Keeping an Eye on Intellectual Property

Consulting engineers might think that intellectual property (IP) law only applies to corporate giants, but nothing could be further from the truth. In any size firm, engineers who take the time to educate themselves on the basics will be able to avoid common pitfalls and take full advantage of IP law.

By David J. Dawsey, P.E., Esq. and Michael J. Gallagher, Esq., Gallagher & Dawsey Co., L.P.A., Columbus, Ohio August 1, 2002

Consulting engineers might think that intellectual property (IP) law only applies to corporate giants, but nothing could be further from the truth. In any size firm, engineers who take the time to educate themselves on the basics will be able to avoid common pitfalls and take full advantage of IP law.

Start-up: the firm’s name

While few people think of their firm name as warranting IP protection, everyone desires a unique and distinctive name. Nowadays, the trend has moved away from listing owners and toward more descriptive names. In fact, many of today’s firms use a series of letters or numbers: for example, XYZ or A1B2. Such names are more likely to be confused with those of other businesses than a traditional name like Smith, Jones, Smith & Jones, Inc.

Geography is another consideration. If the plan is to remain small and work on local or in-state projects, then a limited search for firms with the same or similar name may be appropriate. However, a business plan that envisions an interstate scope calls for a comprehensive trademark and service mark search. But be forewarned. It’s not a good practice to develop a booming local practice only to discover that the firm’s name cannot be used outside the state.

A business owner must also understand the distinction between trademarks and service marks, as well as distinctions between state and federal registration. A trademark is any word, name, symbol or device—or combination thereof—either used or intended to be used in commerce to identify and distinguish the goods of one manufacturer or seller from those of others, and to indicate the source of the goods.

A service mark, on the other hand, can be defined in the same way, except that instead of goods, services are covered. Service marks apply to the name of a consulting engineering firm.

A common misconception is that if a mark is not federally registered, it is unprotected. Actually, common law rights arise from a mark’s use in commerce, whether or not it is registered. But these common law rights offer less extensive protection than state registration, which in turn offers less protection than that afforded by federal registration. The advantages of federal registration include:

  • Notice to the public of the registrant’s claim of ownership of the mark.

  • Legal presumption of ownership nationwide.

  • Exclusive right to use the mark in connection with the goods or services set forth in the registration.

At a minimum, when starting a firm, one should at least file for state mark registration, and preferably seek federal registration. But this is good advice for established firms as well. For example, Seattle-based NBBJ Architecture—an international firm—was recently forced to dispute the use of the letters “NBBJ” with a small local company offering high-technology training classes under the same acronym. Such disputes can be costly, yet may be inexpensively avoided through the use of service mark registration.

Employee policies and IP law

Once a firm has been established, the next issue is protecting its intellectual property from competitors. Many firms are neglectful in this respect.

A company should do everything possible to ensure that marketing data, client lists and other proprietary information does not fall into a competitor’s hands, which can happen if a competitor hires away an employee. A non-compete agreement —a contract between the employee and employer that explicitly identifies what the employee may and may not do when he or she leaves the company—can minimize this threat. The state laws governing these agreements vary, but virtually all states require reasonableness in the scope and type of information protected.

Non-compete agreements should be addressed in a firm’s articles of incorporation or partnership agreement. Employees who are on an ownership track and have access to key information should be required to sign such an agreement.

Because some key employees and prospective owners may be developed from within the company, a plan must be in place identifying when internal recruits must sign such an agreement. Some states consider continued employment with the company to be sufficient consideration to support the enforceability of a non-compete agreement. However, one should always have an attorney draft such agreements and identify procedures that are in accordance with state law.

It is often convenient to require that a non-compete agreement be signed prior to promotion to management or other high-level positions. Employees expected to sign non-compete agreements often require additional compensation; therefore, the fewer employees that sign, the less expense to the employer.

Confidentiality agreements should also be required of all the company’s owners. One who signs an agreement to keep certain information confidential will be less likely to disclose it.

Trade secrets

Another commonly encountered IP issue related to confidentiality is the trade secret. Generally, the term encompasses all forms and types of financial, business, scientific, technical, economic or engineering information. Protection is available—under both state and federal law—if the owner has taken reasonable measures to keep the information secret, and the information has independent economic value, actual or potential, derived from its not being generally known.

Thus, something within the realm of general skills and knowledge is not a protectable trade secret. It must be something not readily duplicated without involving considerable time, effort or expense. This requirement eliminates the majority of the work product of a consulting engineer from being a protectable trade secret. However, niche market consulting firms, such as firms involved in the design of secretive industrial processes—should discuss trade secret matters both with their attorney and clients.

Copyrights and patents

Once the issues of firm name, service marks and non-compete agreements have been resolved, the focus should turn to IP issues encountered during business operation, such as copyright and patent law.

Engineers are often misinformed about copyright law. An original building design embodied in any tangible medium of expression—architectural plans, drawings or the building itself—is subject to copyright protection as an “architectural work.” This includes the overall form as well as the arrangement of spaces and elements in the design, but does not include individual standard features or design elements that are functionally required.

This means that the work of consulting engineers is not generally afforded copyright protection. Nevertheless, we have all seen standard details on engineering plans with the copyright symbol wrongly incorporated. While engineers may love a unique feature they have added to a standard detail, it nonetheless is not afforded copyright protection. However, copyright protection may be appropriate for the firm’s web site, marketing material, published articles and software developed in-house.

More likely to apply to the work of a consulting engineer is patent law. A patent, issued by the U.S. Patent and Trademark Office, grants a property right to an inventor for an invention.

Generally, the term of a new patent is 20 years from the date on which the application was filed. Any U.S. patent grants are effective only within the United States and U.S. territories and possessions. A patent grants the right to exclude others from making, using or offering an invention for sale in—or importing the invention into—the United States.

When designing building systems, consulting engineers must avoid the mindset that they are just applying tried and true engineering principles. While it is true that much of their job is applying established standards, in many ways consulting engineers are in a unique position to develop inventions that may be patentable. They are typically required to know the subtle similarities and differences among products by several manufacturers. They also benefit from discussions with service technicians, maintenance personnel and a myriad of contractors to learn the strengths and weaknesses of the products. All this information puts consulting engineers in an excellent position to develop new inventions and improvements that may be worth a significant amount of money.

Recently awarded patents to engineering firms include: a sheet piling supported modular wall system, a new unique pipe connection method, an HVAC system economizer, a steam-cooled gas turbine combined power plant and a method of building underground structures, to name but a few.

Winding Up a Firm

Finally, every engineering firm must plan for the eventual retirement or discharge of the owners. Virtually every ownership agreement will include the necessary provisions as to how the company will be valued and the method of distributing the departing owners share in the business. However, owners of firms having intellectual property should be particularly concerned as to how it will be valued. While intellectual property valuation is a complicated subject, it’s not a subject to consider for the first time when dissolving a firm. It should be discussed at the outset, when the firm is being created, to avoid litigation when it comes time for owners to part ways or retire.

Engineers Turned Software Pirates

An IP issue that is often ignored, but which may pose the most serious problem for engineering firms, is software piracy—both intentional and inadvertent. Unlicensed end-user copying of software by businesses and individuals includes installing software on more company computers than there are licenses for and disk swapping among friends and associates. These activities are illegal and put not only the individual at risk, but the company as well.

Every consulting firm should have a written policy against unauthorized software duplication. Additionally, software and licenses should be meticulously cataloged and stored in a locked enclosure. All it takes is one disgruntled employee to tip off a software company, which happened in a recent case where a consulting engineering firm was forced to settle with Autodesk for close to $208,000.