Report 2000-110 Summary - November 2000

State-Owned Intellectual Property:

Opportunities Exist for the State to Improve Administration of Its Copyrights, Trademarks, Patents, and Trade Secrets

RESULTS IN BRIEF

Many state agencies are not sufficiently knowledgeable about the intellectual property they own.1 Intellectual property consists primarily of copyrights, trademarks, patents, and trade secrets. Lacking adequate knowledge of their intellectual property ownership and rights, state agencies could fail to act against individuals and entities that use the State's intellectual property inappropriately. Inappropriate use includes improperly profiting from products developed at state expense, unauthorized use of trademarks to imply state approval, and claiming patent rights to state-developed inventions.

As part of our review of state-owned intellectual property, we surveyed state agencies. The survey's results, combined with other work we performed, disclosed that more than half of them actually own some form of intellectual property whether they know it or not. Typical properties held by state agencies include documents, web sites, and software, which can be copyrighted; and agency logos and acronyms, which may qualify as trademarks. Few state agencies report owning patents and trade secrets.

The results of our review of the intellectual property owned by state agencies revealed that, although 125 agencies had more than 113,000 identified items of intellectual property, state-level direction concerning intellectual property is limited. This lack of direction contributes to state agencies not being knowledgeable about the intellectual property they own, and in some instances, agencies believing that they are not authorized to own or formally protect through registration intellectual property they create. For instance, 74 state agencies that indicated they had no intellectual property failed to identify their web sites, which can be copyrighted. Further, the web sites for nearly three dozen of these agencies showed agency logos, which likely qualify as trademarks. For these and other reasons, we believe that the State actually owns more intellectual property than our report identifies.

When state agencies do not adequately administer their intellectual property, they risk being unable to act against people or entities that use it inappropriately. Weak administration of intellectual property could, for example, lead to the State's failure to act against a vendor that deceives consumers by inappropriately using a trademark, such as a state agency's logo, in connection with its products or services to imply approval by the State. It could also result in inaction against a publisher that improperly sells state-copyrighted information that a state agency otherwise provides free or at low cost. Likewise, weak administration could cause the State to pay unnecessary license fees to a patent owner to use a device that the State actually invented or paid a contractor to invent for it.

Proper administration of intellectual property would allow state agencies to act against others who infringe on their rights to control how their property is used. For example, because the California Department of Alcohol and Drug Programs was aware of its intellectual property rights, it was able to prevent a person from operating a pornographic web site with a name that was identical to one of the department's federally registered trademarks.

Our review of the State's overall administration of its intellectual property revealed other weaknesses. For example, many state agencies have no written policies for intellectual property management. Of those written policies provided to us, none provides complete guidance to help the agency to, among other things, identify items that could qualify as intellectual property, determine whether to formally protect intellectual property, and enforce its rights against those infringing on the intellectual property.

A final concern we observed was the limited extent to which state agencies appeared to capitalize on their intellectual property. Capitalizing on their intellectual property may lead to reduced contract costs or the development of new revenue sources. Yet, state agencies do not have statewide guidance that describes the circumstances under which they can or should capitalize on their intellectual property. We also question whether the State's use of standard contract language that essentially gives contractors a free license to use or sell intellectual property is in the best interest of the public.

1Throughout this report, the term state agency refers to any type of state entity, regardless of its formal name (e.g., agency, board, bureau, commission, council, department, university, etc.).

RECOMMENDATIONS

The Legislature should clarify state law to specifically allow all state agencies to own and, if necessary, formally register intellectual property they create or otherwise acquire when it is deemed to be in the public's best interest.

The Legislature should designate a single state agency as the lead for developing overall policies and guidance related to state-owned intellectual property. This agency should be responsible for, among other tasks:

  • Developing an outreach campaign informing state agencies of their rights and abilities concerning intellectual property.

  • Establishing guidelines for use by state agencies in administering their intellectual property, including establishing policies concerning the criteria for determining which products will be treated as intellectual property, which should be placed into the public domain, and factors that state agencies should consider when deciding whether to sell their intellectual property or license it to others.
Finally, the Legislature should consider whether the interest of the public is best served when the State uses standard contract language that essentially gives contractors a free license to use and sell intellectual property they develop for the State.


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