www.nexsenpruet.com4th Quarter, 2012

Vol. 4; No. 3

INTELLECTUAL PROPERTY IS WARWARE FOR MARKET SHAREBy Michael A. Mann

SEVEN TIPS FOR PROTECTING YOUR INTEL-LECTUAL PROPERTY IN THE AGE OF SOCIAL MEDIABy Corby C. Anderson

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INTELLECTUAL PROPERTY IS WARWARE FOR MARKET SHAREBy Michael A. Mann© 2012 by Nexsen Pruet, LLC

Businesses having strategic advantages over their competitors will take market share. Think of a business as engaged in a series of battles in a long war, a war with many competitors and few allies, all competing for market share. Each business needs to gird itself with the warware it needs for market share battles, that is to say, with intellectual property. Battles will be won and lost; market share will change hands often. But the prize is always market share and it will go to the competitor with the most powerful intel-lectual property.

Intellectual property includes know-how, inno-vation, message, and reputation. These are the warware of a business. The advantage goes to the possessor of the better warware. The more powerful its warware, the greater its advantage in the fight for market share.

No business can compete for market share without an army, but the army of employees and management must have formidable know-how. This army must be trained and disciplined, organized into teams each with their different capabilities. Most importantly, the business army needs management with a vision of the competitive battlefield that enables them to see the strategic high ground and to formulate effective marketing strategies for each battle. To

execute this strategy, management must have the leadership to command the respect of their employees.

A business needs to innovate. It cannot fight today’s battles for market share with yesterday’s tactics. It needs the advantage of surprise coming from innovation. It needs smart prod-ucts and services, new channels of delivery, and a demonstrably better value proposition than its competitors.

A business needs a message for its army of employees, a message that overcomes resis-tance, that persuades and motivates, that gives heart. The message to employees must embody a clear and compelling vision. The business must also have a message for its customers, namely, a superior value proposition.

A business needs a reputation. Its competi-tors should have a profound respect for that reputation, knowing that they will have to work as hard and smart to acquire a reputation that rivals it. Customers should welcome the new products and services of a business as they would welcome a liberator, the reputation of the previous products and services of that busi-ness having preceded them. Intellectual property is warware for market share. The business that fails to arm itself with intellectual property will lose battles, because its employees will do shoddy work, its manage-ment will be indifferent, its products, undistin-guished, its message, unheeded and garbled, its reputation, tawdry, and it will see its market share crumble and blow away in the wind.

Michael A. MannMembermmann@nexsenpruet.com

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SEVEN TIPS FOR PROTECTING YOUR INTELLECTUAL PROPERTY IN THE AGE OF SOCIAL MEDIABy Corby C. Anderson© 2012 by Nexsen Pruet, LLC

Social media is an important tool in gaining, and keeping, market share. A business can use social media to reach huge numbers of current and prospective customers almost immediately, and for relatively low cost, with information about products and services and special offers; to test concepts and get feedback about them; to build loyalty among existing customers and attract new customers; to drive customers to other marketing channels; to find and communicate with prospec-tive business partners; to “start fires” by gener-ating buzz about a product or service; and to “put out fires” with a quick, proactive response to a public relations crisis.

But in the rush to take advantage of the bene-fits social media has to offer, companies some-times fail to recognize and guard against the risks inherent in this form of communication. One of the primary risks involved in using social media is the risk to a company’s intellectual property (otherwise known as IP) including trademarks, copyrights, trade secrets, and publicity and privacy rights.

Before social media arrived on the scene, compa-nies’ primary communication with the public was through carefully crafted monologues, such as scripted ad campaigns, press releases, and appearances by designated spokespersons. Social media replaces these monologues with conversa-tions – conversations that are fluid, involve many people within and outside the company, and occur in real-time. In these conversations, the company has less control over what is said and who is saying it. This increases both business risks and legal risks to the company’s IP.

Such risks have been widely publicized: An employee blogging about new developments in the office inadvertently discloses information that is highly confidential, destroying the compa-ny’s ability to protect it as a trade secret. Video footage of rats skittering through a local fran-chise of a national restaurant chain goes “viral,” inflicting immediate harm on the brand of the entire franchise system. A company sponsors an ad contest inviting entrants to make and post videos promoting the company’s product, and the

most popular entry features the image and music of a celebrity artist, all used without the artist’s authorization.

How can companies minimize such risks? Outlined below are seven steps to consider:

1. Make it about more than marketing. The most effective – and safest – users of social media take an integrated approach to it. They realize that launching and maintaining a social media campaign should involve a broader segment of the company than marketing. It should also involve information technology, sales, legal, communica-tions, and human resources.

2. Issue a social media policy and enforce it. No company should be without a social media policy. Even if the company itself has not taken the plunge into social media, its employees, busi-ness partners, and customers surely have. Many companies have two policies – one governing third parties’ use of social media on company-spon-sored sites and another governing employees’ use of social media. Some have an additional policy specific to employees who are authorized to speak on behalf of the company on social media sites.

Because social media changes constantly, no policy can cover every contingency that may arise, but every policy should cover certain basics. Having an effective policy published and imple-mented gives a company a significant advantage when it must take action to enforce its IP rights. (On the other hand, having a policy that has been published but forgotten or ignored can do more harm than good.)

Key IP-related issues that social media policies should cover include:

•Howcompanytrademarksandlogos may be used.

•Howcopyrightedmaterialsmaybe used, if at all.

•Whatkindsofcompanyinformation are confidential and proprietary, and how that information should be protected.

•Whoownsuser-generatedcontent posted on company-sponsored sites and who may be liable for such content.

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•Howinformationcollectedoncompany- sponsored sites may be used, disclosed, or shared.

•Whatprotocolwillbefollowedfor reporting and addressing infringing or defamatory content posted by third parties on company-sponsored sites (including the steps a site host must take to qualify for protection against liability for copyright infringement, under the Digital Millennium Copyright Act, and liability for defamation, under the Communications Decency Act).

•Howthecompanywillenforceits rights in its own IP.

•Whomayspeakforthecompanyon social media platforms, and what stan- dards they must meet for tone, content, and timing.

•Whenemployeesmustpost disclaimers making it clear that the views expressed are their own and not the company’s.

•Whatbasicexpectationsexistfor online behavior.

3. Make sure standard IP-related policies and agreements take social media into account. Most companies already have standard IP policies and confidentiality and non-disclosure agreements that they have used for years. If these policies and agreements were drafted before the advent of social media, they may not cover the risks that can result from using this new form of communication. Such existing policies and agreements should be reviewed and amended if necessary to account for these risks. 4. Know and understand the rules of social media platforms. Before using any social media platform, companies should review the platform’s terms of use and privacy policy. If a company is advertising on a social media site, it must follow any additional rules governing advertising. Social media platforms typically provide rules on how trademarks, copyrights, and other forms of IP are protected. Companies should consult these rules not only to avoid infringing others’ rights, but also to enforce their own rights when third parties post content that infringes their IP.

Companies should consult privacy policies to understand how information posted on a site may be used and disclosed. Although some users take comfort in the “privacy settings” offered by social media sites, that comfort can be misplaced. The basic assumption for using social media should be that if it is posted, it is public. An excerpt from Twitter’s privacy policy illustrates this point:

Our Services are primarily designed to help you share information with the world. Most of the information you provide us is information you are asking us to make public. This includes not only the messages you Tweet and the metadata provided with Tweets, such as when you Tweeted, but also the lists you create, the people you follow, the Tweets you mark as favorites or Retweet, and many other bits of information that result from your use of the Services. . . . Your public infor-mation is broadly and instantly disseminated. . . . When you share information or content like photos, videos, and links via the Services, you should think carefully about what you are making public.

Social media platforms can – and do – change their rules from time to time, and companies using these platforms must keep current with the changes.

5. Don’t make promises you can’t (or won’t) keep. Companies often want to reassure site users about privacy issues by stating in their privacy policies that they protect consumers’ informa-tion and do not share it. Such promises, if not kept, can pose a significant risk of liability. Even if a company initially intends to keep personal information for internal use only, at some point it may be tempted to analyze, and then monetize, that personal information by sharing it with third parties. Before a company makes promises in its privacy policy, it should think carefully about its current practices and its future business needs and expansion plans. To allow leeway for future changes, a privacy policy should reserve the right to make changes.

6. Educate employees on why and how they should protect the company’s IP. Employees, espe-cially those who use social media, should under-stand the value of the company’s brand and the value of their role in helping the company main-tain its brand. They should be familiar with the proper way to use the company’s trademarks and logos. And they should be aware of the procedure

an explanation of its policy regarding passengers who cannot fit into their seats. This quick and effective response was possible only because the company was on the watch for trouble and had a plan in place for dealing with it as soon as it occurred.

Companies should also be proactive in protecting their IP against new opportunities for infringement in the social media world. For example, whether or not a company uses social media to promote its products and services, the company should guard against “cybersquatting” by reserving for itself the domains, fan sites, channels, and user accounts in social media that feature the compa-ny’s name or brands. Finally, companies that own trademarks and copyrights should include social media sites in their policing strategy and should enforce their IP rights on those sites just as forcefully as they would in other media.

These seven steps can help companies minimize the IP risks involved in using social media while making the most of the advantages this powerful communications tool has to offer.

GREENSBORO843.577.9440Gary L. BeaverJeff Reichard*

GREENVILLE864.370.2211Amy Allen Hinson*Sara Centioni-Kanos*Joseph T. Guy, Ph D**John B. Hardaway III*

*Registered Patent Attorney**Patent Agent

LightSwitch is published as a service to our clients and friends. It does not constitute legal advice regarding any specific situation.

CHARLESTON843.577.9440Townsend M. Belser, Jr.*Angelica M. Colwell*J. David HawkinsCherie Blackburn

CHARLOTTE704.339.0304Corby C. Anderson*

COLUMBIA803.771.8900Mark BenderDavid BlackWilliam Y. Klett*Daniel Leonardi*Michael A. Mann*Marcus A. ManosVal H. StieglitzMarguerite S. Willis

©2012 by Nexsen Pruet, LLC. All rights reserved.

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Corby C. AndersonMembercanderson@nexsenpruet.com

to follow in reporting any content they see in social media that infringes or disparages the company’s brand.

Employees should also understand the value of the company’s confidential and proprietary informa-tion – its trade secrets – and how best to protect that information. To claim trade secret protec-tion, a company must show that the information at issue derives independent economic value from not being generally known by others, and that the company has made reasonable efforts to keep the information secret. Companies need to educate employees about the kinds of information they deem secret and about best practices for guarding against disclosure of that information in social media. This disclosure could be inadvertent or even intentional, through sites such as Theflyon-thewall.com or Wikileaks.com that actively solicit disclosure of company secrets.

7. Be vigilant and proactive. Companies must monitor their own sites and others’ sites for postings that may diminish their IP rights, by infringement or by disparagement of their brand. With social media, time is of the essence. Moni-toring for problems permits a quicker response. To cite one example: An airline passenger became a cause célèbre on the internet after Tweeting about being ordered off a plane for being too large. By the time his story had gained traction on Google, however, the airline had apologized to him via Twitter and had posted on its blog an apology and