This is the 1Q installment of our In-House Counsel Solutions Series for our blog Ideate. The series is focused on identifying trending legal issues facing in-house counsel and providing practical solutions to these problems.
In this issue, we highlight recent developments and practical insights across several areas of intellectual property, contract drafting, and emerging technology. We examine how increased scrutiny at the USPTO is affecting federal trademark registration, explore recent Texas case law reshaping indemnity provisions, and analyze how changes at the Patent Office under the current administration are altering patent-challenge strategies. We also revisit the fundamentals of copyright ownership for works made for hire and take a closer look at how businesses should think about protecting AI prompts as valuable intellectual property.
AI Prompts Are The New Form of Intellectual Property
Daily we read stories of how Artificial intelligence (AI) has evolved from a futuristic concept into an everyday business tool. While much attention focuses on the AI models themselves, the real value may lie in the prompts—the detailed instructions that shape how AI systems generate useful results. For businesses, these prompts can represent proprietary knowledge, operational shortcuts, and even a form of intellectual property. This article discusses why AI prompts are the new form of intellectual property and practical steps businesses can take to protect these valuable assets.
A comprehensive discussion on AI prompts can be found at our Ideate blog: AI Prompts Are The New Form of Intellectual Property by Darin M. Klemchuk, CEO, Member, and Founder.
The Federal Trademark Registration Process Is More Complicated Than Ever
If it seems to you that the process of obtaining federal trademark registration has become more complicated and time-consuming in recent years, you are not alone. As an initial matter, an almost 28% increase in the number of applications in 2021 (likely due to COVID) created a backlog at the United States Patent and Trademark Office (USPTO). This means it can take as long as 6 to 9 months before an Examiner first reviews a new application.
Still further, the number of applications that successfully navigate the process to registration has been declining—from 59.22% in 2019 to 48.49% in 2023. This lower success rate is reflective of any number of factors, including the increased complexity of the process itself as well as more rigorous standards of review. For most businesses, this begs a number of questions: (1) is federal trademark registration worth it? and (2) How can businesses maximize their chance of success in obtaining federal trademark registration?
A comprehensive discussion on the federal trademark registration process can be found at our Ideate blog: The Federal Trademark Registration Process Is More Complicated Than Ever by Mandi Phillips, Senior Attorney.
What Do You Mean I Am Not Indemnified?—The Comparative Negligence Trap in Indemnity Clauses in Texas
Texas, like a number of other states, strictly interprets indemnity clauses. Moreover, it has adopted a strict interpretation of a rule called the Express Negligence Doctrine. The express negligence doctrine, adopted by the Texas Supreme Court in 1987 in Ethyl Corp v. Daniel Construction Co., 725 S.W.2d at [703] (1987), was created to ‘to cut through the ambiguity’ of indemnity provisions, thereby reducing the need for satellite litigation regarding the interpretation of indemnity clauses.’”
In essence, the doctrine provides that a party seeking to have a counterparty indemnify them for their own negligence must express that intent in specific terms and within the four corners of the agreement. Failure to do so makes any indemnity unenforceable as a matter of law. See Fisk Elec. Co. v. Constructors & Assocs., Inc., 888 S.W.2d 813, 814 (Tex. 1994). This doctrine is one of contract interpretation, so a failure to comply means the indemnity provision becomes unenforceable absent a court reforming it, which is unlikely.
For a further discussion of indemnity clauses in Texas, visit our Ideate blog: The Comparative Negligence Trap in Indemnity Clauses in Texas by Mark Stachiw, Of Counsel.
The Trump Administration Patent Office — Not Business as Usual
Companies sued for patent infringement have several tools to combat the infringement claims brought against them, including options for challenging patents in the U.S. Patent & Trademark Office (“PTO”). Companies regularly finding themselves accused of infringement have reliably turned to the “inter partes review” or “IPR” proceedings in the PTO. At least before January 2025. As in many areas, the availability of these IPR proceedings has been significantly curtailed with the second Trump administration.
Those patent defendants who previously would ask the PTO to declare invalid the patents asserted against them often find that such processes are no longer available under the current administration. Thus, many of these defendants find themselves in a position similar to where the industry was before the 2011 patent-law amendments that sought to overcome what many perceived as significant problems with the American patent system.
A comprehensive discussion on these changes can be found at our Ideate blog: The Trump Administration Patent Office — Not Business as Usual by Rich Wynne, Senior Counsel.
Part II: A Business Owners Guide to Works Made For Hire
In the last installment, we discussed the potential pitfalls of relying on the employer/employee relationship to secure the copyright to your company’s creative works. Our primary concern was the fact that, while the copyright to an employee’s work will sometimes automatically vest in the employer, the concept of “employee” is strict and does not include the classes of persons who often create the core intellectual property of the company—namely, owners and contractors. The test for determining if a worker is an employee or contractor is complicated and not always clear when the work is created.
For a further discussion of works made for hire, visit our Ideate blog: Part II: A Business Owners Guide to Works Made For Hire by Brian Casper, Member.
Klemchuk PLLC is a leading IP law firm based in Dallas, Texas, focusing on litigation, anti-counterfeiting, trademarks, patents, and business law. Our experienced attorneys assist clients in safeguarding innovation and expanding market share through strategic investments in intellectual property.
This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.
