For many startup founders, it is extremely important to know how to protect their innovation. This issue is among the top 3 legal questions discussed in the law clinic hosted by the „Innovation and Entrepreneurship“ research project at the Alexander von Humboldt-Institute for Internet and Society. In most cases, the initial discussion is about how to protect the startup’s own innovation. However, during the discussion, the startup usually begins to recognize that the law also protects other people’s innovations – against the startup itself.
The double-edged nature of law is what I myself experienced with my own startup MAUERSCHAU. In our app, MAUERSCHAU, we make historic Berlin visible once more using augmented reality and original photographs. In addition, eyewitnesses lead the users of our app through location-based interviews about the places where historic events occurred. It is a digital tour guide. When we got financing (at the beginning of last year), we thought this idea was so unique that we could hardly believe it when other startups with more or less similar ideas started mushrooming. At first, we assumed that people from these companies must have „stolen” our concept. We had indeed sent it to many potential sponsors and partners. However, the truth is that many ideas are simply in the air, waiting to be caught. In most cases, they consist of previously known elements that are constantly recombined in new configurations. In fact, we had drawn on existing techniques and artistic ideas in developing the idea for MAUERSCHAU: The augmented reality technique lent itself to providing original photographs at the places where they were taken. And, compared to other cities, Berlin is the most appropriate application site in view of the fact that, as times change, its cultural heritage is at risk of being forgotten. Finally, our idea of making location-based documentaries with eyewitnesses was inspired by the artistic work „Alter Bahnhof Video Walk“shown by Janett Cardiff and Georges Bures Miller at dOCUMENTA(13). So, would these artists and the inventors or very first appliers of augmented reality techniques be able to prohibit our mobile application MAUERSCHAU?
The answer to this question depends on the legal instruments that protect innovations. These are, amongst others, copyright law, patent law, protection for databases, protection for trade secrets, and trademark law. While all these rights protect different aspects of intellectual property, they are commonly based on the presumption that they foster innovation by protecting the interests of people who have invested time, money or creativity in them. For example, copyright law seeks to protect an author’s own intellectual creation from being copied, altered, exhibited or distributed by others. It guarantees the creator a legal monopoly on the usage of his or her work. Such a monopoly indeed risks restricting later creations: For example, if the idea of love letters were to be protected, nobody would be free to write love letters, at least, not without permission. This is why – generally put – copyright law does not protect the idea but only its expression in a certain form. Given that love letters can be expressed in an unlimited number of forms, the idea-expression dichotomy safeguards the range of expression for lovers of the future. Of course, the line between idea and expression is difficult to draw, which has given rise to many legal cases (I examined the definition of the copyright protected work in more detail in my master’s thesis „Copyright Protection of Formats in the European Single Market“). However, let us return to our example, MAUERSCHAU: Pursuant to the idea-expression-dichotomy, the artists Janett Cardiff and George Bures Miller would only be able to forbid the re-creation of their work but not the transfer of their idea to our location-based interviews.
In contrast to copyright law, patent law also protects ideas, provided that they are registered as patents in a patent registry, for example, with the German Patent and Trademark Agency (DPMA). In order to be registered, the patent must fulfil several substantive legal requirements. The primary requirement is that it must be a technical invention. Unlike US patent law, European patent law does consider software to be technical inventions, but only under certain conditions. The rule of thumb is that computer programs can only be protected as patents if they control a mechanism, for example, the anti-blocking system (ABS) in a car or a computer’s operation system. Technical inventions must be, in addition, be new, suitable for use in industrial applications and result from a process of invention. The invention is deemed new if it is not part of the technical state of the art, therefore, it cannot have been published anywhere. This is important to know when testing the invention. Such tests should only take place in closed groups with particular test users. Finally, the requirement that it emerge from inventive activities excludes an invention that does not sufficiently set apart itself from the technical state of the art. More self-evident inventions are not protected under patent law. For them, the protection of so-called utility patents might be relevant. In fact, in the case of MAUERSCHAU, there was a seeming conflict with a pre-existent utility patent.
Like most startups, I did not check if there were registered patents for augmented reality techniques. As a technical layman, it would have required much effort to go through the technical labyrinth of the registry files, which I could hardly afford to spend. I simply trusted that software is not patentable in Europe. Of course, some doubts remained: Did our augmented reality application use the iPhone camera and hence control a mechanism? Before I had a chance to lose my legal mind, some bad news began to circulate within our Berlin Transmedia Community. A cease and desist letter was sent by a person claiming to have registered a utility patent for the use of augmented reality with respect to museum tours. We were not the direct addressee of this letter, but we were explicitly promoting MAUERSCHAU as the „biggest virtual museum in the world!“. I was particularly angry because I doubted the legitimacy of this cease and desist letter. Perhaps it was possible in principle to register the usage of augmented reality techniques for museums, not as a real patent but as utility patent. But in my opinion, this idea was certainly not new worldwide. The essential point here is that unlike real patents, utility patents are not tested to ensure they comply with the substantive requirements. Therefore, it is possible to formally register a utility patent even though the substantive requirements, such as that the invention must be new, are not fulfilled. The substantive requirements are only tested in the case of litigation. Few people working in the creative field know that – and I presumed that this is what the person sending the cease and desist letter expected. That person demanded that community members experimenting with AR pay him or her corresponding licence fees. However, to my knowledge, no one actually paid the fees. It nevertheless remains an illustrative example of the double-edged nature of the legal instruments protecting innovation.
As mentioned above, there are further legal protection instruments beside copyright and patent law. In the law clinic, legal protection for databases is particularly relevant. This instrument protects against the extraction of all or a substantial quantity of data that was systematically collected and for which a substantial investment was necessary. Database protection comes into play at the moment startups use crawling techniques to gather data from other websites. Many startups do not know that if they gather at least a substantial part of the data from a website, this might infringe on the copyright related right to database protection. If the maker of the database – such as a website – does not provide an application programming interface (API) for the retrieval of its data or the startup cannot accept an individual agreement, the startup may not retrieve the data. However, the law does not protect against any retrieval of data but only against the retrieval of a substantial part of the database. In many cases, it is therefore possible to design the crawling technique that does not infringe the law.
A less relevant topic in the law clinic is the protection of business secrets. Secrets may be an issue if, like us, the startup sends its concept to potential sponsors or business partners. At least in the television industry, it occurs from time to time that a potential business partner declines an offer to buy a television format but then produces it without paying license fees. In those cases, the evidence that the startup sent the concept in response to a business interest signalled by the partner and that the latter received it can play an important role in proving the infringement of business secrecy rules. However, this is no longer an issue if the information in question is no longer a secret, for example, because the startup has already pitched it publicly. In those cases, even a non-disclosure agreement (NDA) might not help because most potential business partners simply do not sign it. They will not risk having a startup sue them only because it thinks they would have stolen its idea. The same issue mentioned above becomes apparent: The broader the idea is, the less room an NDA would leave the business partner to pursue their own similar projects.
This leads us to what is in my opinion the most frequent protection instrument. I term this the „art of execution“. It is not a legal mechanism but a practical de facto mechanism that might be supplemented by lock in-effects and further legal protection provided for by trademark law. The starting point here is that amongst many startups that are pursuing a more or less similar business idea, only a few successfully bring it to market. The reasons for this are the startup’s individual competencies and opportunities. If a startup finds a way of successfully executing the idea, it can indicate the success of its product or service by its brand. As such, it can register any signs (words, pictures, music, and even aromas) provided that they are distinctive, not misleading and not merely descriptive. An example for the latter requirement is that a manufacturer of handkerchiefs cannot register the term „handkerchief“ as trademark. Here again, the thought behind this is: If the manufacturer of handkerchiefs could protect this term, competitors would not be allowed to promote their products using this description. If these requirements are met, it can be registered in a trademark register, for example, the DPMA register. Similar to the utility patent, the registry only checks the formal but not substantive requirements, such as whether the usage of the trademark infringes on any pre-existing trademarks. This is highly relevant for startups because it might be very disadvantageous to change a brand after it becomes successful. Therefore, a startup should always check in advance whether its brand is identical or confusingly similar to another one that relates to the same classes of products and/or services. This principle also applies to Internet domains. These may also be similar to pre-existing trademarks and, therefore, cause confusion about the origin of the products or services offered on the website.
The previous examples should illustrate the nature of legal protection instruments for innovations as a double-edged sword. The legislator seeks to balance the interest of a person in protecting his or her innovation with the interest of others in maintaining the widest range of possible creations. De facto, many startups over-estimate the effects of legal protection and under-estimate the effects of practical protection mechanisms. In many cases that come to the law clinic, trademark law, as a supplementing protection instrument, is the most effective mechanism for maintaining the startup’s practical unique selling point. Of course, the law here provides the legal basis for many marketing-related questions, from the architecture of the brand to its internationalisation. Whether these questions really become relevant depends on the startup’s success in executing them. This principle also applies to our MAUERSCHAU. The question of whether our competitors or end up on top or we do primarily depends on the individual competencies and opportunities – and, ultimately, on the creativity of the market.