What to keep in mind when building your business
Intellectual Property Is A Bigger Issue Than You Think
By Attorney Corey Donaldson
Special to THELAW.TV
Intellectual property is one of the most important, but often overlooked, issues for any business. Below are ten IP issues that every business — big and small — must consider.
Five IP issues for every business
1. Consideration of third party intellectual property rights
When naming a line of products or designing a logo, be wary of making a choice similar to names and logos already in use. If you choose a name or logo that could cause consumer confusion or be considered a "colorable imitation" of a mark that already exists, you may not only be forgoing establishing any trademark rights of your own, but also exposing your company to liability for trademark infringement.
2. Trademark registration
Analyze your business to determine whether or not you have any valuable trademarks. The most common trademarks used by businesses include catchy names and/or logos (which can be a stylized version of the name) that are used to describe products used in interstate commerce. The more unique a trademark (such as the made-up word XEROX) or the more unrelated the trademark is to the products for which it is used (such as the word APPLE, which has a completely different meaning than the computer goods for which the mark is used), the more likely it is a trademark can be registered with the United States Patent and Trademark Office. Some generic terms, such as "shop" to describe a store, are not registrable. Potential marks between these examples may or may not be registrable based upon various factors, including whether or not the mark has gained a reputation in the community as a source identifier. While trademark rights are common law rights and thus exist even if the mark is not registered, registration provides several advantages (see http://www.uspto.gov/trademarks/basics/register.jsp).
3. Enforcement of intellectual property rights
Once your business owns the rights to a trademark, it is important to enforce them. Whether or not a party is infringing can be a somewhat complicated legal question. The threshold question is often whether or not there is a "likelihood of confusion" as to the source of products labeled with your company's registered trademark and the products labeled with the potentially infringing mark (i.e., whether a consumer would think the third party product originated with your company). A trademark attorney should be able to give an educated opinion of the chances the third party is infringing. Failing to enforce your company's trademark rights can weaken the mark or, in extreme cases, lead to its invalidation.
4. Business entity selection
Operating as an individual (or as a solo proprietorship) can be risky. For example, if such a business venture is found liable, a third party may be able to reach personal assets which have nothing to do with the business. It is therefore important to consider starting a business entity such as a corporation or a limited liability company (LLC) in order to limit liability. It is also important to ensure the separation of your personal assets from the assets of the business entity – including intellectual property rights. For example, by assigning a trademark to a corporation or LLC, it is more likely that the business entity (instead of you as an individual) will incur liabilities associated with this trademark.
5. Preparation (and budgeting) for assertion entities
If your company becomes well-known, it is foreseeable that at some point it may be accused of infringing some sort of intellectual property rights. It can be very surprising to learn the broadness of certain patents that are still enforceable today; for advice on dealing with a Patent Assertion Entity (or "PAE," as they are known in the industry), see this article. Similar strategies can be used in responding to an entity attempting to enforce trademark rights.
Five IP issues for tech companies
1. Seek advice from the start
If you believe there is any chance you may want to protect a technology your company has developed, immediately seek the advice of a patent attorney. Even if you don't end up wanting to go through the cost and difficulty of seeking protection, a patent attorney can tell you actions that you must not take while you make that decision. For instance, selling or offering to sell a product can be a statutory bar to patenting the product.
2. Choose the type of protection that fits your situation
While patents grant a legal monopoly, they have one very distinct disadvantage: they are public knowledge. Further, in the vast majority of cases, the patent application becomes public knowledge regardless of whether or not you are ever granted a patent. This should be considered when deciding whether to pursue patent protection or rely on protection of the technology as a trade secret. Trade secrets are indefinite in duration (unlike a patent) and avoid the initial expense of obtaining patent protection, but have at least one very major pitfall: once a trade secret gets out, all protection is lost.
3. Technologies developed by employees
If your employees are involved in developing technology, then employment contracts should be very carefully drafted such that this technology is automatically assigned to the company. Further, even if such an employment contract is in place, your company should seek a separate assignment of any patent applications from the employee to the company as backup.
4. Licensing and alternative funding sources
Start-ups and individuals may have a hard time funding the pursuit of patent rights and, therefore, they may want to explore the possibility of a licensee paying for this process. Seeking out potential licensees and offering to pitch your idea can potentially lead to receiving funding in exchange for at least some rights in any patent that matures from the idea. Alternative sources of funding also exist – and what better source of funding than the government that your company's taxes fund? Government grants, such as those available through the Small Business Innovation Research program (www.sbir.gov), can help provide the funding to develop your technology.
5. Protection while seeking funding
Certain precautions should be taken before disclosing your idea in an effort to obtain funding. For example, a start-up should make sure a party signs a non-disclosure agreement before any confidential information is disclosed. Further, as extra protection, a start-up may want to consider filing a less costly provisional patent application before disclosure to any third party. While this will not provide a lot of protection and must, within one year, be turned into a full utility patent application, it will provide some preliminary protection for a low cost. Of course, the best form of protection is almost always filing a full utility patent application in the first place.
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