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Legal Terms, Acronyms, Wise-isms, and Nonsense
-A-
abstract
A concise statement or summary, typically using key identifying words to describe a
subject and to allow for indexing. Abstract of record (US courts): A concise abbreviated
history of a case. Patent abstract (IP): One or two sentence description of the invention
claimed in a patent.
ademption (US wills & estates)
A gift made in a will that fails because the person who made the will (testator) no
longer owned the property at the time of death.
adjudication (US courts)
A judge's decree or decision, including the reading or pronouncing of such decree or
decision.
administration (US wills & estates)
A process by which an authorized representative inventories assets, pays obligations,
and distributes remaining assets left by a person who died (decedent).
administrator (US wills & estates)
A personal representative or other person whom a probate court appoints to administer
the estate of a person who died (decedent). In some states, an "administrator" is
appointed only when no executor is available, while in other states the term
"administrator" refers to executors, representatives, and all others who administer an
estate.
adversary system (international)
A judicial system in which opposing parties are allowed to present and support their
own facts and arguments before an objective tribunal before that tribunal decides or
adjudicates the action.
affidavit (international)
A voluntary written declaration of fact given based on the declarant's current information
and belief and made under oath or otherwise under penalty of law. See notary.
accrual method
An accounting method under which income is subject to tax after all events have
occurred which fix the right to receive such income and deductions are allowed when
all the events have occurred to fix the obligation to pay the debt.
agent
A person authorized by another to act on their behalf. Thus, an agent can enter into
contracts and other such legal binding functions on behalf of another. Usually, the
corporation's officers act as corporate agents.
aggregate par value
Aggregate par value is the par value multiplied by the number of authorized shares.
This amount is important in determining initial fees and annual franchise taxes in many
states.
annual meeting of shareholders
Nearly all states require a corporation to hold an annual meeting of shareholders at
which time directors are elected and other corporate issues are voted on.
apostille
Is a method of certifying a document for use in another country pursuant to the 1961
Hague Convention. With this certification by apostille, a document is entitled to
recognition in the country of intended use, and no certification or legalization by the
embassy or consulate of the foreign country where the document is to be used is
required. With our international package, we include an apostilled copy of the certificate
of incorporation for use in your desired country.
articles of incorporation
(Certificate of Incorporation or charter). The articles are the primary legal document of a
corporation; they serve as a corporation's constitution. The articles are filed with the
state government to begin corporate existence. The articles contain basic information
on the corporation as required by state law. Business Filings Incorporated prepares
the articles as part of its incorporation services.
articles of organization
LLCs must file the articles with the proper state authorities to begin existence. The
articles of organization are very similar to a corporation's articles of incorporation.
Business Filings Incorporated prepares the articles as part of its incorporation services.
asset
Anything owned that has monetary value.
assumed name
A name under which a corporation conducts business that is not the legal name of the
corporation as shown in its articles of incorporation. Assumed names (also called
fictitious name and Doing Business As) are typically filed at the county level with the
county recorders office. A corporation can use multiple assumed names.
authorized shares
The total number of shares a corporation is authorized to issue. This number is
specified in the articles of incorporation. All of the shares authorized need not be
issued to shareholders, the corporation can have unissued shares that can distributed
at a latter time.
authorized stock
See Authorized Shares.
- B -
Business Entity
An organization that possesses a separate existence for tax purposes. Some types of
business entities include corporations and foreign corporations, business trusts,
limited liability companies, and limited partnerships.
Business Judgment Rule
The rule states that directors of corporations will not be held personally liable for
unwise business decisions providing that the directors made an informed decision
and that decision was not tainted by self-interest.
Bylaws
Bylaws are the rules and regulations adopted by a corporation for its internal
governance. It usually contains provisions relating to shareholders, directors, officers
and general corporate business. At the corporation's initial meeting the bylaws are
adopted. Bylaws are a private document not filed with any state authority. Bylaws are
more flexible than the articles of incorporation because they are easier to amend.
- C -
Capital Gains or Losses
Gains or losses realized from the sale or exchange of capital assets. The amount is
determined by calculating the difference between an asset's purchase and sale price.
Capital Stock
See Authorized stock.
Cash Method
An accounting method under which income is subject to tax when actually received and
deductions are allowed when actually paid.
C Corporation
A C corporation is simply a standard business corporation. It is called a C corporation
because it is taxed under subsection C of the IRS code.
Certificate of Authority
Is a document issued by the proper state authority to a foreign corporation granting the
corporation the right to do business in that state.
Close Corporations
A close corporation is a corporation that possesses the following traits: a small
number of shareholders; no ready market for the corporation's stock; and substantial
participation by the majority shareholders in the management of the corporation. Some
states have close corporation statutes.
Common Stock
The primary stock of a corporation. This stock gives shareholders the right to
participate in management of the corporation and give the shareholder a proportionate
share of the dividends.
Corporate Record Book
Maintaining the proper records is very important to assure limited liability to corporate
shareholders. The corporation should have a record book which contains a copy of the
articles of incorporation, bylaws, initial and subsequent minutes of directors and
shareholders meetings and a stock register.
Cumulative Voting
This method of voting is intended to create adequate representation of minority
shareholders. Cumulative voting allows shareholders to aggregate their votes in favor
of fewer candidates than there are slots available.
conservator
A court-appointed person or entity that administers a person’s estate. If two or more
persons/entities are appointed, they are co-trustees.
- D -
Directors
Directors are elected by the shareholders. They manage or direct the affairs of
corporation. Typically, the directors make only major business decisions and monitor
the activities of the officers.
Dissolution
Is the termination of a corporation's legal existence. Dissolution may be caused many
ways including, failure to file annual reports, failure to pay certain taxes, bankruptcy, or
voluntary dissolution of the corporation by the shareholders and directors. Business
Filings does perform voluntary dissolution filings.
Doing Business As (DBA)
A "DBA", also known as an "assumed name", is typically completed by making a filing
at the county level where the business is located. This filing does not change the
official name of the corporation; however, it allows the company to use additional
names.
Dividend
A dividend is a distribution of money or property paid by the corporation out of the
corporation's profits to shareholders. Dividend payments are subject to double taxation,
the corporation pays tax on its profits and the dividend recipient must pay income taxes
on the dividend payment, the same money is taxed twice. The directors of the
corporation decide if a dividend payment is to be made and it can only be made if the
corporation has profits.
Domestic Corporation
A corporation is a domestic corporation in the state where it has incorporated.
Double Taxation
Corporations are treated as a separate legal taxable entity for income tax purposes.
Therefore, corporations pay tax on their earnings. If corporate earnings are distributed
to shareholders in the form of dividends, the corporation does not receive the
reasonable business expense deduction, and dividend income is taxed as regular
income to the shareholders. Thus, to the extent that earnings are distributed to
shareholders as dividends, there is a double tax on earnings at the corporate and
shareholder level. S corporations and LLCs are pass-through entities which are not
subject to the double tax.
- E -
Equity
The ownership of a shareholder in a corporation.
- F -
Fictitous Name
See doing business as.
Fiscal Year
Any twelve-month period used by a business as its fiscal accounting period.
Federal Tax Identification Number (TIN)
This is a number assigned to a corporation or other business entity by the federal
government for tax purposes. Banks generally require a tax identification number to
open bank accounts. The federal tax identification number is also known as the
Employer Identification Number (EIN).
Foreign Corporation
A corporation is referred to as a foreign corporation in all states except for the state
where it is incorporated. If a corporation is "transacting business" in a state other than
where it is incorporated, it must register for a certificate of authority to transact business
in the other state or possibly lose access to that state's courts and face fines.
Franchise Tax
Is a tax on the privilege of carrying on business as a corporation or LLC in a state. The
value of the franchise tax may be measured by amount of earnings, total value of capital
or stock, or by amount of business done. In some states, like California, the franchise
tax is simply an income tax.
- G -
- H -
Holding Company
A corporation that has no other function except owning stock in and supervising
management of other business entities.
- I -
Incorporator
The person or entity that prepares, files and signs the articles of incorporation.
Business Filings Inc. acts as an incorporator for many new companies.
Indemnify
To reimburse or compensate. Directors and officers of corporations are often
reimbursed or indemnified for all the expenses they may have incurred during the
incorporation process.
IRS Form 1023
This form is used to apply for tax-exempt status with the IRS.
IRS Form SS-4
This form is used to apply for a federal tax ID number.
IRS 2253
This form is used to apply for S corporation status.
- J -
- K -
- L -
Limited Liability Company
A business entity formed upon filing articles of organization with the proper state
authorities and paying all fees. LLCs provide the limited liability to their members, and
are taxed like a partnership, preventing double taxation. LLCs can be formed in every
state.
- M -
Manager
An LLC may be operated by a group of managers who act much like a board of
directors. If an LLC is to controlled by mangers this fact must be stated in the articles of
organization.
Membership Interest
A member's ownership of an LLC is represented by "interests" just as a partner has an
interest in a partnership and shareholders own stock in a corporation.
Member
A member is a person or entity who is an owner of some or all of a Limited Liability
Company. The business decisions of an LLC are made by the members unless the
articles of organization provide that the LLC will controlled by a manager or managers.
Merger
A merger occurs when two corporations join together into one, with one corporation
surviving and the other corporation disappearing. The assets and liabilities of the
disappearing entity are absorbed into the surviving entity.
Minutes
A written record which details the events of the corporation. These records should be
kept in the corporation's or LLC's record book.
- N -
Name Reservation
The name of a corporation or LLC must be distinguishable on the records of the state
government. If the name is not unique, the state will reject the articles of incorporation
or articles of organization (for LLCs). A name can be reserved, usually for 120 days, by
applying with the proper state authorities and paying a fee.
No-Par-Value Stock
Stock with no minimum value. Most states allow no-par stock. If the stock is no-par
stock then the amount of stated capital is an arbitrary amount assigned by the board of
directors. Further, the value of capital for franchise tax purposes is determined by the
state and this may result in higher franchise taxes in comparison with low par-value
stock.
Not-For-Profit Corporation
A corporation organized for some charitable, civil or other social purpose which does
not entail the generation of profits for shareholders. These corporations can apply for
tax-exempt status at both the federal and state level. Not-for-profit corporations must file
not-for-profit articles of incorporation with the state.
- O -
Officers
The directors appoint officers. They manage the daily affairs of the corporation. A
corporation's officers usually consist of a president, vice-president, treasurer and
secretary. In most states, one person can hold all of these posts.
Operating Agreement
An agreement among the LLC's members which govern the LLC's operations and the
rights of its members. It is analogous to corporate bylaws.
Organizational Meeting
The initial meeting where the formation of the corporation is completed. At the
organizational meeting a number of initial tasks are completed such as: the articles of
incorporation are ratified, the initial shares are issued, officers are elected, bylaws
approved, and a resolution authorizing the opening of bank accounts is passed. If the
initial directors are named in the articles of incorporation, they can hold the
organizational meeting. If they are not named, then the organizational meeting is held
by the incorporator.
- P -
Paid in Capital Requirements
A few states require corporations to have a specified amount of paid in capital prior to
starting business. These states include CT, DC, SD and TX and require that the
company have $1,000 in paid in capital before starting business.
Par-Value
The stated minimum value of a share stock. Stock must be sold for at least this value
or the owner of the stock can face liability. With low par value stock or no par value stock
this liability is minimized.
Partnership
A partnership is "an association of two or more persons to carry on as co-owners of a
business for profit." In contrast to a corporation, a general partnership can come into
existence without the need to file any formal papers with any state official. Thus, if
Jones and Smith, without signing any agreement between them and without filing any
documents with the state begin to jointly operate a corner candy store, they will have a
general partnership.
Pass-Through Taxation
The income to the entity is not taxed at the entity level; however, the entity does
complete a tax return. The income or loss as shown on this return is "passed through"
the business entity to the individual shareholders or interest holders, and is reported
on their individual tax returns. S corporations and LLCs are both pass-through tax
entities.
Piercing the Corporate Veil
If corporate formalities are not followed, it is possible that the corporate entity will not
protect shareholders from corporate debt. Keeping proper records and holding regular
meetings help solve this possible problem.
Preemptive Rights
Rights delineated in the articles of incorporation granting shareholders the first
opportunity to buy a new issue of stock in proportion to their current equity percentage.
The shareholder has the right to buy the new issue of stock, but is not required to make
the purchase. If the shareholder elects not to exercise this right, the shares can be sold
on the open market.
Preferred Stock
Stock which generally provides the shareholder with preferential payment of dividends
but does not carry voting rights. If a corporation is to have preferred stock, this fact must
be stated in the articles of incorporation.
Professional Corporation
A corporation which is organized for the purpose of engaging in a learned profession
such as law, medicine or architecture. Professional Corporations must file articles of
incorporation with the state which meet the state's requirements for professional
corporations.
Proxy
If a shareholder can not attend a meeting, the shareholder is allowed to vote by proxy. A
proxy grants another individual the power to vote on their behalf.
- Q -
Quorum
The minimum attendance required to conduct business at a meeting. Usually, a
quorum is achieved if a majority of directors are present (for directors meetings) or
outstanding shares are represented (for shareholder meetings). The percentage
needed for a quorum may be modified in the bylaws.
- R -
Registered Agent
The agent named in the articles of incorporation. The agent will receive service of
process on the corporation and other important documents. The agent must be named
in the articles of incorporation, and must be located in the state of incorporation or
organization.
Registered Office
The office named in the articles of incorporation. The registered office must be where
the registered agent is located, and need not be the principal office or place of
business of the corporation.
Resolution
A resolution is a formal decision of the corporation which has been adopted by either
the shareholders or the board of directors.
- S -
S Corporation
A corporation which elects subchapter S tax treatment. This tax treatment allows the
corporation to avoid entity level taxation.
Section 1244 Stock
An individual investor in a corporation which meets the Section 1244 requirements is
entitled to treat up to $50,000 (or $100,000 if filing a joint return) of losses on the 1244
section stock as ordinary losses.
Share
An interest in a corporation. The total ownership of a corporation is divided into shares
of stock.
Shareholder
Any holder of one or more shares in a corporation. A shareholder usually has evidence
that they are a shareholder; this evidence is represented by a stock certificate.
Sole Proprietorship
A business carried on by the owner as an individual. The owner of a sole proprietorship
is personally and fully liable for all business debts; thus, personal property could be
taken to pay business debts.
Stated Capital
The par value of shares multiplied by the number of shares outstanding. The amount of
stated capital may effect the ability to pay dividends.
Stock
An equity or ownership interest in a corporation, measured in shares. Ownership of
shares is demonstrated by stock certificates.
Stock Certificate
A written instrument that shows ownership of shares in a corporation.
Stockholder
See shareholder.
Stock Transfer Book
A record book which lists the owners of shares of stock in a corporation.
- T -
Treasury Shares
Shares of stock which were issued, and later acquired by the corporation.
- U -
Ultra Vires
Traditionally, the purpose of a corporation was closely spelled out in its articles of
incorporation. If the corporation acted beyond its described purposes these actions
were unenforceable against the corporation or by the corporation. However, most
modern statutes allow corporate purposes to be any lawful activity.
Unanimous Written Consent
Nearly all states allow directors and shareholders to act without a meeting if they each
give their consent to specific corporate actions in writing.
A
ADR
alternative dispute resolution
D
D.A.
District Attorney
I
IP
Intellectual Property
T
TPPM
TRO
temporary restraining order
U
U.C.C.
Ukase
Unclean hands
V
V.A.
Veterans' Administration
V.A.T.
Value Added Tax
V.E.
vs.
W
W.H.O.
World Health Organization
WIPO
World Intellectual Property Organization
X
ABRIDGEMENT (COPYRIGHT) See DERIVATIVE WORK.
ABSTRACT (PATENT) A summary included with a patent application and generally
placed at the front of a registered patent to describe briefly the nature, structure, and
purpose of the invention.
AFRICAN REGIONAL INTELLECTUAL PROPERTY ORGANIZATION (ARIPO) An
agreement between the African states of Kenya, Malawi, and Sudan to cooperate and
coordinate in the registration of IP rights. See Ch. 11, IP Rights in Multinational Forums.
AGENCY A relationship between two parties, the first of whom (the agent) represents,
acts for, and binds the other (the principal) in accordance with the principal’s oral or
written instruction of the principal. In some countries, an agency can be created only by
a written agreement or power of attorney entered into by the principals and agents. See
AGENT; PRINCIPAL; POWER OF ATTORNEY.
AGENT An individual or legal entity authorized to act on behalf of another individual or
legal entity (the principal). An agent’s authorized actions will bind the principal, such as
when the owner of a book protected by copyright authorizes another person to sell the
rights to publish the book to a third party. Within the intellectual property laws of many
countries, “agent” is given a special meaning as a person or company that has
qualified under the law to file for the protection of intellectual property rights. These
“agents” need not be qualified as lawyers, but they must usually have technical,
scientific, or legal training. See AGENT; PRINCIPAL; POWER OF ATTORNEY.
ALL RIGHTS RESERVED (COPYRIGHT) A term that appears in many copyright notices
for purposes of securing protection under the Buenos Aires Convention, by which the
United States and Latin American countries agreed to reciprocal protection rights in
copyrighted works. This term is of little significance today because other international
treaties have superceded the Buenos Aires Convention, and these other treaties do not
require use of this term.
AMENDMENT An addition, deletion, or other change in a legal document or legislation.
ANDEAN GROUP An alliance of Latin American countries, also known as the Andean
Pact. The Group was formed in 1969 to promote regional economic integration,
including integration of intellectual property rights, among medium-sized countries
within the Andean region. Members include Bolivia, Colombia, Ecuador, Peru, and
Venezuela. Address: Andean Group: Avenida Paseo de la Republica 3895, Casilla
Postal 18-1177, Lima 18, Peru; tel: + (14) 41-4212; telex: 20104 PE; fax + (14) 42-0911.
See Ch. 11, IP Rights in Multinational Forums.
ANNUITY(PATENT) A fee imposed by law to maintain the validity of a patent registration.
If an annuity payment is not made timely, the patent may lapse.
ANTICIPATED (PATENT) An invention that is so similar to an earlier patent that it is not
considered to be novel, and therefore it cannot be registered as a patent. An invention
may be anticipated by the existence of prior art or public use or display that precedes in
time the filing of the patent. See PRIOR ART and PUBLICATION.
ANTI-COMPETITION AGREEMENT See COVENANT NOT TO COMPETE.
ANTI-SHELVING CLAUSE A clause in a license agreement by which the licensee
agrees to use commercially the intellectual property rights licensed within a stated
period of time and not to merely “put the licensed rights on a shelf.” This clause places
an affirmative duty on the licensee to use or lose the rights to the license, and it is
important to the licensor who has granted the license in exchange for royalties from the
commercial sales.
ANTI-TRUST LAW A statute that prohibits business operations intentionally aimed at
unfairly dominating a market such that in practice a monopoly results, and further
prohibiting business arrangements between companies by which they cooperatively
engage in practices that result in the restriction or restraint of free trade, such as price
fixing or bid rigging. Example: A company that shares its trade secret with only one of its
competitors pursuant to an agreement by which the two companies plan to cooperate
and corner the market is likely to be in violation of antitrust laws.
ANTHOLOGY (COPYRIGHT) See COMPILATION WORKS.
ANTICIPATION (PATENT) See PRIOR ART.
APEC See ASIA PACIFIC ECONOMIC COOPERATION.
ARCHIVAL COPY (COPYRIGHT) An authorized copy of software made by the party who
uses the software. Parties who “buy” software are actually purchasing a restricted
license to use it, and they are not permitted to copy it with one exception. A single copy
may be made and kept in a secure place for purposes of having a copy to ensure
against damage or loss of the original. This right is protected by law in some countries
(for example, the US Computer Software Protection Act) and is also granted by most
software program license agreements. If the software is transferred or destroyed, the
archival copy must also be transferred or destroyed.
ARIPO See AFRICAN REGIONAL INTELLECTUAL PROPERTY ORGANIZATION.
ARM’S LENGTH TRANSACTION A transaction in which both parties have similar
bargaining power during the negotiation and finalization of the arrangement and in
which the parties exchange consideration of equivalent or nearly equivalent value. For
example: an assignment of IP rights between unrelated parties is an arm’s length
transaction if the assignor receives valuable consideration based on the assessed
value of the IP rights and the assignee gains IP rights that are in fact worth the
consideration paid.
ASEAN See ASSOCIATION OF SOUTHEAST ASIAN NATIONS.
ASIA PACIFIC ECONOMIC COOPERATION (APEC) An informal forum in which
ministerial leaders of Asia Pacific countries gather for discussion of economic issues
that affect their region and their specific countries. Members include Australia, Brunei,
Canada, China, Hong Kong, Indonesia, Japan, Korea (South), Malaysia, the
Philippines, Singapore, Thailand, Taiwan, and the United States. Address of the
Secretariat: 438 Alexander Road 19-01, Singapore 0315; tel: + 276 1880; fax: + 276
3602. See Ch. 11, IP Rights in Multinational Forums.
ASSIGNEE A person or legal entity who is granted a property ownership right previously
held by another party (the assignor). See ASSIGNOR; ASSIGNMENT.
ASSIGNMENT A transfer of property ownership rights, including title, interest, and
benefits in the property, from the owner (the assignor) to another individual or legal
entity (the assignee), who then becomes the owner of the property rights. See
ASSIGNEE; ASSIGNOR. See the related term LICENSE.
ASSIGNOR The owner of a property right who transfers that ownership right to another
party (the assignee). See ASSIGNEE; ASSIGNMENT.
ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN) A trade and economic pact
formed in 1967 to promote political, economic, and social cooperation among its
members. Members: Brunei, Cambodia, Indonesia, Malaysia, Philippines, Singapore,
and Thailand. Address: ASEAN, Jalan Sisingamangaraja, PO Box 2072, Jakarta,
Indonesia; tel: + (21) 712 272. See Ch. 11, IP Rights in Multinational Forums.
BELGIUM, NETHERLANDS, LUXEMBOURG ECONOMIC UNION (BENELUX) An
economic and political cooperation pact that created an organization to encourage
economic activity among the three member nations, including a central Registry for
trade marks, service marks, copyrights, and patents. Address: BENELUX, 39 rue de la
Regence, 1000 Brussels, Belgium; tel: + (02) 519-38-11; fax + (02) 513-42-06. See Ch.
11, IP Rights in Multinational Forums.
BENELUX See BELGIUM, NETHERLANDS, LUXEMBOURG ECONOMIC UNION.
BERNE CONVENTION See INTERNATIONAL UNION FOR THE PROTECTION OF
LITERARY AND ARTISTIC WORKS.
BEST EDITION (COPYRIGHT) The highest quality version of a work protected by
copyright. Most copyright registration laws require the party seeking copyright to deposit
with the registry the best edition at the time the application for registration or deposit is
made.
BEST MODE (PATENT) A disclosure of an invention that is sufficient in detail to allow a
person of ordinary skill in the same technology to build or develop it. When filing a
patent, the inventor must disclose the best mode because the inventor is granted a
monopoly over the invention, but only in exchange for improving public knowledge of the
technology.
BONA FIDE In or with good faith, honesty, and sincerity. A bona fide trade mark
application, for example, is one that has been made by a trade mark owner who has
actual and sincere intent and belief that he or she will use the mark in connection with
the commercial sale of goods and that the mark is not an infringement on the rights of
any other IP owner.
BUENOS AIRES CONVENTION See ALL RIGHTS RESERVED.
CLAIM (PATENT) A statement in a patent application that describes the invention in the
precise and formal language required by the patent registry. The claims contained in a
patent will determine the scope of the patent and the breadth of protection given, but if
claims are too broad there is a likihood that the invention may have common
characteristics with prior art and therefore cannot be patented. A patent application will
usually contain a number of claims that define different aspects of the invention. An
independent claim is one that describes the invention without reference to any other
claims. A dependent claim is one that refers to other claims.
CLASSIFICATION (MARK) Numbered categories of goods and services based on their
type and used for limiting the scope trademark or service mark protection to a particular
specification of goods or services. See Nice Agreement in Ch. 11, IP Rights in
Multinational Forums.
CLASSIFICATION (PATENT) Numbered categories of patents based on the type of
invention and used for indexing and finding registered and pending patents. In general,
the classification is assigned by the Registry because of the complexity and
importance of classifications. For example, in the US, an invention may be classified
within one or more of 66,000 classes.
CAUTIONARY NOTICE A notice published in a public or legal newspaper or other
periodical commonly circulated for purposes of informing the public at large about
protected rights in a trademark or service mark. A cautionary notice is most commonly
used when a country has no laws protecting trademarks or service marks. It may also
be published to alert the public to infringement activities and to identify distinctive
features of the IP belonging to the rightful owner.
COMBINATION IN RESTRAINT OF TRADE See RESTRAINT OF TRADE.
COMMUNITY TRADEMARK A trademark or service mark filed and registered in a single
Registry established pursuant to the European Union (formerly the European
Community) and protected in all of the European Union member nations. The Registry
is called the Office of Harmonization of the Internal Market and is located in Alicante,
Spain. See Ch. 11, IP Rights in Multinational Forums.
COMPULSORY LICENSE See LICENSE.
CONFIDENTIALITY AGREEMENT An employment agreement in which the employee
agrees to hold in confidence all trade secrets learned during the employment. It is
preferable to have a written confidentiality agreement because proof can be more
easily established in court in the event that the employee breaches the agreement.
Such an agreement can be implied by a court if there is proof that a duty of trust or
confidentiality existed during the employment. See related definition at
NONDISCLOSURE AGREEMENT.
CONSIDERATION An item of value passed from one contracting party to the other as an
inducement to make the contract, and without which the contract is not binding. For
example, the owner of an IP right may transfer that right to another person, and that
transfer will be considered valid provided valuable consideration has been received in
return.
CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY See PARIS
CONVENTION.
COPYRIGHT NOTICE See NOTICE OF IP RIGHTS.
CONVENTION FOR THE PROTECTION OF PRODUCERS OF PHONOGRAMS
AGAINST UNAUTHORIZED DUPLICATION OF THEIR PHONOGRAMS A multinational
agreement created in 1971 by member nations to harmonize protection of audio
reproductions, including any material in which sound can be fixed, reproduced, and
communicated. See Ch. 11, IP Rights in Multinational Forums.
CONVENTION ON THE MEANS OF PROHIBITING AND PREVENTING THE ILLICIT
IMPORT, EXPORT, AND TRANSFER OF OWNERSHIP OF CULTURAL PROPERTY A
multinational agreement signed in 1970 by member nations to recognize the rights of
countries to their cultural property and to harmonize the treatment of illegal activities
related to removing cultural property from its homeland. See Ch. 11, IP Rights in
Multinational Forums.
COPY (COPYRIGHT) A copy refers to a tangible form of an expression that is retained
for any period of time, regardless of how brief. Examples include photocopies, audio
and visual tape recordings, programs and documents on computers and diskettes,
programs held in computer memory. The right to make a copy is exclusive to the owner
of the copyright.
COVENANT NOT TO COMPETE A contractual provision by which one party promises
not to compete against the other for a specific time or within a specific region. For
example, this covenant may be included within a contract for employment to prevent an
employee from taking a job with a competing company or within a contract for the sale
of a business to prevent the seller from competing with the purchaser of the business.
The covenant must be restricted, such as by time or geographical location, to be
enforceable, and usually the purpose of the covenant is to protect the trade secrets of
the company. In some places, covenants not to compete in employment contracts are
prohibited by law and cannot be enforced, but such covenants in contracts for the sale
of a business are usually enforced.
CREDIT LINE A spoken or written statement of acknowledgment used in connection
with an IP work to identify the author or creator of that work. If the work is created by one
author or creator, the credit line will simply identify the same. If the work of other author’
s is also incorporated, several credit lines are usually included to indicate use by
permission, and the permission to use is commonly conditioned on the inclusion of a
credit line to show ownership and source of the work.
CROSS-LICENSING A license arrangement by which patent owners agree to
cooperate in the use of each other’s inventions for producing goods that use many
inventions without having to pay substantial royalties to each other.
CYBER-SQUATTING The bad faith registration of a domain name that is similar or
identical to the trademark of a well-known company. Such a registration is usually
made for purposes of selling that name back to the company. Most internet service
providers now have procedures for cancellation of these names, and a growing
number of countries are enacting laws by which companies can seek injunctions and
damages against cyber-squatters.
CTM See COMMUNITY TRADEMARK.
DILUTION (MARK) A decrease in the value, reputation, and distinctiveness of a mark
because a competitor’s use of a same or similar mark tends to taint indirectly the mark’
s reputation or reduce its distinctiveness. For example, the use of the trademark IBM on
a pornography magazine is a dilution of the mark. Dilution is not a direct infringement,
and therefore many countries have enacted anti-dilution laws to provide remedies to
companies that are faced with this situation.
DOCTRINE OF EQUIVALENTS (PATENT) A test developed and used by courts to
decide whether a patent is being infringed based on whether another invention alleged
to be infringing does the same work in substantially the same way to achieve the same
result as the prior patented invention. See READ ON DOCTRINE.
EUROPEAN PATENT CONVENTION (EPC) An agreement between European nations
to centralize and standardize patent law and procedure by establishing a central office
(European Patent Office) for patent filings among the member nations. Once granted,
the patent matures into individual patents—one in each country. Address: European
Patent Office, Erhardtstrasse 27, 8000 Munich 2, Germany; tel: (89) 2399-0; Fax (89)
2399-4465. See Ch. 11, IP Rights in Multinational Forums.
EUROPEAN PATENT OFFICE See EUROPEAN PATENT CONVENTION.
FAIR USE (COPYRIGHT) An exception to the exclusive rights accorded to an owner of a
copyright by which a third party can use the copyrighted work without the owner’s
permission and without threat of liability for infringement. A third party may copy, restate,
or otherwise use work that is subject to copyright in connection with one of the
following: scholarly or research activity, critique or commentary on the work (including
parodies), news reporting, or teaching.
FIRST SALE DOCTRINE (COPYRIGHT) With a few exceptions, a copyright owner’s
rights over a legal copy of the work end when the work is first sold. The purchaser is
free to destroy, sell, lend, or otherwise dispose of the work in any manner whatsoever.
However, the purchaser cannot make additional copies of the work, because that is an
infringement of the copyright. Exceptions to this rule are made by law, and therefore
they vary from country to country. For example, countries that have enacted computer
software protection statutes typically prohibit the purchaser of a computer program from
later renting or otherwise lending a copy to the public for any commercial benefit.
FIRST TO FILE LAW A law that gives IP rights to the party who first files an application to
register the rights, regardless of whether the party was first to use the IP. Sometimes
referred to as “race statutes,” these laws award a party who is first in line at the registry
without accounting for the rights of a party who has already used the IP, whether that
use has occurred within or outside of the country.
FIRST TO INVENT LAW (PATENT) A law that awards IP rights in a patentable invention
to the party who can prove that he or she was first to conceive the invention. If another
party applies to register the patent first, the party who claims to have conceived the
invention first may file an interference or opposition against the application to reclaim
the IP rights.
FIRST TO USE LAW (MARKS) A law that awards IP rights in a trademark or service
mark to the party who can prove that he or she used the mark first. In some countries,
first use is recognized only if the use was made within the country. The laws of other
countries acknowledge IP rights in a mark first used outside the country, particularly if
the mark has become well-known in other jurisdictions.
GATT See GENERAL AGREEMENT ON TARIFFS AND TRADE.
GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) A multilateral trade treaty
that has been negotiated by member countries in progressive meetings beginning in
1987 and continuing every few years. The major goal of GATT is to harmonize trade
requirements and reduce trade friction and barriers among the member nations.
Included within GATT are provisions related to the recognition and treatment of IP rights
among the member nations. The GATT treaty has established the World Trade
Organization (WTO) as the regulatory body for enforcing compliance. The GATT
provisions for protection of intellectual property are contained within the Trade Related
Aspects of Intellectual Property Rights (TRIPS) agreement. See Ch. 11, IP Rights in
Multinational Forums.
GRANT OF RIGHTS (COPYRIGHT) The assignment of all copyright rights from the
author to a publisher in advance of publication and in exchange for payment or future
royalties.
IDENTIFYING MATERIAL (COPYRIGHT) A deposit of part of a work or a representation
of the entire work with the Copyright Office, which is permitted in lieu of depositing the
entire work whenever the work is difficult to deposit as a whole.
INDUSTRIAL PROPERTY A form of intellectual property rights, commonly referring to IP
rights in property developed and used specifically for commercial application, such as
patents, trademarks, trade secrets, and appellations of origin.
INDUSTRIAL SECRET A trade secret that is mechanical, technological, scientific, or
technical in nature, such as a secret process, machine, formula, manufacturing
method, or unregistered industrial design. Some countries, such as the US, treat
industrial secrets the same as trade secrets, affording them protection only if they have
not been publicly disclosed. Other countries, such as France, Germany, and Japan,
make a distinction for industrial secrets, affording them protection as even if the
general process or method related to the industrial secret is patented or otherwise
publicly known. For example, the process of making ceramics is widely known in
Japan, but factors that make ceramics a commercial success (product mixture, glaze
mixture, firing temperature and time, and so forth) may be protected as industrial
secrets.
INTANGIBLE PROPERTY A type of property that can be owned and transferred, but that
is not tangible because one cannot observe it with any of one’s senses. A book can be
seen, held, and read, but the exclusive ownership right to the intellectual creation from
which the presentation of the material was derived cannot be seen, held, or read. The
ownership right may be represented by a registration notice, but the copyright itself is
intangible.
INTELLECTUAL PROPERTY (IP) Intangible property rights in works created by a
person’s intellect. These rights can be protected if the works are novel, unique, or
otherwise original, and they include copyrights, trademarks, service marks, patents,
designs, trade secrets, traditional indigenous knowledge, and appellations of origin.
INTERFERENCE An administrative procedure for determining patent rights when two
patents or pending patents claim the same invention.
INTERNATIONAL CLASSIFICATION OF GOODS See CLASSIFICATION (TRADEMARK).
See Ch. 11, IP Rights in Multinational Forums.
INTERNATIONAL CONVENTION FOR THE PROTECTION OF PERFORMERS,
PRODUCERS OF PHONOGRAMS, AND BROADCASTING ORGANIZATIONS A 1961
multinational agreement intended to identify and harmonize among the member states
the laws and legal treatment related to the IP rights of performers, phonogram
producers, and broadcasters in live, taped, and recorded performances.
INTERNATIONAL UNION FOR THE PROTECTION OF INDUSTRIAL PROPERTY (PARIS
CONVENTION) Founded in 1883, amended periodically, and today administered by
WIPO, this international agreement was intended to harmonize national patent and
trademark treatment and to prevent discrimination against cross-border registrants
and users of industrial property.
INTERNATIONAL UNION FOR THE PROTECTION OF LITERARY AND ARTISTIC
WORKS (BERNE CONVENTION) An international agreement that was originally
concluded at Berne, Switzerland, in 1886 by representatives of participating countries to
provide for the recognition and treatment of rights in intellectual property among the
signatories. The member countries have agreed to protect copyrighted works by foreign
authors in the same fashion as works by national authors and to extend copyright
protection in a work for at least the life of the author plus 50 years. All countries that are
signatory to GATT must also adhere to the Berne Convention. Also known as the Berne
Convention or Berne Union, it has been revised periodically (Stockholm 1967 and Paris
1971) and it is now administered by the World Intellectual Property Organization
(WIPO). See WORLD INTELLECTUAL PROPERTY ORGANIZATION.
LICENSE An agreement by which the owner of intellectual property rights (the licensor)
authorizes another party (the licensee) to use the intellectual property in exchange for
royalties or other compensation and with the restriction that the owner retains full
ownership rights in the intellectual property. A license may grant exclusive use for a
particular time, territory, or trade or it may be nonexclusive. A shrink-wrap license is an
agreement by which software publishers limit use of the software by the consumer.
The license agreement is usually enclosed within the packaging so it cannot be read
until after the software is purchased, but it must allow for a refund if the consumer
refuses to accept the terms of the license. A site license is granted by software
publishers to a company that installs a number of copies of the software on several
individual computers. The site license provides for a reduced rate for each copy of the
software needed. In some countries, the law or the courts may impose against the
owner of IP a compulsory license, under which the owner must allow use of the IP by
certain licensees and under certain conditions in exchange for compensation to the
owner. For example, a compulsory license will arise by US law if, after a nondramatic
musical composition is recorded and distributed to the public, the copyright owner
refuses to permit any other company to record the music for distribution to the general
public for private use. In such event, the law compels the copyright owner to grant a
license, and royalties are determined by the amount provided in the statute. See the
related term ASSIGNMENT.
LICENSEE See LICENSE.
LICENSOR See LICENSE.
MADRID CONVENTION ON INTERNATIONAL REGISTRATION OF TRADEMARKS An
international agreement joined by various countries by which their nationals can submit
registrations obtained within their own country to a central registry for recognition in all
member countries. Each member country may accept or reject the mark registration.
See Ch. 11, IP Rights in Multinational Forums.
MARKING The inclusion of a symbol or term on or in connection with material that is
subject to an IP right. For example, © may be used in connection with material that is
protected by copyright, ™ or ® or may be used in connection with marks that are
registered as trademarks or service marks, and “Patent Pending” or “Pat. Pend.” may
be used in connection with materials that are subject to patent protection. These marks
serve to place the public on notice that the materials constitute protected IP and are
subject to private rights, but they have little meaning in most countries today because
marking is not a requirement of the international treaties that are intended to harmonize
the treatment of IP rights. Some countries continue to enforce marking laws, however,
and therefore local requirements should be checked before marketing IP protected
items across a border.
NAFTA See NORTH AMERICAN FREE TRADE AGREEMENT.
NICE AGREEMENT See CLASSIFICATION (TRADEMARK). See Ch. 11, IP Rights in
Multinational Forums.
NONDISCLOSURE AGREEMENT An agreement between a company and another party
by which the party agrees not to disclose trade and industrial secrets to any other
person or company without authority. Violation of a nondisclosure agreement gives rise
to an action for breach of contract against the party to the agreement. If any infringement
has occurred because of the violation, the intellectual property owner can also sue to
enjoin the commercial use of the intellectual property disclosed and to recover money
damages.
NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) An agreement between
Canada, Mexico, and the United States finalized in 1993 to eliminate trade barriers
among these countries. NAFTA requires these countries to make certain provisions
and to establish certain forums for the protection of IP rights in cross-border
transactions. See Ch. 11, IP Rights in Multinational Forums.
NOTICE OF IP RIGHTS A notice that is displayed on or in connection with works,
products, or other items that are protected as intellectual property. This notice is
intended to make all third parties aware of your IP rights. Their knowledge will be
implied if you have used the notice, and therefore they may be found to have acted in
bad faith by copying and using your IP in commerce, even if they claim no actual
knowledge of your rights. In some countries, a notice is mandatory and you may lose
your IP rights if you do not have the notice displayed. In most countries, use of a notice
prior to registration of your IP rights gives rise to fines or other legal proceedings
against you, and even to loss of your IP rights. The proper notice to be used varies from
country to country. For example, some countries require the owner of a trademark to
display the mark with the notice ®, some countries require use of ™, and other
countries have no notice requirement at all.
PARIS CONVENTION A treaty by which the member countries have agreed to
harmonize their treatment of various types of industrial property rights, including
trademarks, service marks, and patents. For details, see Ch. 11, IP Rights in
Multinational Forums.
PARTY (to a transaction) An individual, group, or entity that represents one side of a
question, contract, or dispute.
PASSING OFF DOCTRINE (MARK) An act in bad faith by a party who uses a mark in
such a way as to represent to consumers or the public at large that the party owns or
has authority to use the mark when such is not the case, resulting in confusion as to
the source of goods or services. This doctrine has been developed primarily in the
courts to protect owners of trademarks against bad faith usage of their marks that may
not qualify as statutory infringement. For example, Company A uses a trade name in
small print to identify its distributorship, and that trade name is an identical or similar
copy of the trademark of Company B. There is no direct infringement because the use
of a trade name is distinct from the use of a trademark. However, Company B can sue
for passing off on the ground that use of the trade name is likely to confuse consumers
and the public at large and Company A intentionally selected the name to cause
confusion.
PATENT COOPERATION TREATY (PCT) An international agreement signed by
member states in 1970 to provide for efficient and uniform patent protection. A single
PCT application must be filed with a central registry, and then national filings must be
made in each member country. See Ch. 11, IP Rights in Multinational Forums.
PCT See PATENT COOPERATION TREATY.
PIRACY Any activity undertaken with intent to infringe on another’s IP right or to acquire
that right improperly.
PLAGIARISM (COPYRIGHT) The deliberate copying of another’s original expression or
creative ideas and passing it off as one’s own. Most plagiarism is not a violation of law,
but merely an ethical or moral issue. However, if plagiarism is committed for
commercial gain, it can be the basis of an infringement action.
POWER OF ATTORNEY A written or oral authorization by which one individual or entity
(the principal) authorizes another (the agent) to perform stated actions on the principal’
s behalf. For example, a principal may sign a special power of attorney authorizing an
agent to file an initial application to register a specific IP right or a general power of
attorney authorizing an agent to file, process, and renew one or more IP rights.
PRIOR ART All inventions conceived and made public prior to the filing of a new patent
application. A prior art reference is any written description or discussion of prior art that
has been published—including in a periodical, prior patent application or registration,
or other publication in any language printed anywhere in the world—prior to the filing of
a new patent application.
PRINCIPAL An individual or legal entity that authorizes another individual or legal entity
(the agent) to act on the principal’s behalf. The principal will be bound by the agent’s
actions, provided such actions are within the scope of the authorization given. See
AGENCY; AGENT; POWER OF ATTORNEY.
PROVISIONAL PATENT A patent application allowed in some countries by which an
inventor may file an interim application that sufficiently discloses the invention but that
contains only part of the information required for a complete application. The
provisional patent is not examined for its substantive content until a complete
application is filed. It also has limited validity, and the application must therefore be
revised and completed within a specific time or it will be deemed abandoned.
PUBLIC DOMAIN The rights and interests of the public at large, as opposed to the
private rights and interests of an individual or company. Works and creations that enter
the public domain are no longer the property of a particular private individual or
company, and they no longer fall within the protection of intellectual property laws
against infringement.
PUBLICATION A work, invention, or creation that has been displayed or distributed to
the public at large is considered to have been published. For most types of IP rights,
the rights must be secured prior to publication.
RACE STATUTE See FIRST TO FILE.
READ ON DOCTRINE A test developed and used by courts to determine whether a
patent is being infringed based on whether the literal language of the patent claims are
similar or identical to each element of the device or process alleged to be an
infringement.
RESTRAINT OF TRADE A business activity that limits the free flow of commerce, such
as an arrangement by which two businesses agree to fix prices (price fixing
agreement), by which trade is restricted by geographical region (territorial restriction
agreements) or by which a consumer must purchase one product as a condition of
buying another product (tying arrangement). See related definitions at ANTI-TRUST
LAWS and at COVENANT NOT TO COMPETE.
REVERSE ENGINEERING An examination of a product to find out its components and
the method of manufacture. If IP is protected solely as a trade secret and another
company through reverse engineering is able to determine the components and
method of manufacture, the trade secret is considered public domain and cannot be
protected. However, if the IP has been patented or copyrighted, then it remains
protected regardless of discoveries made by means of reverse engineering.
SHOP RIGHTS An employer’s right to license its employee’s invention when the
employee has conceived and developed that invention within the scope of his or her
employment. The employer’s license is royalty-free, irrevocable, nonexclusive, and
nontransferable. The employee retains ownership rights in the patent, including the
right to issue nonexclusive licenses to other companies. Shop rights arise in the
absence of an employment contract by which the employee has assigned all
inventions to the employer.
SHRINK-WRAP LICENSE See LICENSE.
SITE LICENSE See LICENSE.
TANGIBLE MEDIUM OF EXPRESSION (COPYRIGHT) A physical form or representation
that can be perceived, reproduced, or otherwise communicated and that is more than
transitory in duration. In most countries that offer copyright protection, a work is
protected from the time when it is reduced to a tangible medium of expression.
Examples include paper, computer disk drives or diskettes, film, audio and video tape,
and mediums for sculpture.
TRADE RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS (TRIPS) See
GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT).
TRIPS See GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT).
TYING ARRANGEMENT See RESTRAINT OF TRADE.
UNCITRAL See
UNESCO Treaty See
UNFAIR COMPETITION Commercial activities that are dishonest or fraudulent against
the activities of other traders, such as fraudulent advertising, counterfeiting, and similar
illegal trade practices.
UNIVERSAL COPYRIGHT CONVENTION (U.C.C.) An international treaty first signed in
1952 for protection of copyrights among the member nations. The members agree to
offer national treatment to any work first published in any member country or by a
national of any member country. The formalities that must be met to confer copyright
protection on a work is merely the inclusion of the following notice: “© [year of first
publication] [author’s name].” This Convention applies in member countries that have
not yet acceded to GATT and the Berne Convention.
VALUE ADDED TAX (VAT) A tax based on the value added to a product at each stage of
production and applied to foreign transactions. These taxes can also be applied to
value added by services to a document or property right. These taxes are indirect trade
barriers on doing business internationally because they are passed to the consumer,
making cross-border transactions more expensive than local, in-country ones.
VOID AB INITIO Having no effect from the time of initiation. An IP right that is registered
in bad faith may be considered void ab initio.
WIPO See WORLD INTELLECTUAL PROPERTY ORGANIZATION.
WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO) A specialized agency of
the United Nations that seeks to promote international cooperation in the protection of
intellectual property, administers various treaties and unions of member countries, and
offers arbitration forums for resolution of cross-border disputes among nationals of
member countries.
WORLD TRADE ORGANIZATION (WTO) See GENERAL AGREEMENT ON TARIFFS
AND TRADE (GATT).
WTO See GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT).
abstract
A concise statement or summary, typically using key identifying words to describe a
subject and to allow for indexing. Abstract of record (US courts): A concise abbreviated
history of a case. Patent abstract (IP): One or two sentence description of the invention
claimed in a patent.
ademption (US wills & estates)
A gift made in a will that fails because the person who made the will (testator) no
longer owned the property at the time of death.
adjudication (US courts)
A judge's decree or decision, including the reading or pronouncing of such decree or
decision.
administration (US wills & estates)
A process by which an authorized representative inventories assets, pays obligations,
and distributes remaining assets left by a person who died (decedent).
administrator (US wills & estates)
A personal representative or other person whom a probate court appoints to administer
the estate of a person who died (decedent). In some states, an "administrator" is
appointed only when no executor is available, while in other states the term
"administrator" refers to executors, representatives, and all others who administer an
estate.
adversary system (international)
A judicial system in which opposing parties are allowed to present and support their
own facts and arguments before an objective tribunal before that tribunal decides or
adjudicates the action.
affidavit (international)
A voluntary written declaration of fact given based on the declarant's current information
and belief and made under oath or otherwise under penalty of law. See notary.
accrual method
An accounting method under which income is subject to tax after all events have
occurred which fix the right to receive such income and deductions are allowed when
all the events have occurred to fix the obligation to pay the debt.
agent
A person authorized by another to act on their behalf. Thus, an agent can enter into
contracts and other such legal binding functions on behalf of another. Usually, the
corporation's officers act as corporate agents.
aggregate par value
Aggregate par value is the par value multiplied by the number of authorized shares.
This amount is important in determining initial fees and annual franchise taxes in many
states.
annual meeting of shareholders
Nearly all states require a corporation to hold an annual meeting of shareholders at
which time directors are elected and other corporate issues are voted on.
apostille
Is a method of certifying a document for use in another country pursuant to the 1961
Hague Convention. With this certification by apostille, a document is entitled to
recognition in the country of intended use, and no certification or legalization by the
embassy or consulate of the foreign country where the document is to be used is
required. With our international package, we include an apostilled copy of the certificate
of incorporation for use in your desired country.
articles of incorporation
(Certificate of Incorporation or charter). The articles are the primary legal document of a
corporation; they serve as a corporation's constitution. The articles are filed with the
state government to begin corporate existence. The articles contain basic information
on the corporation as required by state law. Business Filings Incorporated prepares
the articles as part of its incorporation services.
articles of organization
LLCs must file the articles with the proper state authorities to begin existence. The
articles of organization are very similar to a corporation's articles of incorporation.
Business Filings Incorporated prepares the articles as part of its incorporation services.
asset
Anything owned that has monetary value.
assumed name
A name under which a corporation conducts business that is not the legal name of the
corporation as shown in its articles of incorporation. Assumed names (also called
fictitious name and Doing Business As) are typically filed at the county level with the
county recorders office. A corporation can use multiple assumed names.
authorized shares
The total number of shares a corporation is authorized to issue. This number is
specified in the articles of incorporation. All of the shares authorized need not be
issued to shareholders, the corporation can have unissued shares that can distributed
at a latter time.
authorized stock
See Authorized Shares.
- B -
Business Entity
An organization that possesses a separate existence for tax purposes. Some types of
business entities include corporations and foreign corporations, business trusts,
limited liability companies, and limited partnerships.
Business Judgment Rule
The rule states that directors of corporations will not be held personally liable for
unwise business decisions providing that the directors made an informed decision
and that decision was not tainted by self-interest.
Bylaws
Bylaws are the rules and regulations adopted by a corporation for its internal
governance. It usually contains provisions relating to shareholders, directors, officers
and general corporate business. At the corporation's initial meeting the bylaws are
adopted. Bylaws are a private document not filed with any state authority. Bylaws are
more flexible than the articles of incorporation because they are easier to amend.
- C -
Capital Gains or Losses
Gains or losses realized from the sale or exchange of capital assets. The amount is
determined by calculating the difference between an asset's purchase and sale price.
Capital Stock
See Authorized stock.
Cash Method
An accounting method under which income is subject to tax when actually received and
deductions are allowed when actually paid.
C Corporation
A C corporation is simply a standard business corporation. It is called a C corporation
because it is taxed under subsection C of the IRS code.
Certificate of Authority
Is a document issued by the proper state authority to a foreign corporation granting the
corporation the right to do business in that state.
Close Corporations
A close corporation is a corporation that possesses the following traits: a small
number of shareholders; no ready market for the corporation's stock; and substantial
participation by the majority shareholders in the management of the corporation. Some
states have close corporation statutes.
Common Stock
The primary stock of a corporation. This stock gives shareholders the right to
participate in management of the corporation and give the shareholder a proportionate
share of the dividends.
Corporate Record Book
Maintaining the proper records is very important to assure limited liability to corporate
shareholders. The corporation should have a record book which contains a copy of the
articles of incorporation, bylaws, initial and subsequent minutes of directors and
shareholders meetings and a stock register.
Cumulative Voting
This method of voting is intended to create adequate representation of minority
shareholders. Cumulative voting allows shareholders to aggregate their votes in favor
of fewer candidates than there are slots available.
conservator
A court-appointed person or entity that administers a person’s estate. If two or more
persons/entities are appointed, they are co-trustees.
- D -
Directors
Directors are elected by the shareholders. They manage or direct the affairs of
corporation. Typically, the directors make only major business decisions and monitor
the activities of the officers.
Dissolution
Is the termination of a corporation's legal existence. Dissolution may be caused many
ways including, failure to file annual reports, failure to pay certain taxes, bankruptcy, or
voluntary dissolution of the corporation by the shareholders and directors. Business
Filings does perform voluntary dissolution filings.
Doing Business As (DBA)
A "DBA", also known as an "assumed name", is typically completed by making a filing
at the county level where the business is located. This filing does not change the
official name of the corporation; however, it allows the company to use additional
names.
Dividend
A dividend is a distribution of money or property paid by the corporation out of the
corporation's profits to shareholders. Dividend payments are subject to double taxation,
the corporation pays tax on its profits and the dividend recipient must pay income taxes
on the dividend payment, the same money is taxed twice. The directors of the
corporation decide if a dividend payment is to be made and it can only be made if the
corporation has profits.
Domestic Corporation
A corporation is a domestic corporation in the state where it has incorporated.
Double Taxation
Corporations are treated as a separate legal taxable entity for income tax purposes.
Therefore, corporations pay tax on their earnings. If corporate earnings are distributed
to shareholders in the form of dividends, the corporation does not receive the
reasonable business expense deduction, and dividend income is taxed as regular
income to the shareholders. Thus, to the extent that earnings are distributed to
shareholders as dividends, there is a double tax on earnings at the corporate and
shareholder level. S corporations and LLCs are pass-through entities which are not
subject to the double tax.
- E -
Equity
The ownership of a shareholder in a corporation.
- F -
Fictitous Name
See doing business as.
Fiscal Year
Any twelve-month period used by a business as its fiscal accounting period.
Federal Tax Identification Number (TIN)
This is a number assigned to a corporation or other business entity by the federal
government for tax purposes. Banks generally require a tax identification number to
open bank accounts. The federal tax identification number is also known as the
Employer Identification Number (EIN).
Foreign Corporation
A corporation is referred to as a foreign corporation in all states except for the state
where it is incorporated. If a corporation is "transacting business" in a state other than
where it is incorporated, it must register for a certificate of authority to transact business
in the other state or possibly lose access to that state's courts and face fines.
Franchise Tax
Is a tax on the privilege of carrying on business as a corporation or LLC in a state. The
value of the franchise tax may be measured by amount of earnings, total value of capital
or stock, or by amount of business done. In some states, like California, the franchise
tax is simply an income tax.
- G -
- H -
Holding Company
A corporation that has no other function except owning stock in and supervising
management of other business entities.
- I -
Incorporator
The person or entity that prepares, files and signs the articles of incorporation.
Business Filings Inc. acts as an incorporator for many new companies.
Indemnify
To reimburse or compensate. Directors and officers of corporations are often
reimbursed or indemnified for all the expenses they may have incurred during the
incorporation process.
IRS Form 1023
This form is used to apply for tax-exempt status with the IRS.
IRS Form SS-4
This form is used to apply for a federal tax ID number.
IRS 2253
This form is used to apply for S corporation status.
- J -
- K -
- L -
Limited Liability Company
A business entity formed upon filing articles of organization with the proper state
authorities and paying all fees. LLCs provide the limited liability to their members, and
are taxed like a partnership, preventing double taxation. LLCs can be formed in every
state.
- M -
Manager
An LLC may be operated by a group of managers who act much like a board of
directors. If an LLC is to controlled by mangers this fact must be stated in the articles of
organization.
Membership Interest
A member's ownership of an LLC is represented by "interests" just as a partner has an
interest in a partnership and shareholders own stock in a corporation.
Member
A member is a person or entity who is an owner of some or all of a Limited Liability
Company. The business decisions of an LLC are made by the members unless the
articles of organization provide that the LLC will controlled by a manager or managers.
Merger
A merger occurs when two corporations join together into one, with one corporation
surviving and the other corporation disappearing. The assets and liabilities of the
disappearing entity are absorbed into the surviving entity.
Minutes
A written record which details the events of the corporation. These records should be
kept in the corporation's or LLC's record book.
- N -
Name Reservation
The name of a corporation or LLC must be distinguishable on the records of the state
government. If the name is not unique, the state will reject the articles of incorporation
or articles of organization (for LLCs). A name can be reserved, usually for 120 days, by
applying with the proper state authorities and paying a fee.
No-Par-Value Stock
Stock with no minimum value. Most states allow no-par stock. If the stock is no-par
stock then the amount of stated capital is an arbitrary amount assigned by the board of
directors. Further, the value of capital for franchise tax purposes is determined by the
state and this may result in higher franchise taxes in comparison with low par-value
stock.
Not-For-Profit Corporation
A corporation organized for some charitable, civil or other social purpose which does
not entail the generation of profits for shareholders. These corporations can apply for
tax-exempt status at both the federal and state level. Not-for-profit corporations must file
not-for-profit articles of incorporation with the state.
- O -
Officers
The directors appoint officers. They manage the daily affairs of the corporation. A
corporation's officers usually consist of a president, vice-president, treasurer and
secretary. In most states, one person can hold all of these posts.
Operating Agreement
An agreement among the LLC's members which govern the LLC's operations and the
rights of its members. It is analogous to corporate bylaws.
Organizational Meeting
The initial meeting where the formation of the corporation is completed. At the
organizational meeting a number of initial tasks are completed such as: the articles of
incorporation are ratified, the initial shares are issued, officers are elected, bylaws
approved, and a resolution authorizing the opening of bank accounts is passed. If the
initial directors are named in the articles of incorporation, they can hold the
organizational meeting. If they are not named, then the organizational meeting is held
by the incorporator.
- P -
Paid in Capital Requirements
A few states require corporations to have a specified amount of paid in capital prior to
starting business. These states include CT, DC, SD and TX and require that the
company have $1,000 in paid in capital before starting business.
Par-Value
The stated minimum value of a share stock. Stock must be sold for at least this value
or the owner of the stock can face liability. With low par value stock or no par value stock
this liability is minimized.
Partnership
A partnership is "an association of two or more persons to carry on as co-owners of a
business for profit." In contrast to a corporation, a general partnership can come into
existence without the need to file any formal papers with any state official. Thus, if
Jones and Smith, without signing any agreement between them and without filing any
documents with the state begin to jointly operate a corner candy store, they will have a
general partnership.
Pass-Through Taxation
The income to the entity is not taxed at the entity level; however, the entity does
complete a tax return. The income or loss as shown on this return is "passed through"
the business entity to the individual shareholders or interest holders, and is reported
on their individual tax returns. S corporations and LLCs are both pass-through tax
entities.
Piercing the Corporate Veil
If corporate formalities are not followed, it is possible that the corporate entity will not
protect shareholders from corporate debt. Keeping proper records and holding regular
meetings help solve this possible problem.
Preemptive Rights
Rights delineated in the articles of incorporation granting shareholders the first
opportunity to buy a new issue of stock in proportion to their current equity percentage.
The shareholder has the right to buy the new issue of stock, but is not required to make
the purchase. If the shareholder elects not to exercise this right, the shares can be sold
on the open market.
Preferred Stock
Stock which generally provides the shareholder with preferential payment of dividends
but does not carry voting rights. If a corporation is to have preferred stock, this fact must
be stated in the articles of incorporation.
Professional Corporation
A corporation which is organized for the purpose of engaging in a learned profession
such as law, medicine or architecture. Professional Corporations must file articles of
incorporation with the state which meet the state's requirements for professional
corporations.
Proxy
If a shareholder can not attend a meeting, the shareholder is allowed to vote by proxy. A
proxy grants another individual the power to vote on their behalf.
- Q -
Quorum
The minimum attendance required to conduct business at a meeting. Usually, a
quorum is achieved if a majority of directors are present (for directors meetings) or
outstanding shares are represented (for shareholder meetings). The percentage
needed for a quorum may be modified in the bylaws.
- R -
Registered Agent
The agent named in the articles of incorporation. The agent will receive service of
process on the corporation and other important documents. The agent must be named
in the articles of incorporation, and must be located in the state of incorporation or
organization.
Registered Office
The office named in the articles of incorporation. The registered office must be where
the registered agent is located, and need not be the principal office or place of
business of the corporation.
Resolution
A resolution is a formal decision of the corporation which has been adopted by either
the shareholders or the board of directors.
- S -
S Corporation
A corporation which elects subchapter S tax treatment. This tax treatment allows the
corporation to avoid entity level taxation.
Section 1244 Stock
An individual investor in a corporation which meets the Section 1244 requirements is
entitled to treat up to $50,000 (or $100,000 if filing a joint return) of losses on the 1244
section stock as ordinary losses.
Share
An interest in a corporation. The total ownership of a corporation is divided into shares
of stock.
Shareholder
Any holder of one or more shares in a corporation. A shareholder usually has evidence
that they are a shareholder; this evidence is represented by a stock certificate.
Sole Proprietorship
A business carried on by the owner as an individual. The owner of a sole proprietorship
is personally and fully liable for all business debts; thus, personal property could be
taken to pay business debts.
Stated Capital
The par value of shares multiplied by the number of shares outstanding. The amount of
stated capital may effect the ability to pay dividends.
Stock
An equity or ownership interest in a corporation, measured in shares. Ownership of
shares is demonstrated by stock certificates.
Stock Certificate
A written instrument that shows ownership of shares in a corporation.
Stockholder
See shareholder.
Stock Transfer Book
A record book which lists the owners of shares of stock in a corporation.
- T -
Treasury Shares
Shares of stock which were issued, and later acquired by the corporation.
- U -
Ultra Vires
Traditionally, the purpose of a corporation was closely spelled out in its articles of
incorporation. If the corporation acted beyond its described purposes these actions
were unenforceable against the corporation or by the corporation. However, most
modern statutes allow corporate purposes to be any lawful activity.
Unanimous Written Consent
Nearly all states allow directors and shareholders to act without a meeting if they each
give their consent to specific corporate actions in writing.
A
ADR
alternative dispute resolution
D
D.A.
District Attorney
I
IP
Intellectual Property
T
TPPM
TRO
temporary restraining order
U
U.C.C.
Ukase
Unclean hands
V
V.A.
Veterans' Administration
V.A.T.
Value Added Tax
V.E.
vs.
W
W.H.O.
World Health Organization
WIPO
World Intellectual Property Organization
X
ABRIDGEMENT (COPYRIGHT) See DERIVATIVE WORK.
ABSTRACT (PATENT) A summary included with a patent application and generally
placed at the front of a registered patent to describe briefly the nature, structure, and
purpose of the invention.
AFRICAN REGIONAL INTELLECTUAL PROPERTY ORGANIZATION (ARIPO) An
agreement between the African states of Kenya, Malawi, and Sudan to cooperate and
coordinate in the registration of IP rights. See Ch. 11, IP Rights in Multinational Forums.
AGENCY A relationship between two parties, the first of whom (the agent) represents,
acts for, and binds the other (the principal) in accordance with the principal’s oral or
written instruction of the principal. In some countries, an agency can be created only by
a written agreement or power of attorney entered into by the principals and agents. See
AGENT; PRINCIPAL; POWER OF ATTORNEY.
AGENT An individual or legal entity authorized to act on behalf of another individual or
legal entity (the principal). An agent’s authorized actions will bind the principal, such as
when the owner of a book protected by copyright authorizes another person to sell the
rights to publish the book to a third party. Within the intellectual property laws of many
countries, “agent” is given a special meaning as a person or company that has
qualified under the law to file for the protection of intellectual property rights. These
“agents” need not be qualified as lawyers, but they must usually have technical,
scientific, or legal training. See AGENT; PRINCIPAL; POWER OF ATTORNEY.
ALL RIGHTS RESERVED (COPYRIGHT) A term that appears in many copyright notices
for purposes of securing protection under the Buenos Aires Convention, by which the
United States and Latin American countries agreed to reciprocal protection rights in
copyrighted works. This term is of little significance today because other international
treaties have superceded the Buenos Aires Convention, and these other treaties do not
require use of this term.
AMENDMENT An addition, deletion, or other change in a legal document or legislation.
ANDEAN GROUP An alliance of Latin American countries, also known as the Andean
Pact. The Group was formed in 1969 to promote regional economic integration,
including integration of intellectual property rights, among medium-sized countries
within the Andean region. Members include Bolivia, Colombia, Ecuador, Peru, and
Venezuela. Address: Andean Group: Avenida Paseo de la Republica 3895, Casilla
Postal 18-1177, Lima 18, Peru; tel: + (14) 41-4212; telex: 20104 PE; fax + (14) 42-0911.
See Ch. 11, IP Rights in Multinational Forums.
ANNUITY(PATENT) A fee imposed by law to maintain the validity of a patent registration.
If an annuity payment is not made timely, the patent may lapse.
ANTICIPATED (PATENT) An invention that is so similar to an earlier patent that it is not
considered to be novel, and therefore it cannot be registered as a patent. An invention
may be anticipated by the existence of prior art or public use or display that precedes in
time the filing of the patent. See PRIOR ART and PUBLICATION.
ANTI-COMPETITION AGREEMENT See COVENANT NOT TO COMPETE.
ANTI-SHELVING CLAUSE A clause in a license agreement by which the licensee
agrees to use commercially the intellectual property rights licensed within a stated
period of time and not to merely “put the licensed rights on a shelf.” This clause places
an affirmative duty on the licensee to use or lose the rights to the license, and it is
important to the licensor who has granted the license in exchange for royalties from the
commercial sales.
ANTI-TRUST LAW A statute that prohibits business operations intentionally aimed at
unfairly dominating a market such that in practice a monopoly results, and further
prohibiting business arrangements between companies by which they cooperatively
engage in practices that result in the restriction or restraint of free trade, such as price
fixing or bid rigging. Example: A company that shares its trade secret with only one of its
competitors pursuant to an agreement by which the two companies plan to cooperate
and corner the market is likely to be in violation of antitrust laws.
ANTHOLOGY (COPYRIGHT) See COMPILATION WORKS.
ANTICIPATION (PATENT) See PRIOR ART.
APEC See ASIA PACIFIC ECONOMIC COOPERATION.
ARCHIVAL COPY (COPYRIGHT) An authorized copy of software made by the party who
uses the software. Parties who “buy” software are actually purchasing a restricted
license to use it, and they are not permitted to copy it with one exception. A single copy
may be made and kept in a secure place for purposes of having a copy to ensure
against damage or loss of the original. This right is protected by law in some countries
(for example, the US Computer Software Protection Act) and is also granted by most
software program license agreements. If the software is transferred or destroyed, the
archival copy must also be transferred or destroyed.
ARIPO See AFRICAN REGIONAL INTELLECTUAL PROPERTY ORGANIZATION.
ARM’S LENGTH TRANSACTION A transaction in which both parties have similar
bargaining power during the negotiation and finalization of the arrangement and in
which the parties exchange consideration of equivalent or nearly equivalent value. For
example: an assignment of IP rights between unrelated parties is an arm’s length
transaction if the assignor receives valuable consideration based on the assessed
value of the IP rights and the assignee gains IP rights that are in fact worth the
consideration paid.
ASEAN See ASSOCIATION OF SOUTHEAST ASIAN NATIONS.
ASIA PACIFIC ECONOMIC COOPERATION (APEC) An informal forum in which
ministerial leaders of Asia Pacific countries gather for discussion of economic issues
that affect their region and their specific countries. Members include Australia, Brunei,
Canada, China, Hong Kong, Indonesia, Japan, Korea (South), Malaysia, the
Philippines, Singapore, Thailand, Taiwan, and the United States. Address of the
Secretariat: 438 Alexander Road 19-01, Singapore 0315; tel: + 276 1880; fax: + 276
3602. See Ch. 11, IP Rights in Multinational Forums.
ASSIGNEE A person or legal entity who is granted a property ownership right previously
held by another party (the assignor). See ASSIGNOR; ASSIGNMENT.
ASSIGNMENT A transfer of property ownership rights, including title, interest, and
benefits in the property, from the owner (the assignor) to another individual or legal
entity (the assignee), who then becomes the owner of the property rights. See
ASSIGNEE; ASSIGNOR. See the related term LICENSE.
ASSIGNOR The owner of a property right who transfers that ownership right to another
party (the assignee). See ASSIGNEE; ASSIGNMENT.
ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN) A trade and economic pact
formed in 1967 to promote political, economic, and social cooperation among its
members. Members: Brunei, Cambodia, Indonesia, Malaysia, Philippines, Singapore,
and Thailand. Address: ASEAN, Jalan Sisingamangaraja, PO Box 2072, Jakarta,
Indonesia; tel: + (21) 712 272. See Ch. 11, IP Rights in Multinational Forums.
BELGIUM, NETHERLANDS, LUXEMBOURG ECONOMIC UNION (BENELUX) An
economic and political cooperation pact that created an organization to encourage
economic activity among the three member nations, including a central Registry for
trade marks, service marks, copyrights, and patents. Address: BENELUX, 39 rue de la
Regence, 1000 Brussels, Belgium; tel: + (02) 519-38-11; fax + (02) 513-42-06. See Ch.
11, IP Rights in Multinational Forums.
BENELUX See BELGIUM, NETHERLANDS, LUXEMBOURG ECONOMIC UNION.
BERNE CONVENTION See INTERNATIONAL UNION FOR THE PROTECTION OF
LITERARY AND ARTISTIC WORKS.
BEST EDITION (COPYRIGHT) The highest quality version of a work protected by
copyright. Most copyright registration laws require the party seeking copyright to deposit
with the registry the best edition at the time the application for registration or deposit is
made.
BEST MODE (PATENT) A disclosure of an invention that is sufficient in detail to allow a
person of ordinary skill in the same technology to build or develop it. When filing a
patent, the inventor must disclose the best mode because the inventor is granted a
monopoly over the invention, but only in exchange for improving public knowledge of the
technology.
BONA FIDE In or with good faith, honesty, and sincerity. A bona fide trade mark
application, for example, is one that has been made by a trade mark owner who has
actual and sincere intent and belief that he or she will use the mark in connection with
the commercial sale of goods and that the mark is not an infringement on the rights of
any other IP owner.
BUENOS AIRES CONVENTION See ALL RIGHTS RESERVED.
CLAIM (PATENT) A statement in a patent application that describes the invention in the
precise and formal language required by the patent registry. The claims contained in a
patent will determine the scope of the patent and the breadth of protection given, but if
claims are too broad there is a likihood that the invention may have common
characteristics with prior art and therefore cannot be patented. A patent application will
usually contain a number of claims that define different aspects of the invention. An
independent claim is one that describes the invention without reference to any other
claims. A dependent claim is one that refers to other claims.
CLASSIFICATION (MARK) Numbered categories of goods and services based on their
type and used for limiting the scope trademark or service mark protection to a particular
specification of goods or services. See Nice Agreement in Ch. 11, IP Rights in
Multinational Forums.
CLASSIFICATION (PATENT) Numbered categories of patents based on the type of
invention and used for indexing and finding registered and pending patents. In general,
the classification is assigned by the Registry because of the complexity and
importance of classifications. For example, in the US, an invention may be classified
within one or more of 66,000 classes.
CAUTIONARY NOTICE A notice published in a public or legal newspaper or other
periodical commonly circulated for purposes of informing the public at large about
protected rights in a trademark or service mark. A cautionary notice is most commonly
used when a country has no laws protecting trademarks or service marks. It may also
be published to alert the public to infringement activities and to identify distinctive
features of the IP belonging to the rightful owner.
COMBINATION IN RESTRAINT OF TRADE See RESTRAINT OF TRADE.
COMMUNITY TRADEMARK A trademark or service mark filed and registered in a single
Registry established pursuant to the European Union (formerly the European
Community) and protected in all of the European Union member nations. The Registry
is called the Office of Harmonization of the Internal Market and is located in Alicante,
Spain. See Ch. 11, IP Rights in Multinational Forums.
COMPULSORY LICENSE See LICENSE.
CONFIDENTIALITY AGREEMENT An employment agreement in which the employee
agrees to hold in confidence all trade secrets learned during the employment. It is
preferable to have a written confidentiality agreement because proof can be more
easily established in court in the event that the employee breaches the agreement.
Such an agreement can be implied by a court if there is proof that a duty of trust or
confidentiality existed during the employment. See related definition at
NONDISCLOSURE AGREEMENT.
CONSIDERATION An item of value passed from one contracting party to the other as an
inducement to make the contract, and without which the contract is not binding. For
example, the owner of an IP right may transfer that right to another person, and that
transfer will be considered valid provided valuable consideration has been received in
return.
CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY See PARIS
CONVENTION.
COPYRIGHT NOTICE See NOTICE OF IP RIGHTS.
CONVENTION FOR THE PROTECTION OF PRODUCERS OF PHONOGRAMS
AGAINST UNAUTHORIZED DUPLICATION OF THEIR PHONOGRAMS A multinational
agreement created in 1971 by member nations to harmonize protection of audio
reproductions, including any material in which sound can be fixed, reproduced, and
communicated. See Ch. 11, IP Rights in Multinational Forums.
CONVENTION ON THE MEANS OF PROHIBITING AND PREVENTING THE ILLICIT
IMPORT, EXPORT, AND TRANSFER OF OWNERSHIP OF CULTURAL PROPERTY A
multinational agreement signed in 1970 by member nations to recognize the rights of
countries to their cultural property and to harmonize the treatment of illegal activities
related to removing cultural property from its homeland. See Ch. 11, IP Rights in
Multinational Forums.
COPY (COPYRIGHT) A copy refers to a tangible form of an expression that is retained
for any period of time, regardless of how brief. Examples include photocopies, audio
and visual tape recordings, programs and documents on computers and diskettes,
programs held in computer memory. The right to make a copy is exclusive to the owner
of the copyright.
COVENANT NOT TO COMPETE A contractual provision by which one party promises
not to compete against the other for a specific time or within a specific region. For
example, this covenant may be included within a contract for employment to prevent an
employee from taking a job with a competing company or within a contract for the sale
of a business to prevent the seller from competing with the purchaser of the business.
The covenant must be restricted, such as by time or geographical location, to be
enforceable, and usually the purpose of the covenant is to protect the trade secrets of
the company. In some places, covenants not to compete in employment contracts are
prohibited by law and cannot be enforced, but such covenants in contracts for the sale
of a business are usually enforced.
CREDIT LINE A spoken or written statement of acknowledgment used in connection
with an IP work to identify the author or creator of that work. If the work is created by one
author or creator, the credit line will simply identify the same. If the work of other author’
s is also incorporated, several credit lines are usually included to indicate use by
permission, and the permission to use is commonly conditioned on the inclusion of a
credit line to show ownership and source of the work.
CROSS-LICENSING A license arrangement by which patent owners agree to
cooperate in the use of each other’s inventions for producing goods that use many
inventions without having to pay substantial royalties to each other.
CYBER-SQUATTING The bad faith registration of a domain name that is similar or
identical to the trademark of a well-known company. Such a registration is usually
made for purposes of selling that name back to the company. Most internet service
providers now have procedures for cancellation of these names, and a growing
number of countries are enacting laws by which companies can seek injunctions and
damages against cyber-squatters.
CTM See COMMUNITY TRADEMARK.
DILUTION (MARK) A decrease in the value, reputation, and distinctiveness of a mark
because a competitor’s use of a same or similar mark tends to taint indirectly the mark’
s reputation or reduce its distinctiveness. For example, the use of the trademark IBM on
a pornography magazine is a dilution of the mark. Dilution is not a direct infringement,
and therefore many countries have enacted anti-dilution laws to provide remedies to
companies that are faced with this situation.
DOCTRINE OF EQUIVALENTS (PATENT) A test developed and used by courts to
decide whether a patent is being infringed based on whether another invention alleged
to be infringing does the same work in substantially the same way to achieve the same
result as the prior patented invention. See READ ON DOCTRINE.
EUROPEAN PATENT CONVENTION (EPC) An agreement between European nations
to centralize and standardize patent law and procedure by establishing a central office
(European Patent Office) for patent filings among the member nations. Once granted,
the patent matures into individual patents—one in each country. Address: European
Patent Office, Erhardtstrasse 27, 8000 Munich 2, Germany; tel: (89) 2399-0; Fax (89)
2399-4465. See Ch. 11, IP Rights in Multinational Forums.
EUROPEAN PATENT OFFICE See EUROPEAN PATENT CONVENTION.
FAIR USE (COPYRIGHT) An exception to the exclusive rights accorded to an owner of a
copyright by which a third party can use the copyrighted work without the owner’s
permission and without threat of liability for infringement. A third party may copy, restate,
or otherwise use work that is subject to copyright in connection with one of the
following: scholarly or research activity, critique or commentary on the work (including
parodies), news reporting, or teaching.
FIRST SALE DOCTRINE (COPYRIGHT) With a few exceptions, a copyright owner’s
rights over a legal copy of the work end when the work is first sold. The purchaser is
free to destroy, sell, lend, or otherwise dispose of the work in any manner whatsoever.
However, the purchaser cannot make additional copies of the work, because that is an
infringement of the copyright. Exceptions to this rule are made by law, and therefore
they vary from country to country. For example, countries that have enacted computer
software protection statutes typically prohibit the purchaser of a computer program from
later renting or otherwise lending a copy to the public for any commercial benefit.
FIRST TO FILE LAW A law that gives IP rights to the party who first files an application to
register the rights, regardless of whether the party was first to use the IP. Sometimes
referred to as “race statutes,” these laws award a party who is first in line at the registry
without accounting for the rights of a party who has already used the IP, whether that
use has occurred within or outside of the country.
FIRST TO INVENT LAW (PATENT) A law that awards IP rights in a patentable invention
to the party who can prove that he or she was first to conceive the invention. If another
party applies to register the patent first, the party who claims to have conceived the
invention first may file an interference or opposition against the application to reclaim
the IP rights.
FIRST TO USE LAW (MARKS) A law that awards IP rights in a trademark or service
mark to the party who can prove that he or she used the mark first. In some countries,
first use is recognized only if the use was made within the country. The laws of other
countries acknowledge IP rights in a mark first used outside the country, particularly if
the mark has become well-known in other jurisdictions.
GATT See GENERAL AGREEMENT ON TARIFFS AND TRADE.
GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) A multilateral trade treaty
that has been negotiated by member countries in progressive meetings beginning in
1987 and continuing every few years. The major goal of GATT is to harmonize trade
requirements and reduce trade friction and barriers among the member nations.
Included within GATT are provisions related to the recognition and treatment of IP rights
among the member nations. The GATT treaty has established the World Trade
Organization (WTO) as the regulatory body for enforcing compliance. The GATT
provisions for protection of intellectual property are contained within the Trade Related
Aspects of Intellectual Property Rights (TRIPS) agreement. See Ch. 11, IP Rights in
Multinational Forums.
GRANT OF RIGHTS (COPYRIGHT) The assignment of all copyright rights from the
author to a publisher in advance of publication and in exchange for payment or future
royalties.
IDENTIFYING MATERIAL (COPYRIGHT) A deposit of part of a work or a representation
of the entire work with the Copyright Office, which is permitted in lieu of depositing the
entire work whenever the work is difficult to deposit as a whole.
INDUSTRIAL PROPERTY A form of intellectual property rights, commonly referring to IP
rights in property developed and used specifically for commercial application, such as
patents, trademarks, trade secrets, and appellations of origin.
INDUSTRIAL SECRET A trade secret that is mechanical, technological, scientific, or
technical in nature, such as a secret process, machine, formula, manufacturing
method, or unregistered industrial design. Some countries, such as the US, treat
industrial secrets the same as trade secrets, affording them protection only if they have
not been publicly disclosed. Other countries, such as France, Germany, and Japan,
make a distinction for industrial secrets, affording them protection as even if the
general process or method related to the industrial secret is patented or otherwise
publicly known. For example, the process of making ceramics is widely known in
Japan, but factors that make ceramics a commercial success (product mixture, glaze
mixture, firing temperature and time, and so forth) may be protected as industrial
secrets.
INTANGIBLE PROPERTY A type of property that can be owned and transferred, but that
is not tangible because one cannot observe it with any of one’s senses. A book can be
seen, held, and read, but the exclusive ownership right to the intellectual creation from
which the presentation of the material was derived cannot be seen, held, or read. The
ownership right may be represented by a registration notice, but the copyright itself is
intangible.
INTELLECTUAL PROPERTY (IP) Intangible property rights in works created by a
person’s intellect. These rights can be protected if the works are novel, unique, or
otherwise original, and they include copyrights, trademarks, service marks, patents,
designs, trade secrets, traditional indigenous knowledge, and appellations of origin.
INTERFERENCE An administrative procedure for determining patent rights when two
patents or pending patents claim the same invention.
INTERNATIONAL CLASSIFICATION OF GOODS See CLASSIFICATION (TRADEMARK).
See Ch. 11, IP Rights in Multinational Forums.
INTERNATIONAL CONVENTION FOR THE PROTECTION OF PERFORMERS,
PRODUCERS OF PHONOGRAMS, AND BROADCASTING ORGANIZATIONS A 1961
multinational agreement intended to identify and harmonize among the member states
the laws and legal treatment related to the IP rights of performers, phonogram
producers, and broadcasters in live, taped, and recorded performances.
INTERNATIONAL UNION FOR THE PROTECTION OF INDUSTRIAL PROPERTY (PARIS
CONVENTION) Founded in 1883, amended periodically, and today administered by
WIPO, this international agreement was intended to harmonize national patent and
trademark treatment and to prevent discrimination against cross-border registrants
and users of industrial property.
INTERNATIONAL UNION FOR THE PROTECTION OF LITERARY AND ARTISTIC
WORKS (BERNE CONVENTION) An international agreement that was originally
concluded at Berne, Switzerland, in 1886 by representatives of participating countries to
provide for the recognition and treatment of rights in intellectual property among the
signatories. The member countries have agreed to protect copyrighted works by foreign
authors in the same fashion as works by national authors and to extend copyright
protection in a work for at least the life of the author plus 50 years. All countries that are
signatory to GATT must also adhere to the Berne Convention. Also known as the Berne
Convention or Berne Union, it has been revised periodically (Stockholm 1967 and Paris
1971) and it is now administered by the World Intellectual Property Organization
(WIPO). See WORLD INTELLECTUAL PROPERTY ORGANIZATION.
LICENSE An agreement by which the owner of intellectual property rights (the licensor)
authorizes another party (the licensee) to use the intellectual property in exchange for
royalties or other compensation and with the restriction that the owner retains full
ownership rights in the intellectual property. A license may grant exclusive use for a
particular time, territory, or trade or it may be nonexclusive. A shrink-wrap license is an
agreement by which software publishers limit use of the software by the consumer.
The license agreement is usually enclosed within the packaging so it cannot be read
until after the software is purchased, but it must allow for a refund if the consumer
refuses to accept the terms of the license. A site license is granted by software
publishers to a company that installs a number of copies of the software on several
individual computers. The site license provides for a reduced rate for each copy of the
software needed. In some countries, the law or the courts may impose against the
owner of IP a compulsory license, under which the owner must allow use of the IP by
certain licensees and under certain conditions in exchange for compensation to the
owner. For example, a compulsory license will arise by US law if, after a nondramatic
musical composition is recorded and distributed to the public, the copyright owner
refuses to permit any other company to record the music for distribution to the general
public for private use. In such event, the law compels the copyright owner to grant a
license, and royalties are determined by the amount provided in the statute. See the
related term ASSIGNMENT.
LICENSEE See LICENSE.
LICENSOR See LICENSE.
MADRID CONVENTION ON INTERNATIONAL REGISTRATION OF TRADEMARKS An
international agreement joined by various countries by which their nationals can submit
registrations obtained within their own country to a central registry for recognition in all
member countries. Each member country may accept or reject the mark registration.
See Ch. 11, IP Rights in Multinational Forums.
MARKING The inclusion of a symbol or term on or in connection with material that is
subject to an IP right. For example, © may be used in connection with material that is
protected by copyright, ™ or ® or may be used in connection with marks that are
registered as trademarks or service marks, and “Patent Pending” or “Pat. Pend.” may
be used in connection with materials that are subject to patent protection. These marks
serve to place the public on notice that the materials constitute protected IP and are
subject to private rights, but they have little meaning in most countries today because
marking is not a requirement of the international treaties that are intended to harmonize
the treatment of IP rights. Some countries continue to enforce marking laws, however,
and therefore local requirements should be checked before marketing IP protected
items across a border.
NAFTA See NORTH AMERICAN FREE TRADE AGREEMENT.
NICE AGREEMENT See CLASSIFICATION (TRADEMARK). See Ch. 11, IP Rights in
Multinational Forums.
NONDISCLOSURE AGREEMENT An agreement between a company and another party
by which the party agrees not to disclose trade and industrial secrets to any other
person or company without authority. Violation of a nondisclosure agreement gives rise
to an action for breach of contract against the party to the agreement. If any infringement
has occurred because of the violation, the intellectual property owner can also sue to
enjoin the commercial use of the intellectual property disclosed and to recover money
damages.
NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) An agreement between
Canada, Mexico, and the United States finalized in 1993 to eliminate trade barriers
among these countries. NAFTA requires these countries to make certain provisions
and to establish certain forums for the protection of IP rights in cross-border
transactions. See Ch. 11, IP Rights in Multinational Forums.
NOTICE OF IP RIGHTS A notice that is displayed on or in connection with works,
products, or other items that are protected as intellectual property. This notice is
intended to make all third parties aware of your IP rights. Their knowledge will be
implied if you have used the notice, and therefore they may be found to have acted in
bad faith by copying and using your IP in commerce, even if they claim no actual
knowledge of your rights. In some countries, a notice is mandatory and you may lose
your IP rights if you do not have the notice displayed. In most countries, use of a notice
prior to registration of your IP rights gives rise to fines or other legal proceedings
against you, and even to loss of your IP rights. The proper notice to be used varies from
country to country. For example, some countries require the owner of a trademark to
display the mark with the notice ®, some countries require use of ™, and other
countries have no notice requirement at all.
PARIS CONVENTION A treaty by which the member countries have agreed to
harmonize their treatment of various types of industrial property rights, including
trademarks, service marks, and patents. For details, see Ch. 11, IP Rights in
Multinational Forums.
PARTY (to a transaction) An individual, group, or entity that represents one side of a
question, contract, or dispute.
PASSING OFF DOCTRINE (MARK) An act in bad faith by a party who uses a mark in
such a way as to represent to consumers or the public at large that the party owns or
has authority to use the mark when such is not the case, resulting in confusion as to
the source of goods or services. This doctrine has been developed primarily in the
courts to protect owners of trademarks against bad faith usage of their marks that may
not qualify as statutory infringement. For example, Company A uses a trade name in
small print to identify its distributorship, and that trade name is an identical or similar
copy of the trademark of Company B. There is no direct infringement because the use
of a trade name is distinct from the use of a trademark. However, Company B can sue
for passing off on the ground that use of the trade name is likely to confuse consumers
and the public at large and Company A intentionally selected the name to cause
confusion.
PATENT COOPERATION TREATY (PCT) An international agreement signed by
member states in 1970 to provide for efficient and uniform patent protection. A single
PCT application must be filed with a central registry, and then national filings must be
made in each member country. See Ch. 11, IP Rights in Multinational Forums.
PCT See PATENT COOPERATION TREATY.
PIRACY Any activity undertaken with intent to infringe on another’s IP right or to acquire
that right improperly.
PLAGIARISM (COPYRIGHT) The deliberate copying of another’s original expression or
creative ideas and passing it off as one’s own. Most plagiarism is not a violation of law,
but merely an ethical or moral issue. However, if plagiarism is committed for
commercial gain, it can be the basis of an infringement action.
POWER OF ATTORNEY A written or oral authorization by which one individual or entity
(the principal) authorizes another (the agent) to perform stated actions on the principal’
s behalf. For example, a principal may sign a special power of attorney authorizing an
agent to file an initial application to register a specific IP right or a general power of
attorney authorizing an agent to file, process, and renew one or more IP rights.
PRIOR ART All inventions conceived and made public prior to the filing of a new patent
application. A prior art reference is any written description or discussion of prior art that
has been published—including in a periodical, prior patent application or registration,
or other publication in any language printed anywhere in the world—prior to the filing of
a new patent application.
PRINCIPAL An individual or legal entity that authorizes another individual or legal entity
(the agent) to act on the principal’s behalf. The principal will be bound by the agent’s
actions, provided such actions are within the scope of the authorization given. See
AGENCY; AGENT; POWER OF ATTORNEY.
PROVISIONAL PATENT A patent application allowed in some countries by which an
inventor may file an interim application that sufficiently discloses the invention but that
contains only part of the information required for a complete application. The
provisional patent is not examined for its substantive content until a complete
application is filed. It also has limited validity, and the application must therefore be
revised and completed within a specific time or it will be deemed abandoned.
PUBLIC DOMAIN The rights and interests of the public at large, as opposed to the
private rights and interests of an individual or company. Works and creations that enter
the public domain are no longer the property of a particular private individual or
company, and they no longer fall within the protection of intellectual property laws
against infringement.
PUBLICATION A work, invention, or creation that has been displayed or distributed to
the public at large is considered to have been published. For most types of IP rights,
the rights must be secured prior to publication.
RACE STATUTE See FIRST TO FILE.
READ ON DOCTRINE A test developed and used by courts to determine whether a
patent is being infringed based on whether the literal language of the patent claims are
similar or identical to each element of the device or process alleged to be an
infringement.
RESTRAINT OF TRADE A business activity that limits the free flow of commerce, such
as an arrangement by which two businesses agree to fix prices (price fixing
agreement), by which trade is restricted by geographical region (territorial restriction
agreements) or by which a consumer must purchase one product as a condition of
buying another product (tying arrangement). See related definitions at ANTI-TRUST
LAWS and at COVENANT NOT TO COMPETE.
REVERSE ENGINEERING An examination of a product to find out its components and
the method of manufacture. If IP is protected solely as a trade secret and another
company through reverse engineering is able to determine the components and
method of manufacture, the trade secret is considered public domain and cannot be
protected. However, if the IP has been patented or copyrighted, then it remains
protected regardless of discoveries made by means of reverse engineering.
SHOP RIGHTS An employer’s right to license its employee’s invention when the
employee has conceived and developed that invention within the scope of his or her
employment. The employer’s license is royalty-free, irrevocable, nonexclusive, and
nontransferable. The employee retains ownership rights in the patent, including the
right to issue nonexclusive licenses to other companies. Shop rights arise in the
absence of an employment contract by which the employee has assigned all
inventions to the employer.
SHRINK-WRAP LICENSE See LICENSE.
SITE LICENSE See LICENSE.
TANGIBLE MEDIUM OF EXPRESSION (COPYRIGHT) A physical form or representation
that can be perceived, reproduced, or otherwise communicated and that is more than
transitory in duration. In most countries that offer copyright protection, a work is
protected from the time when it is reduced to a tangible medium of expression.
Examples include paper, computer disk drives or diskettes, film, audio and video tape,
and mediums for sculpture.
TRADE RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS (TRIPS) See
GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT).
TRIPS See GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT).
TYING ARRANGEMENT See RESTRAINT OF TRADE.
UNCITRAL See
UNESCO Treaty See
UNFAIR COMPETITION Commercial activities that are dishonest or fraudulent against
the activities of other traders, such as fraudulent advertising, counterfeiting, and similar
illegal trade practices.
UNIVERSAL COPYRIGHT CONVENTION (U.C.C.) An international treaty first signed in
1952 for protection of copyrights among the member nations. The members agree to
offer national treatment to any work first published in any member country or by a
national of any member country. The formalities that must be met to confer copyright
protection on a work is merely the inclusion of the following notice: “© [year of first
publication] [author’s name].” This Convention applies in member countries that have
not yet acceded to GATT and the Berne Convention.
VALUE ADDED TAX (VAT) A tax based on the value added to a product at each stage of
production and applied to foreign transactions. These taxes can also be applied to
value added by services to a document or property right. These taxes are indirect trade
barriers on doing business internationally because they are passed to the consumer,
making cross-border transactions more expensive than local, in-country ones.
VOID AB INITIO Having no effect from the time of initiation. An IP right that is registered
in bad faith may be considered void ab initio.
WIPO See WORLD INTELLECTUAL PROPERTY ORGANIZATION.
WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO) A specialized agency of
the United Nations that seeks to promote international cooperation in the protection of
intellectual property, administers various treaties and unions of member countries, and
offers arbitration forums for resolution of cross-border disputes among nationals of
member countries.
WORLD TRADE ORGANIZATION (WTO) See GENERAL AGREEMENT ON TARIFFS
AND TRADE (GATT).
WTO See GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT).
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| A man walked into a bar with his alligator and asked the bartender, "Do you serve lawyers here?". "Sure do," replied the bartender. "Good," said the man. "Give me a beer, and I'll have a lawyer for my 'Gator." |
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