), and 3) focus on vulnerabilities and not opportunities. While these recommendations of cautious IT investments are intended for the current environment, it is remarkable that Schwab's initial E-business strategy back in 1995 was implemented with a minor IT capital investment by using the existing infrastructure.

Brown and Hagel III (2003) agree that some business nowadays may have overestimated the strategic value of IT, significantly overspent on technology, and recognize the importance of managing IS more rigorously to reduce capital investment requirements and operating costs (Brown.03). However, they emphasize that while in many cases IT (especially standardized IT) is diminishing as a source of strategic differentiation, IT matters a lot (i.e. it does matter to the point of being critical). Brown and Hagel III are of the position that while differentiation is not in IT itself, it is in the new practices and services that IT/IS enable to create that make it critical. Consequently, while Schwab was able to achieve competitive advantages through superior IS/IT capability, it is unlikely that IT alone will be the source that enables the firm to sustain its leadership position.

The question of whether sustainable competitive advantage is possible in fast-changing hyper-competitive environments such as the financial services sector is actively being debated by the research community. Attaining and sustaining competitive advantage in today's continuously changing hyper-competitive global environment is challenging. Continuous and disrupting change is especially significant in the financial services sector since regulatory pressure and policy can change very quickly depending on the national and global economic situation as well as political factors.
Some authors have argued that in the current fast-changing environment the firm's objective should be directed to an active strategy of disrupting the status quo to create an unsustainable series of competitive advantages (D'Aveni.99). According to this school of thought, sustainable competitive advantages are no longer possible and we are in the next level of competition (D'Aveni.99). The reality of continuous change leads to a new competitive paradigm that goes beyond the traditional basis for competition such as service, quality, price, products, reputation, customer base, and market access. These classical factors are certainly a pre-requisite for achieving success, but sustaining a leadership position depends on great measure of intangible factors operating at the social fabric level of the firm. These include the firm's culture, processes, corporate systems, human resources, management style, adaptability and agility, as well as leadership capability and vision. Schwab's ability to quickly prototype, test, and successfully intro to market new services (e.g. e.Schwab in 1996, Schwab Brokerage Site in 1998, Schwab Alerts in 1999, Learning Center in 2000, PocketBroker in 2000, CyberTrader in 2003, Personal Choice in 2004, Rebalacing Wizard in 2004) as well as the numerous awards received since 1998 are an indication of Schwab's capability and potential for sustainable success through continuous innovation in finding new ways to add value for customers in order to retain their loyalty.

The resource-based view (RBV) is useful to complement Porter's competitive forces model focused on the industry structure analysis. The RBV framework proposed by Barney and others provides a theoretical model to analyze the idiosyncratic attributes of the firm and their impact on its competitive position (Barney.91).

From the RBV framework it is important to note that by the time Schwab was ready to implement the E-business strategy in 1995, it already possessed significant technological resources, systems, know-how, and capability. Ever since its inception in 1971, Schwab had been a technological front-runner. Dave Potturck (Former Schwab President) preferred to think of Schwab as a technology firm which operated in the financial services industry. Robert Duste (Senior VP, 97) remarked that technology was not a sideline but a core part of the brand and a core part of the business (``almost every business decision involves a discussion of how we're going to use technology to do things for our customers that no-one else can do"). In fact, Schwab introduced services to enable stock trading through PCs in 1985 before it started using the telephone for trading in 1989. By 1985 Schwab posessed core competencies that were difficult to replicate, transfer, and appropriate by traditional full-service financial service firms such as Merryll Lynch. Consequently, they 1) leveraged their unique technological resources to improve value, 2) differentiated their product (discount brokerage targeted to individual investors) based on core competencies (IS/IT capability), and 3) changed the rules of competition by creating new customized products based on their IS/IT leadership (Barney.91).

Beyond the actual physical IT infrastructure that Schwab already possessed by 1995 (hardware and networks), it also had three other critical resources, namely 1) the ability to mobilize and rapidly deploy new IS/IT to achieve business objectives (e.g. a 30 member team developed, prototyped, tested, and launched e.Schwab in less than 12 months), 2) human IT infrastructure (skills and management capability), and 3) intangible IT resources such as IS culture assets, customer-focused orientations, and excellent management practices capable of aligning IS and business strategy. Research has shown that precisely these intangible IT-based resources (e.g. corporate culture, customer orientation, environmental orientation, know-how, change management) deeply embedded in the firms social fabric are a major contributor to competitive advantage and superior performance (Bharadwaj.00).

In this post we analyze how Schwab's strategic use of information technology enabled the firm to address the competitive forces at work. The well-known Porter's competitive forces model (Porter.79) is a useful theoretical framework to start examining the nature of the interactions between Schwab and each of the five forces within the industry environment in which it operates. Briefly, according to Porter's competitive forces model, in order for a firm to succeed in any given industry, it must effectively address five competitive forces: 1) intensity of rivalry among the existing competitors in the industry, 2) threat of potential new entrants, 3) threat of substitutes, 4) bargaining power of suppliers, and 5) bargaining power of customers (Porter.79).

Schwab's E-business strategy was part of a larger multi-channel strategy rooted on the firm's customer-focused corporate philosophy whose objective was to provide the maximum number of channels for customers to interact and transact with the company (i.e. ``to provide customers with the most useful and ethical brokerage services in the US"). The objective was to give customers a wide choice. Given this intrinsic strategic alignment between business and IS strategy (Henderson.93), IS/IT capability enabled Schwab to create competitive advantages by offering new services, improving efficiency, improving decision making, and using information systems to achieve operational effectiveness.

A key element of Schwab's IS strategy was to avoid over investing in complete new IT systems (Carr.03). As Carr points out greater IT expenditures do not necessarily lead to superior financial results. Instead, in 1995 Schwab's research group developed a software to enable the existing servers at Schwab to receive trading orders through a web-browser at a PC, send it to Schwab's operational back-end systems, fulfill the order, and pass on the confirmation to the PC. The system (e.Schwab) was developed by a 30-member team in less than a year. By 1996, e.Schwab was ready with a new internet-based product and the firm had become the first major financial services company to permit web-based trading of listed OTC stocks, mutual funds, bonds, and options. Using Porter's competitive forces framework, this new and transforming product can be considered a substitute product that enabled access to a significant market and help change the nature of the competition to put Schwab in a dominant competitive position. The Internet facilitated the completion of trade transactions at a much lower cost since it reduced the need for personnel at contact centers, and given that it did not require Schwab to make a substantial capital investment on IT infrastructure or manpower (Carr.03), the savings could be passed on to customers by charging less commission per trade.

In terms of the classical Porterian competitive strategies, Schwab was able to effectively use IS/IT in order to 1) offer a differentiated product resulting in overall best product leadership, 2) reduce operational costs resulting in overall operational leadership, and 3) lower product costs resulting in overall low cost leadership. By 1997, one year after the introduction of the transforming IS product, the value of online assets handled by e.Schwab had reached \$81B. In these earlier years of the internet revolution, Schwab critical alignment between business and IS/IT strategy enabled the firm to gain competitive advantage through information~\Porter.85 by 1) lowering costs at all levels in the value chain, 2) enhancing differentiation}by using IS/IT to customize products, 3) changing the competitive scope by using IS/IT to increase the firm's ability to coordinate its activities regionally, nationally, and globally (e.g. reducing workload at local branches); creating interrelationships among previously separated industries (e.g. services such as ``Analyst Center" provided customers access to external research from leading firms such as S\&P and DJ); segment their offerings in ways previously feasible only for focused (niche) companies (e.g. ability to provide customized service offerings depending on need of its customers); and 4) spawning new business by creating derived demand for new products and services (e.g. new Schwab services and programs such as Schwab Alerts, Learning Center, PocketBroker, Personal Choice, Rebalancing Wizard).

In the late 90s, a key element of Schwab's strategy was to use the IS/IT systems to extract data regarding the customer preferences, monitoring the customer accounts, and studying the websites customers visited in oder to segment and target its customers and use this proprietary marketing information to design innovative customized products and manage customer relationships more effectively. Thus, Schwab was effectively using IS/IT at all levels in the value chain as a powerful tool for enhancing operational effectiveness in order to complement the traditional ways of competing (Porter.01).

In summary, as a customer-focused technology firm operating in the financial services sector, Schwab was able to make effective use of their information technology and information systems capability to affect competition in three general ways: 1) changing the industry structure and the rules of competition, 2) creating competitive advantage by enabling the company to create new customized products which were both differentiated and low-cost, and 3) transforming the value chain to enhance operational effectiveness (Porter.79, Porter.85, Porter.01). Furthermore, Schwab was able to implement this aligned business/IS strategy without incurring in major IT infrastructure investments or new IS/IT systems implementation (Carr.03). Instead, Schwab's strategic impact of IT investments came from the cumulative effect of sustained initiatives to innovate business practices in the near term and aimed for differentiation not in the IT itself but in the new customized services and operational practices it enabled to create to meet the customer needs and demands (Brown.03).

The alignment and execution of Charles Schwab's (Schwab) business and information systems/information technology (IS/IT) strategies have made the firm a leading discount brokerage firm targeted at individual investors. Schwab is now the industry leader discount investment brokerage firm in terms of market capitalization (17.59B) and return on equity (ttm, 31.57%). In the following blog posts we analyze Schwab's IS/IT strategy using Porter's competitive forces (Porter.79,Porter.85, Porter.01) and the resource-based view (RBV) of strategy frameworks (Barney.91,Bharadwaj.00). Finally, we address the question of whether Schwab's success is sustainable (Carr.03,Brown.03) and introduce Hax's Delta Model (Hax.03) to facilitate this analysis.

The next series of blog post examine the relationship between Charles Schwab’s business and information systems/information technology (IS/IT) strategy. We analyze Schwab’s IS/IT strategy using Porter’s competitive forces and the resource-based view of strategy frameworks. Finally, we address the question of whether Schwab’s success is sustainable using current frameworks including Hax’s Delta Model.

Papers is an excellent application for Mac that enables you to search, download, archive papers. It allows you to browse, organize, read, annotate, etc. Here is the link.

The best introduction to LaTeX I know of is entitled “The Not So Short Introduction to LaTeX -or LateX2e in 141 minutes” written by Toblas Oetlker. You can get the PDF by clicking here.

Several of my students have been asking me about installation of LaTeX for Mac OS X. Below is a series of steps:

-1) Download the MacTeX package: http://www.tug.org/mactex/
-2) Follow the GUI instructions to install MacTeX
-3) Download and Install TeXShop: http://www.uoregon.edu/~koch/texshop/
-4) Install a reference manager such as JabRef: http://jabref.sourceforge.net/

Note: TeXShop may already be included with the newer MacTeX distributions.

Students, friends, and colleagues often ask me about software tools I use to prepare class materials, record lectures, write journal papers, manage research articles, etc. I spend a lot of time answering these individual questions by email. Thus, I decided to create a new Category on my blog -the Programs Category. I will go posting entries as I receive new requests... I expect this will save a me a lot of time.

I received some questions regarding the fact that I have categories for almost all the core subjects in the graduate management curriculum (e.g. MBA) except for finance. Classically, the core functional areas of management are strategy, marketing, finance, operations management, human resource management, management information systems, and business law (primarily IP law and contract law).

I had intentionally left out finance because I felt a little bit uneasy talking about finance on a blog that is part of my personal academic site. I have now added the category and I will probably have some postings about financial accounting and managerial accounting in the future but I don’t plan to talk about investing, trading, or any financial engineering topics in this blog.

Unless I start a new area of research focused on applying statistical signal processing and time-series analysis to study some financial engineering problems I will use a separate blog for those postings: http://www.aboyfinancial.com/

The list below includes some of the authors and corresponding books that have influenced me the most in the field of signal processing. The list I provide consist of my top 15 selection. I hope to have time to do a more detailed review of each of them someday in the future:

-Digital Signal Processing, Proakis (DSP Fudamentals)
-Introduction to Linear Algebra, Strang (Math Basics for SSP)
-Intuitive Probability and Random Processes using MATLAB, Kay (Math Basics for SSP)
-Statistical Digital Signal Processing and Modeling, Hayes (Statistical SP)
-Statistical and Adaptive Signal Processing, Manolakis (Statistical SP)
-Applied Optimal Estimation, Gelb (Kalman Filters)
-Linear Estimation, Kailath/Sayed (Kalman Fitlers)
-Statistical Signal Processing, Kay (Linear Estimation)
-Adaptive Filter Theory, Haykin (Adaptive Filtering)
-Adaptive Signal Processing, Widrow (Adaptive Filtering)
-Fundamentals of Adaptive Filtering, Sayed (Adaptive Filtering)
-Spectral Analysis of Signal, Stoica (Spectrum Estimation)
-Digital Spectral Analysis with Applications, Marple (Spectrum Estimation)
-An Introduction to the Bootstrap, Efron (Adaptive Filtering)
-Bootstrap Techniques for Signal Processing, Zoubir (Bootrap)

Of these, the most influencial books for my research have been Statistical Digital Signal Processing by Hayes and Linear Estimation by Kailath.

The list below includes some of the authors and corresponding books that have influenced me the most in the field of management and leadership. I hope to have time to do a more detailed review of each of them someday in the future:

-The Delta Project, Arnoldo Hax (Strategy)
-Classic Drucker, Peter Drucker (Management)
-The Practice of Management, Peter Drucker (Management)
-The Effective Executive, Peter Drucker (Leadership)
-Kotler on Marketing, Philip Kotler (Marketing)
-Re-Imagine, Tom Peters (Innovation)
-The Circle of Innovation, Tom Peters (Innovation)
-Competitive Strategy, Michael Porter (Strategy)
-Competivite Advantage, Michael Porter (Strategy)
-Leading Change, John Kotter (Change Management)
-Marketing Management and Strategy, Peter Doyle and Phillip Stern (Marteting)
-The Dynamics of International Strategy, Susan Segal-Horn and David Faulkner (International Strategy)
-Analysis for Financial Management, Robert Higgins (Finance)
-The Human Side of Managing Technological Innovation, Ralph Katz (Technology Management)
-The Organization and Architecture of Innovation, Thomas Allen (Space & Innovation).

Of these, the authors that have influenced me the most have been Arnoldo Hax, Peter Drucker, Tom Peters, and Philip Kotler. I had the great pleasure and oppotunity to take the course on “Reinventing Business Strategy” taught by Arnoldo Hax at MIT Sloan. His presentations, analysis, and clarity of thinking was life changing. I also had the opportunity to take courses by Ralph Katz and Thomas Allen at MIT.

In his seminal 2003 Harvard Business Review article "It Doesn't Matter" Nicholas Carr made the argument that while information technology has become the backbone of commerce, the importance of IT and information systems (IS) as a strategic resource capable of gaining sustainable competitive advantage has diminished. Carr's acknowledges that IT is critical to today's competitive environment. However, he makes the point that because IT/IS has become so essential to competition it is inconsequential to strategy. This conclusion is based on the assumption that what makes a resource a source of sustainable competitive advantage is not is ubiquity but its scarcity, that is, a company gains an edge over its competitors by doing something that they can't do or have. Since IS have become commonplace (i.e. data storage, data processing, data transport, CRM, etc), standardized, and available to all competitors as common adopted technologies, its potential as a source of differentiation has diminished. In summary, IS are becoming a commodity and an expense of doing business. In the 1990s , the US Department of Commerce's Bureau of Economic Analysis estimated that 30% of the capital expenditures of US companies went to IT. By the end of the decade it had reached 50% to amount over a $2 trillium a year in IT-related expenses worldwide.

After making the case of how the value of IS as a strategy resource has been vanishing, Carr provides three recommendations regarding IS management: 1) spend less -studies how that companies with the biggest IT investment do not post the best financial results, 2) follow, don't lead -Moore's law guarantees that the longer you wait to make an IT purchase, the more you will get for your money, and you will be investing in IT capabilities that become more homogenized as opposed to proprietary, and 3) focus on vulnerabilities and not opportunities.

Brown and Hagel III (2003) responded to Carr's paper in a letter to the editor entitled "Does IT Matter" HBR (2003). The authors acknowledged the importance and value of Carr's article and agreed that business may have overestimated the strategic value of IT, significantly overspent on technology, and recognized the importance of managing IS more rigorously to reduce capital investment requirements and operating costs. They emphasize that while in many cases IT (especially standardized IT) is diminishing as a source of strategic differentiation, IT matters a lot (i.e. it does matter to the point of being critical). Brown and Hagel III provide a detailed response to Carr's paper and conclude that while differentiation is not in IT itself, it is in the new practises that IT/IS enable.

The value of IT can be studied in terms of the three main schools of strategy: Harvard School (Porter, Five Forces, 80s), London School (Hamel/Prahalad, Resource View, 90s), and MIT Sloan School (Hax,Delta Model, 21st). For instance, in terms of Porter's five forces industry structure model, the strategic use of IS can help build barriers of entry or put in place barriers of entry for competitors, it can help increasing the switching costs for customers and decrease their bargaining power, enable companies to create substitute products, and limit the bargaining power of suppliers. The RBV emphasises how firm-level IS dynamic capabilities may translate into sustainable competitive advantage by generating "generic lead time" (time taken by a competitor to duplicate an IS system, application or IS-based product), "competitive asymmetry" (the ability of the competitor to replicate the first mover's system", and "pre-emption potential" (the ability of the first mover to pre-empt the retaliation by the follower (Feeny, Ives, 90).

In my opinion the best conceptual framework to analyze the value of IS is the Delta Model proposed by Arnoldo Hax (MIT Sloan). As a unified strategic framework developed after the mainstream adoption of Internet, it provides specific strategic options beyond the Best Product Strategy such as Total Customer Solutions and System Lock. Within the wide range of potential strategies the Delta model points out the potential strategic value of IT/IS as enabling technologies to promote boding (with customers, complementors, suppliers, etc) and lead to a range of potential strategies such as "redefining the customer experience" (e.g. Saturn, Barnes & Nobel, Startbucks iTunes), "customer integration" (Dell, Mathworks), "dominant exchange" (Google, YouTube, iTunes), etc.

References:
[1] Carr, N (2003), "IT Doesn't Matter" Harvard Business Review.
[2] Brown, JS & Hagel III, J (2003), "Does IT Matter" Harvard Business Review
[3] Laudon (2004), "Managing Information Systems - Managing the Digital Firm"
[3] Hax, A (2001), "The Delta Project"
[4] Porter, M (1980, 1985), "Competitive Strategy" & "Competitive Advantage"
[5] Barney, J (1991), "Firm Resources and Sustained Competitive Advantage"
[6] Feeny, F, Ives, B (1990), "In Search of Sustainability: Reaping Long-Term Advantage from Investments in Information Technology"

There plenty of examples of companies that have gained sustainable competitive advantage through effective use of information systems (e.g. Amazon, eBay, Dell, Walt-Mart, Apple, YouTube, etc). Many other firms, however, fail to realize the benefits of their capital investments on information technology (IT). This is explained, in part, by the fact that strategies based on technology alone tend to be ill-conceived and limiting. This is the case because a mere technical strategy can have serious negative implications for organizations because it does not take into account numerous "societal considerations" that are critical in order for IT to function as an effective information system (IS). These societal considerations and human factors include an understanding of the organizational culture, context, values, structure, and processes. Top-down implementations based on technology considerations alone can be extremely disruptive to well-established and efficient business processes and often result in resistance from the intended user-base in the organization. Kling (2000) warns firms of the dangers associated with the technological approach and the thinking that IT/IS are mere "tools." According to Kling, viewing IT/IS as tools leads to 1) underestimate the cost associated with effective IS/IT implementation and adoption, and 2) overestimate the generalizability of applications from one setting or group of individuals to another.

IS investments and implementations have a much better change of translating into competitive advantage when they take into account the underlying organizational context and its impact on how IS are used. Societal aspects associated with the firm will determine how the IS will be used. IS will, in turn, affect the organizational context. For instance, the IS adopted in multidomestic enterprises will probably differ from those adopted by global enterprises due to differences in organizational structures, context, and processes; and adopting a given IS may -in turn- change these enterprises to behave more or less as transnational firms.

In summary, IS should be viewed as enabling technologies that are in constant interaction with people and processes within the organization. This is due, in part, to the evolving role of IS from data processing tools (50s), to managerial control tools (60s), to decision support tools (70/80s), to institutional core activities (90s), to becoming a major source of competitive advantage (21st). The view of IS as social systems is known as the "sociotechnical approach" (Laudon 2004) and there is an extensive body of research that examines the design, uses, and consequences of information and communication technologies (ICT) in ways that take into account their interaction with institutional and cultural contexts. This area of research is now known as "social informatics" (Kling 2000).

References:
Kling. "Learning Abut Information Technologies and Social Change: The Contribution of Social Informatics." (2000)
Laudon. "Managing Information Systems - Managing the Digital Firm" (2004)

Information Systems have affected academia significantly. With regards to teaching, IS have became a critical component and online/web courses are now mainstream even at traditional face-to-face/campus universities. IS have also had a tremendous effect on research. Most peer-reviewed journals currently employ manuscript management systems where journal submissions and the peer-review process takes place. This has shortened the review and publication time. Additionally, performing literature reviews and prior-art searches has become easier than ever before due to improvements in IS.

An information system is a set of interrelated components that collect or retrieve, store, analyze, and distribute information to support organisational decision making an control. Information systems include technical components (hardware, software, etc) -i.e. the Information Technology- and the associated human interaction with technology.

According to Aaker, it is wasteful to attempt to community brand attributes and benefits until a name is established in which to associate attributes. The name is central to the personality of a brand or business. Several name qualities are recommended. The name should:

-1. Suggest something about the "benefits"
-2. Suggest product qualities/features/attributes or associations
-3. Be easy to pronounce, recognize, and remember
-4. Be distinctive
-5. Should not carry poor meanings in other languages

The quality of a name is typically assessed using four tests: 1) the association test, 2) the learning test, 3) the memory test, and 4) the preference test.


References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"

Brands have immense value to firms. They are critical to differentiate the company's products and services and protect them against becoming a commodity. It is important to distinguish between name recognition and brand equity. McKinsey distinguishes between: 1) Names -name recognition, 2) Brands -names become brans when consumers associate a set of intangible and tangible benefits to the product/firm, and 3) Power Brands -brands that create strong emotional bonds, strong associations, customer loyalty, and yield price premiums. Power brands have personality, presence, and create strong emotional/psychological bonds.

Brand equity requires differentiation and a strong alignment between what the company communicates about the brand with what it actually delivers. Having a powerful brand is critical to protect the firm and customers against imitators.

Aaker notes that brands have assets and liabilities associated with them. These can be related to 1) customer loyalty, 2) name recognition, 3) perceived quality, 4) brand associations in addition to perceived quality, and 5) other proprietary brand assets. Important points to consider include the trade dress, design patents, trademarks, copyrights, and other IP protection.

References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"

The Martindale-Hubbell (R) Law Directory has been used as an authoritative resource for information on the worldwide legal profession from more than 130 years. The listing includes a database over one million law firms and lawyers in 160 countries. The Martindale-Hubbell Law Directory is accessible on CD-ROM, print-edition (26 volumes), and online at martindale.com, The Martindale-Hubbell directory includes law firms by practice area including Intellectual Property Law. Under the IP Law directory it is possible to search by US-State, Canadian Province, US Territories, and country.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Martindale-Hubbel Law Directory. www.martindale.com

Qualifying small entities can pay a reduced rate fee for their patent application if they file a small entity declaration. For the purposes of determining the patent application fees, small entity are defined by the USPTO as (1) independent inventors, (2) small business concerns (i.e. a business with 500 or less employees during a fiscal year), and (3) nonprofit organizations. In order to qualify the the exception, independent inventors must maintain the patent rights or transfer the rights to a small business concern or nonprofit organization. The small entity status does not apply in cases where the small entity (independent inventor, small business concern, or nonprofit organization) is transferring the rights to an entity that does not qualify as an small entity. The reduced filing and maintenance fees are intended to help promote innovation by small entities.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition

Patents seem to do a good job in general when it comes to protecting the original owner's interest in cases where the invention falls well within the traditional matter of patents: utility patents, plant patents, and design patents. Patent law generally provides good protection for "classic" inventions such as machines, devices, etc (i.e. tangible inventions). However, as we move from a manufacture/engineering-based economy towards the digital economy and the "service/experience" economy, traditional patent protection has limitations. In the past 50 years US firms sought patent protection for their inventions since manufacture and engineering innovations gave them an important competitive advantage. As the technology matures and global competitors can produce similar quality products at lower cost, some of the competitive advantage based exclusively on "tangible" inventions is more limited (Porter). Additionally, given that nowadays the US economy is primarily a "services economy" where even engineering companies that have traditionally focused on device manufacture such as IBM have shifted their orientation towards providing service solutions; protection in the area of business processes, software, and other more "abstract" and "intangible" inventions is becoming more important. While the USPTO have been shown to be more capable of adapting to accommodate this shift toward more intangible inventions than the EPO (European Patent Office), protection is still limited in many emerging areas.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
[4] The European Patent Convention
[5] Porter, ME. "Competitive Advantage".

First-to-file patent systems such as the requirements followed in the European Union place more importance on the filing date than the actual date when the invention was conceived. In the US, the PTO determines the priority between two applications by considering the invention date as well as the filing date. Thus, the USPTO can be considered to follow a "first-to-invent" doctrine. An inventor can publicly disclosure the invention (i.e. demonstrating that the invention has been fully conceived) and wait to file a patent for up to a year in the US. This is not the case in Europe since any public disclosure is considered to be prior art. Consequently, only the filing date matters. Article 60(2) of the European Patent convention (EPC) awards priority to the applicant that first files the invention. Under first-to-file patent systems inventors are more pressured to prepare and file the application as soon as possible in order to gain the IP protection for their invention.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
[4] The European Patent Convention

The one-year rule, also known as the one-year grace period or on-sale bar, is a doctrine that prevents an inventor for acquiring patent protection if the application is filed more than one year of the following: 1) any public use of the invention by the inventor, a sale of the invention, an offer of sale, or public use of the invention in the United States, OR 2) any description of the invention by the inventor in a published document (i.e. a printed publication) in any country. This enables inventors to market or commercialize their inventions for up to a year and decide whether or not they want to seek patent protection. After the one-year period, the invention becomes public domain and is not eligible for patent protection since it is considered to be prior art. In general, disclosure under a signed confidentiality agreement is not considered to be public disclosure.

In 1998 the Supreme Court established a two-part test (Plaff vs Wells) to determine the commencement of the on-sale bar. According to this test 1) there must be an offer for commercial sale -not experimentation-, and 2) the invention must be ready for patenting (i.e. it must be reduced to practice or fully documented so that a person skilled in the art could create a working version of the invention).

For the purposes of patent law, a printed publication is considered to be any method of recording information such as paper, hard-drive, CD/DVD, microfilm, etc. If the printed publication contains a full disclosure of the invention (i.e. a description with enough detail that would enable a person skilled in the art to create a working version of the invention), the inventor will be barred from patent protection if the application is filed after a year of the date of publication. For the purposes of patent law, public disclosure is considered to take place once there is public accessibility to the printed publication. For instance, in the case of a doctoral dissertation public disclosure is considered to be the date when the university catalogs the dissertation and makes it available to the public. In the case of peer-reviewed journals, the date of publication is typically considered to be the date when the paper get published (i.e. available to the public) but depends on the specific editorial policies of the specific journal. In any case, it is a good idea to file for a provisional patent before any public disclosure.

Compared with other countries, the grace period by the USPTO is very generous. For instance, the European Patent Office requires "absolute novelty" (i.e. any public disclosure would prevent the inventor for acquiring patent rights). Article 54(2) of the European Patent Convention (EPC) defines prior art to include "everything made available to the public by means of a written or oral description, by use, or in any other way, before the date of filing of the European patent application."

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition

Utility patents are granted for inventions that can be described or categorized as:
-Machines (i.e. a device that accomplished a specific task -e.g. an engine)
-Articles of Manufacture (i.e. a single object without movable parts or equivalent -e.g. chair, pencil)
-Processes (i.e. a method of accomplishing a result through a series of steps involving physical or chemical interactions).
-Compositions (i.e. a combination of chemical or other materials).
-New Uses of machines, articles of manufacture, processes, or compositions.

The four requirements for a utility patent are:
1. The invention must fall within one of the statutory classes
2. The invention must be useful.
3. The invention must be novel.
4. The invention must be nonobvious.

By statutory classes it is meant that the patent is a machine, process, manufacture, composition, or any new or useful improvement of these. The USPTO regards an invention as useful when it is capable of accomplishing the task it was designed for (i.e. the invention must work). Thus, when filing a patent application it is important to demonstrate that the invention works as intended and therefore has utility. Novelty is a statutory requirement of the US Patent law. By novel it is meant that it differs in some specific way form prior art (i.e. existing knowledge in the public domain or previous patents). Finally, the invention must not be considered to be obvious by people trained in the art.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition

The US Patent and Trademark Office (PTO) has established a certification process that involves taking an examination (the Patent Agent's Exam) after having obtained an approved college degree in engineering or science. Both attorneys (i.e. people that have completed a law degree and have passed the bar examination in a state) and nonattorneys may take the exam as long as they have a college degree in engineering or science that meets the PTO requirements. A Patent Attorney is a lawyer with adequate technical background (i.e. in possession of a college degree in engineering or physical sciences) that has passed the USPTO Patent Exam in addition to the bar examination in a given state. On the other hand, a Patent Agent is a nonattorney with adequate engineering/scientific preparation that has passed the USPTO Exam. Patent Agents can prepare patent applications on behalf of inventors, file patent applications, respond to USPTO office actions (i.e. letters), and participate in the amendment of the applications. In summary, a Patent Agent is a licensed professional certified by the USPTO to prepare and prosecute patent applications. The difference between a Patent Agent and a Patent Attorney is that a Patent Agent cannot advise the inventors regarding the legal consequences that may arise from ownership of the IP. For instance, it cannot provide legal advise regarding how the ownership rights may be affected in the case of a divorce, for the purposes of making a will, or regarding the terms of a licensing contract. These legal issues outside the scope of patent law require the professional counsel of an attorney.

Information regarding the USPTO Patent Exam can be found at http://www.uspto.gov/go/dcom/gcounsel/oed.htm. Briefly, this site includes information regarding the requirements for registration, examples of past exams, and result statistics. Current examinations are based on the 8th Edition (Rev. 2) of the Manual of Patent Examining Procedure (MPEP). The passing rate in the last exam was 58.2%. There are many firms that offer training services, educational programs, and self-study materials for the Patent Bar Exam.


References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition

TM means "trademark", while SM denotes "service mark". Trademarks are primarily used on products (i.e. goods), while service marks are employed to label services. Both TM and SM can be used prior to registration with the federal trademark office (USPTO). Once a trademark or a service mark is registered, the (R) in a circle is used to indicate that the trademark has been registered. The use of the symbols TM (trademark for goods) and SM (service mark for services) is recommended to claim the rights on unregistered marks that have not been used by others in commerce.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).

Domain name registration in .com, .net, .org (i.e. domains open to any kind of registrant) follows a first-come-first served policy. Thus, when deciding on a mark it is often a good idea to search for potential conflicting trademarks by researching domain names that use the mark. The unavailability of a domain name may indicate the existence of a conflicting trademark and it will limit the ability to differentiate products and services.

The availability of domain names can be researched at www.whois.net. WHOIS is a searchable database maintained by registries and registrars that contains information about domain name registrations in the .com, .net, .org, .edu, and ISO 3166 country code top-level domains.

While legally registered domain names can pose a problem for new trademarks, it is also important to recognize that a similar issue is at work when choosing a domain name. It is the domain name registrant’s responsibility to make sure that the domain does not infringe or violate someone the rights of any third party (including trademark rights).

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Lanham Act of 1988.
[4] Uniform Domain Name Dispute Resolution Policy (ICANN)

Criminal penalties are applicable in severe trademark infringement cases involving counterfeiting of products. Counterfeiting is considered to be an extreme form of trademark infrigmement since the infriger knowlgy takes advantage of the trademark, bandname, and goodwill of a firm to deliverately create counterfeit products (i.e. lower quality immitations) for the purpose of seeking economic gain. The Trademark Counterfeiting Act of 1984 and the Anticounterfeiting Consumer Protection Act of 1996 address the problem of trafficking in countefeit trademarked goods and the distribution of imitations of well-known trademarked mechandize. According to these Acts "(w)hoever intentionlly traffics or attempts to traffic in goods and services and knowingly uses a counterfait mark on or in connection with such goods or services" is guildty of a felony. These acts lso ammend the Lanham Act to provide stronger civil penalties in cases involving counterfeiting.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Acceptable Identification of Goods and Services Manual
[4] Trademark Examiners Manual of Procedure (TMEP)
[5] International Schedule of Classes of Goods and Services.
[6] Lanham Act of 1988.
[7] Trademark Counterfeiting Act of 1984
[8] Anticounterfeiting Consumer Protection Act of 1996

Goods and services are classified according to a numerical system of international classification known as the International Schedule of Classes of Goods and Services. For instance, class 35 corresponds to "Advertising and Business" services and class 12 corresponds to "Vehicles; apparatus for locomotion by land, air, or water" goods. This classification is applicable to trademarks filed after September 1, 1973. For to this date, the US Classification System was used for categorization.

In addition to the classification of goods and services, trademark applicants must provide an identification and description of the services beyond the scope of the descriptions listed in the Intenational Classification of Goods and Services document. The USPTO Acceptable Identification of Goods and Services Manual and the Trademark Examiners Manual of Procedure (TMEP) are valuable is a valuable tools to help applicants identifying goods and sevices.


References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Acceptable Identification of Goods and Services Manual
[4] Trademark Examiners Manual of Procedure (TMEP)
[5] International Schedule of Classes of Goods and Services.

When choosing a trademark based on an English word or group of words, it is necessary to evaluate non-English translations of the trademark because these may be considered confusingly similar to registered trademarks in other languages. Similarly, word marks in languages other than English must also be evaluated carefuly since consumers in the United States may be familiar with marks that match the English equivalent of the foreign term. For instance, consider a company that has registered the mark "Arrow" in the United States. If another company tried to use the mark "Flecha" (the Spanish translation of Arrow) this may pose a problem (e.g. Red Bull and Toro Rojo).

In addition to the legal issues associated with potential translations of trademarks, there are also important marketing considerations involved. For instance, a direct translation of an English word to another language may have a different meaning. A classical example used to illustrate this concept is the use of the mark Nova for an automobile since the term Nova sounds as the words meaning of "no-go or doensn't go" in Spanish.

Reference:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).

Personal names can be used as a trademark only if it can be demonstrated that they possess "secondary meaning." Thus, personal names are similar to descriptive marks and they are considered to be weak marks. For the purposes of trademark registration, secondary meaning may be assumed after five years of continued and exclusive use of a mark. Black's Law Dictionary (Fifth Edition) defines the doctrine of secondary meaning for the purpose of trademark law as "[A] ... party through advertising or massive exposure ... [establishing] its trademark in the minds of consumers as an indication of origin from one particular source."

There are numerous examples of trademarks that use personal names: Chanel, Levis, Versace, Gucci, etc. These personal names are protected by trademark law because they have accomplished the objective of forming an association in the mind of the consumer which links the individual products with its manufacturer or distributor.

Reference:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).

The overall purpose of trademark law is to prevent unfair competition by protecting the use of a symbol, word, logo, slogan, design, domain name, etc. that uniquely distinguises the goods or services of a firm. This body of common-law principles ultimately protects consumers by prohibiting companies from using trademarks substantially similar to those of other companies that may have more "brand equity" and customer loyalty. Trademark law is intended to avoid consumer confusion and preventing companies from diluting the marks of other firms. Dilution occurs when a similar mark adversely affects the reputation of a distinctive trademark regardless if it leads to consumer confusion or not.

Given the increased importance of branding and the tangible economic value of the brand (brand equity) in today's experience economy, trademark law is more important than ever before. As consumers become loyal to a particular brand and make purchasing decisions based on their ability to identify a product of service by use of a logo, slogan, etc (i.e. trademark), these marks serve as a point of differentiation and competitive advantage. Consequently, trademark law is important to enable the trademark proprietor to develop goodwill for the product or service and prevent other parties from exploiting the brand.

Reference:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).

A covenant not to compete is an agreement or contract that prevents or restains a person from performing a lawful profession, trade, or business for a period of time. For instance, an engineering firm may want to restrain departing employees from working at competing companies for a certain period of time. The rationale behind these noncompetition provisions is based on the argument that a departing employee will inevitably use concepts, ideas, and potentially trade secrets learned while working at the company once it goes to work for a competing firm. What companies regard as valuable IP is often very broad and goes beyond the legal definition of trade secrets (e.g. employeed trainning, business methods, general experience gained while working, etc.) The regulation of these contracts is a matter of state law and varies from state to state. In general, however, any contract that presents a person from performing his lawful profession or business is generally considered to restrain free trade and is not favored by the corts. Some states, such as California, prohibit these type of restrains on trade. These contracts are enforsable when they meet the requirements of 1) consideration (i.e. the employee must receive something in exchange from it), 2) protection of a legitimate business interest, and 3) reasonabless of the restrain (duration, scope, etc).

Covenants not to compete are intimately related to trade secrets. In fact, companies use these contract to protect their "intellectual property" (defined in more general terms than its legal definition) and competitive advantage. While companies may not be able to enforce some of the noncompetition provisions in certain states, they always can prohibit an employee from using "confidential information" (i.e. trade secrets). If the company can demonstrate that a departing employee is using information that meets the legal requirements of trade secret, it can file a lawsuit to prevent this from happening and seek compensation for the damages caused. The success of these lawsuits greatly depends on the specificity of the trade secret and the company's trade secret management and security plan (e.g. the nature of the confidentiality agreement, how the company treats the secret information, etc.).

Primary Reference:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).

Trade secrets (i.e. any formula, pattern, device, or compilation of information of economic value treated in confidentiality) are protected by state law in two ways: 1) misappropriation and 2) contract law. Trade secret law is primarily derived from common law, state statues, federal law, and the Restatement of Torts. State laws prohibit the misappropriation of trade secrets. Under the Uniform Trade Secrets Act of 1975 (amended in 1985) misappropriation is defined as "(i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (ii) disclosure or use of a trade secret of another without express or implied consent by a person who (A) used improper means to acquire knowledge of the trade secret; or (B) at the time of disclosure or use knew or had reason to know that his knowledge of the trade secret was (I) derived from or through a person who has utilized improper means to acquire it; (II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (C) before a material change of his position, knew or had reason to know that it was a trade secret ad that knowledge of it had been acquired by accident or mistake."

The Uniform Trade Secrets Act does not affect: (1) contractual remedies, whether or not based upon misappropriation of a trade secret, (2) other civil remedies that are not based upon misappropriation of a trade secret, and/or (3) criminal remedies, whether or not based upon misappropriation of a trade secret. Consequently, trade secrets are also protected under the principles of state contract law. Companies are advised to require the relevant parties to enter into a contract that includes a confidentiality or nondisclosure agreement.

Finally, in addition to the protection granted by state law, since 1996 trade secrets are also protected by federal law under the Economic Espionage Act of 1996.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Uniform Trade Secrets Act of 1975 (amended in 1985)
[4] Economic Espionage Act of 1996

The plaintiff can can claim statutory damages if he 1) prevails in the lawsuit, and 2) has registered the work prior to the infringement lawsuit. In this situation, the copyright owner can choose whether to seek statutory damages or actual damages anytime before the final judgment. The decision typically depends on the amount of actual damages and the ability to proof and document them. For instance, if the actual damages can be easily demonstrated and these are significantly higher than the maximum statutory damages award, the plaintiff would likely be advised to seek actual damages. In both cases, the copyright owner sustains the burden of proof regarding the degree of the damages and willfulness. Despite the fact that intent is irrelevant for proving infringement, it is often an important factor to determine the award of statutory damages.

At the time of this writing, statutory damages for infringing a single work range from $750 to $30,000. However, the court may increase the award at its discretion up to $150,000 in cases of evident willful infringement. Similarly, if the court concludes that an infringement was innocent it also has discretion to reduce the statutory damages to a minimum of $200. These amounts are multiplied by the number of works infringed. In addition to the statutory damages, the loosing party may also have to pay all the attorney fees if the copyright owner registered the work prior tot he infringing activity.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Copyright Act of 1976

The Copyright Act of 1976 (Section 507) establishes a three-year period of the copyright owner to bring a claim of copyright infringement. This statute of limitations assumes that the copyright owner knew or should reasonably have known that the infringement occurred. Consequently, the three-year limitation begins when the owner learns about the infringement activity. Furthermore, the statute of limitations period does not start necessarily when the copyright owner first learns about the copyright infringement as long as the infringement is continuing. In these cases, the three-year period can begin at any time during the infringing activity. Thus, the statue of limitations only applies if 1) the copyright owner knew or should reasonable have known about the infringement activity, and 2) the infringement activity is not ongoing (i.e. has stopped).

As an illustrative example, we can consider the case of a student that photocopies his professor's textbook and uses it for his class. Let's assume that the professor knows that the student has photocopied his textbook and copyrighted materials. After finishing the course the students disposes of the copies. Since the infringing activity has stopped, he can only be successfully sued within the next three years. In the case that a lawsuit was filed against him after the statute of limitations period, he will be able to claim the plaintiff waited an unreasonable amount of time to bring the lawsuit.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Copyright Act of 1976

In the context of copyright law, copying is understood in more general terms than exact duplication. It is possible to violate one or more of the exclusive rights granted under copyright law in situations where the work is not an exact duplication. Generally, the user of the work will not be shielded from an infringement claim even if he paraphrased the original work as long as the resulting work has similarities that can result only from copying, rather than from coincidence, independent creation, or derivation from a common source in the public domain. This test is referred to as the "substantial similarity test" and includes both literal similarities (i.e. literal or verbatim copying) and nonliteral or comprehensive similarities.

It is also important to emphasize that it is possible to incur in copyright infringement even in situations where the user of the work cites the original source he is paraphrasing, Thus, the combination of attribution and paraphrasing will not necessarily prevent an infringement claim. Additionally, in certain situations this use of copyrighted material may also lead to other serious claims such as false endorsement and invasion of the right to publicity. This is specially important in the case of advertisement.

While paraphrasing and attribution may not shield the user of the work from infringement claims in general, in certain situations it may be acceptable. For instance, in works involving factual information, charts, maps, compilations, etc. paraphrasing and attribution would typically protect the user from infringement claims. In these cases, the courts use a higher standard for establishing infringement since there are only a limited number of ways to express facts. Consequently, the user would typically be protected as long as he is not copying at verbatim or paraphrasing very closely.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Copyright Act of 1976

Owners of copyrighted work typically demonstrate that they are the rightful owners of the copyrighted work by introducing the copyright registration as evidence. As it was mentioned in an earlier post, copyright registration within five years of first publication creates a legal presumption of ownership and validity. While copyright registration does not prove ownership of copyright, this legal presumption of ownership and validity constitutes a prima facie proof (on first appearance). Consequently, in cases of infringement the court will presume that the ownership of the copyright and the registration is valid and will shift the burden of proof to the defendant to disprove by showing with sufficient evidence the falsity or invalidity of the allegation.

A third party may also bring a suit provided the owner of the copyrighted work has assigned (i.e. transferred) the rights to this party. In these cases, the party can introduce the transfer of copyright ownership written documentation as evidence to "prove" ownership.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Copyright Act of 1976

While registration is generally not required to obtain copyright protection, it is currently a required administrative process to file a lawsuit. Specifically, the plaintiff in a copyright infringement lawsuit must acquire the "certificate of registration" in oder to formally file the lawsuit. The registration process is straightforward. It involves the submission of an application, a fee, and deposit materials. The normal processing of registration may take six weeks or longer. In cases of urgency (e.g. litigation) it is possible to request special expedited handling by preparing the form "Request for Special Handling" and paying an additional expedited handling fee of $500. In these cases, the Copyright Office will process the application within five working days.

Generally actions for infringement cannot be instituted until registration of the copyright claim has been made. However, there are a couple of exceptions to this rule. For instance, if the registration is refused despite having filed the correct form, the copyright owner can still institute the lawsuit. Other exceptions include simultaneous transmissions and certain situations under the Berne Amendments.

Additionally, copyright registration within five years of first publication creates a legal presumption of ownership and validity. While copyright registration does not prove ownership of copyright, this legal presumption of ownership and validity constitutes a prima facie proof (on first appearance). Consequently, in cases of infringement the court will presume that the ownership of the copyright and the registration is valid and will shift the burden of proof to the defendant to disprove by showing with sufficient evidence the falsity or invalidity of the allegation.

Finally, statutory damages can only be awarded in a copyright infringement lawsuit if the work was registered prior to the infringement or within three months of the first publication of the work.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Copyright Act of 1976

Copyright registration within five years of first publication creates a legal presumption of ownership and validity. While copyright registration does not prove ownership of copyright, this legal presumption of ownership and validity constitutes a prima facie proof (on first appearance). Consequently, in cases of infringement the court will presume that the ownership of the copyright and the registration is valid and will shift the burden of proof to the defendant to disprove by showing with sufficient evidence the falsity or invalidity of the allegation.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).

The copyright notice must include three elements: 1) the symbol (c), word Copyright, or abbreviation copr; 2) the year of first publication; and 3) the name or abbreviation of the owner of copyright. In the cases of derivative works it is recommended to indicate a range of years for a work (although this is not required by law). For instance, a copyright notice may be specified according to any of the following variants:

-Copyright (c) Mateo Aboy
-(c) 2007 Mateo Aboy
-Copyright 2007 Mateo Aboy
-Copr. 2007 Mateo Aboy

An exception to the above relates to the copyright notice of sound recordings. Sound recordings embodied on phonorecords are required to include a special notice consisting of the letter P in a circle followed by the year of first publication and by the name of the copyright holder.

Under the Copyright Act of 1909 if an authorized copy of a work was published without notice, the work would be placed permanently on the public domain. This would result in the loss of copyright ownership. This requirement changed when the US passed the Berne Implementation Act of 1998 which became effective on March, 1989. For works published after this date, the omission of the copyright notice does not result in loss of copyright protection. Despite this change in the law it still strongly recommended to use the copyright notice. The notice serves to inform the public that the work is protected and identifies the owner of the work. Additionally, the proper use of a copyright notice makes it significantly more difficult for defendants to claim innocent infringement.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Copyright Act of 1976

Copyrights grant the copyright holder exclusive rights of reproduction, preparation of derivative works, and public performance. In its current state copyright law does a decent job protecting some copyrightable works such as books, songs, and screenplays; but it still seems to be underdeveloped in other areas such as the protection of computer programs.

Since copyright protection does not extend to the underlying idea, procedure, or method of operation; other authors are free to use the same ideas and methods to create independent works. For instance, after reading a novel an author could write another novel using the same plot and as long as he doesn't copy parts of the original copyrighted work literally he will not violate copyright law. This limitation is specially significant in the case of computer programs. Consider the example of a scientist that after investing a considerable amount of time seeking a solution to a scientific problem writes a computer program that can significantly help others in a specific area. In this scenario copyrights will provide very limited IP protection. Other other people can develop their own version of the program that does the exact same thing and will not violate copyright law as long as they do not use the exact same source code. Additionally, reverse engineering is not prohibited either.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Copyright Act of 1976

The Copyright Act of 1976 defines "joint work" as creative work prepared by two or more authors working under the intention that their contributions will be merged into a inseparable or interdependent parts of a unitary whole. This Copyright Act does not specify guidelines on how to value the different contributions in joint works. However, common-law principles, court decisions, and the writing of legal commentators agree that when there is no agreement between the authors, a court will presume that each author had an undivided interest in relation to the total number of authors (i.e. the value is divided equally among the authors).

It is often the case that not all the authors of a copyrighted work contribute equally to the work. When multiple authors write of a textbook or a band that writes a song together it is often the case that not all the authors contributed equally. In these situations it is important for the authors to sign a contract where they specify the rights, obligations, percentage of copyright ownership, and revenues attributable to each author. This type of contract is known as a "collaboration agreement." Collaboration agreements are very common in the creation of works such as books, software programs, screenplays, and songs.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Copyright Act of 1976

The owner of a computer program has the right to make a copy of that program for the following two purposes: 1) the copy is intended for archival (i.e. backup) purposes only and 2) the copy is created to utilize the computer program and not for the purposes of sale or commercial gain (1984 Congress amendment 117 of the Copyright Act). More recently, Congress passed the Digital Millennium Copyright Act (1998). This Act included provisions granting lawful owners or lessees of a computer program additional rights regarding computer programs. Specifically, under the provisions of the Digital Millennium Act lawful owners of computer programs have the right to authorize independent service providers to activate the machine for the sole purpose of repairing or servicing its hardware components. Consequently, a computer repair company does not infringe copyright law under these situations.

We must emphasize that while "owners" of computer programs have the right to make copies for the purposes specified above, selling or renting copies of the software would constitute copyright infringement. To understand these limitations, especially the inability to rent computer programs, it is important to understand "Shrink--Wrap Agreements." Under the first sale doctrine the purchaser of software could rent copies. To avoid this situation, software products are not ``sold", instead they are ``licensed." This license is a contract that grants certain rights and specifies limitations. Anyone who purchases any software and violates the terms of the agreement can be sued for breach of the contract. This arrangement enabled software companies to gain additional protection because the software was licensed and not sold. Consequently, no first sale occurs and the first sale doctrine is not triggered. This practice is known as the "shrink-wrap agreement" or the "click-wrap agreement", depending on whether the software is sold as a packaged product or if it is sold directly on the internet for immediate download. The user enters into a contractual agreement by breaking the shrink--wrapped plastic that seals the CD or DVD or when it clicks on the accept button to accept the terms of the agreement. These agreements typically replace many of the rights granted by copyright law with restrictions. While in the past there was some debate regarding the enforceability of these agreements, since the Electronic Signatures in Global and National Commerce Act became effective in 2000 the law makes it difficult to challenge the validity of click-wrap agreements.

While the amendment of the Copyright Act of 1990 prohibits rental of computer programs, it may be possible to do so in certain situations. For instance, nonprofit libraries may be permitted to lend software without authorization, and software intended for "limited purpose" computers such as video game devices may be rented in certain situations.

Finally, another area of user confusion relates to the rights involved in using shareware (trial software) and freeware (free software). It is important to emphasize that both of these forms are protected by copyright law and cannot be reproduced or distributed unless explicitly authorized by the copyright owners.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Copyright Act of 1976

Under the Copyright Act of 1976 17 U.S.C. 101 there are situations where the ownership of the copyright does not belong to the person responsible for creating the work (i.e. the creator) but to the party commissioning the work (e.g. the employer). This is known as the "work-made-for-hire doctrine."

In order for a hiring party to acquire the copyrights it must meet either of the following two requirements: 1) the work was prepared by an employee within the scope of his or her employment, and/or 2) the work was specially ordered or commissioned for use as a contribution within the following categories: a collective work, as part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answers material for a test, or as an atlas. Additionally, the parties involved expressly agree in writing that the work shall be considered a work made for hire.

While it is relatively simple to apply these two requirements in certain situations (e.g. a waiter that writes a movie script would be an example of a work that falls outside the scope of employment), these two requirements can be problematic. In certain situations it is difficult to determine whether the work was created within the scope of an employer-employee relationship. For instance, a university professor may create instructional materials and seek copyright protection for himself. The employer university could claim that the creation of instructional materials falls within the scope of the employment and seek to obtain ownership of the materials. Similarly, an employed software programmer could create a computer program and seek copyright protection for his creation claiming that he created the program on "his own time" and using his personal tools (e.g. personal computer and software). In both examples it would be difficult to determine who is the legal owner of the copyright. In these situations where an employee desires to retain control of specific works that may be considered to be created within the scope of employment, he should execute an agreement with the employer confirming the arrangement.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Copyright Act of 1976

I was looking for copyright legislation related to the
recording of course lectures. I found the following Act that
amends chapter 1 of title 17, relating to the exemption of
certain performances or displays for educational purposes
from copyright infringement provisions. This ACT may be
cited as the "Technology, Education, and Copyright
Harmonization Act of 2001." Below is the link to the PDF.

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=107_cong_bills&docid=f:s487es.txt.pdf

While this Act is helpful because it provides a general
framework detailing general exemptions of performances and
displays for educational uses, it does touch on recent
issues such as students recoding lectures using iPods,
editing these, and creating their own podcasts based on
lectures.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).

The Copyright Act of 1976 (Section 106) grants the author of the work or the party commissioning the work of authorship all the means of commercially exploiting the copyrightable work. This collection of rights includes the exclusive rights of 1) reproduction, 2) adaptation, 3) publication, 4) performance, and 5) display. In addition to these five rights, the copyright owner may prohibit the importation of infringing copies into the US in certain situations.

In principle, the author of any copyrightable work is granted these basic five rights. However, different works may have different limitations depending on the nature of the work. This is especially true in the case of computer programs, reproduction of pictorial, graphic, or sculptural works, internet material, and sound recordings. For instance, it is not an infringement to make a copy of a computer program provided the copy is to utilize the software for backup purposes and not for sale. In the case of works of art -pictorial, graphic, and sculptural- it is also permitted for third parties to reproduce these works on useful articles such as in new reports, commentaries, and advertisement. This is an example where the Copyright Act of 1976 prevents the author from enforcing the exclusivity rights of reproduction.

Finally, the nature of the work is also an important factor in the assessment of fair use. As an example, it would be easier to protect the rights of a movie or a movie script than those of a public news broadcast, a public scientific information session, or scientific literature. This is the case because the copying from scholarly and informational works is easier to justify as fair use since the purpose is often to educate and disseminate knowledge.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Copyright Act of 1976

The purpose of copyright law is to promote the progress of useful arts and science by protecting the exclusive right of authors and inventors to benefit from their works of authorship. To this end, the US Copyright Act of 1976 -a complete revision of the Copyright Act of 1909- protects all the works of authorship created between 1978 and the present. This protection extends to works that are unpublished but are in a fixed and tangible form. Copyright law is regulated by the federal government by registering copyrighted works through the Copyright Office (a division of the Library of Congress) and by enforcing copyright laws in the federal court system.

The most commonly litigated issue in copyright law involves copyright infringement. Disputes regarding the violation of any exclusive right granted under copyright law, such as copying a work, are filed in federal courts due to Federal Preemption.

Copyright law protects literary, musical, graphic, or other artistic forms in which an author expresses intellectual concepts. In the context of copyright law an author is the creator of any copyrightable creation. Any author creation that meets the standards of copyright law is protectible under copyright law and considered to be a work of authorship. The main two requirements to meet the standards of copyright law are originality and fixation.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).

In the context of copyright law, a work is considered to be fixed when it is embodied in a tangible, stable, and concrete form. For instance, a short story that is printed on paper meets this requirement, while a live performance of the same short story that is not being simultaneously recorded does not. The Copyright Act of 1976 requires that in order to meet the standards of copyright law, works of authorship must be embodied in a form that is sufficiently permanent to be reproduced, communicated, and perceived. Consequently, works that are transitory in nature are not protectible under copyright law, since they are not fixed.

To illustrate the difference between a fixed work and a work that is not fixed in a practical scenario I will consider a real situation involving a university professor and a graduate student regarding the copyrights of lecture materials and associated class notes. A personal friend of mine completing graduate studies had been taking excellent class notes during lectures and creating thorough course guides by complementing the class notes with materials from additional sources and using a professional quality typesetting system to publish them. Additionally, the student decided to make these course guides freely available to other students as PDF documents. I recently learned about a dispute involving the copyrights of the lecture materials between the university professor and the student. The dispute goes as follows. Allegedly, the university professor wanted to prevent the student from sharing her course guides with other students on the basis that since the student had created them based on her lectures, she -as the professor-- was the copyright owner of the materials.

Analyzing the previous case, we find that based on the US Copyright Act of 1976 and the Berne Convention Implementation Act, the student not only is within her right to distribute the course guides as she pleases without any copyright infringement, but also has the right to seek copyright protection for her work of authorship. Given that the professor lectures have not been simultaneously taped or transcribed, they are transient in nature and cannot be protected by copyright laws since they do not meet the fixation requirement. On the other hand, the student's work of authorship meets the originality, fixation, and Judge Learned Hand's abstraction tests. Additionally, copyright protection does not extend to the ideas, but only to the author's unique expression of the ideas. Consequently, in this particular case the student has the right to copyright the course guides or make them public domain.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).

A trademark is any word, symbol, design, device, logo, or slogan that identifies and distinguishes one product or service from another.

To obtain trademark protection it is necessary for a person or a business to sell a product using the mark. Consequently, trademark rights are only acquired when the trademark is used in commerce. Additionally, it is recommended to register the trademark in order to obtain special rights in the event of infringement. Trademarks are protected by federal and state law. Trademark owners can register the trademark with the PTO (federal) or with the respective secretary of state. Trademark rights are acquired by being the first to use the mark in commerce. The first user of the mark on goods in commerce creates an association with consumers, and trademark laws are intended to protect the consumer by avoiding confusion and enabling companies to compete fairly.

Under the Trademark Law Revision Act of 1998 a trademark owner can apply for registration prior to using the mark, based upon the owner's bona fide intent to use (ITU) the mark. If the application is approved and published without opposition, the trademark owner is required to submit evidence that the mark is in use within a period of three years. Upon submitting this evidence the PTO will issue the trademark registration. Currently, trademark registration are protected for an initial 10-year period. The registrant may renew the registration for subsequent 10-year periods as long as the mark continues to be used in commerce.

The extend of trademark rights is affected by several factors. These include:
-Distinctiveness of the mark.

-The date of first use in commerce.
-The geographic area where the mark is used.
-The registration of the mark
-The goods or services associated with the mark

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).

Patent rights in the US are acquired only after the patent is issued by the United States Patent and Trademark Office (PTO). Contrary to other forms of intellectual property, protection does not exist for patentable inventions until the patent is formally issued (Letters Patent). The PTO is responsible for determining the patentability and issuing patents. Even though inventors can prepare their own patent applications, these application are normally prepared by a certified patent specialist with engineering or scientific background.

In the US both attorneys and nonattorneys that meet the educational requirements may take the examination to become certified patent specialist. A nonattorney licensed by the PTO to prepare and prosecute patent applications is a Patent Agent. While patent agents can prepare, file, respond to office actions from the PTO, and participate in the amendment of the application, only Patent Attorneys can provide legal advise.

After the patent is issued, the inventor acquires exclusionary patent rights for a period. Currently, utility patents filed after June 7, 1995 will expire 20 years for the date of filing.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).

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