The Lifeblood of Many Businesses: Intellectual Property

What is intellectual property (IP) and why should you care about protecting it in your business? Defined broadly, IP refers to creations of the mind. IP is your designs, your inventions and innovations, your brand and logo, and in many cases your creative ideas and thoughts put down in written form. IP is the way in which you declare to the world this is your business and you intend to protect it. 

As a powerful driver of business growth and innovation, IP can constitute more than 80 percent of a single company’s value today.

How do you harness this growth potential for your business? 

First, recognize that IP is property. While you cannot touch it like tangible property such as equipment or land, the law (and the IRS) recognize IP as intangible property.  Just like any other property, IP should be identified and catalogued. Accurate identification and cataloguing of your IP are critical to your ability to protect your property rights and ensure you are not infringing on the rights of others.

Second, take steps to ensure you, people who work for you, and those with whom you share your IP engage with protecting your IP as much as you do.

A straightforward but comprehensive IP strategy can accomplish both goals.

Identify and Catalogue your IP

Your business likely started with an original and creative idea or concept.  To protect these ideas and concepts, you must define them.

In general, there are four categories of IP: copyright, trademark, trade secrets (or dress), and patents.  You must identify both what IP you have created and own and keep detailed notes on the dates such IP was created and, if applicable, modified.  This information will provide critical evidence in any enforcement action you may need to take, whether in court or before government agencies such as the United States Patent & Trademark Office and United States Copyright Office.

Copyright

This form of IP protects authors of original works of authorship such as literary, dramatic, musical, artistic, and certain other intellectual works. If you look at the bottom of the Dempsey Foster website, like most other websites, you will see the symbol: ©.  This indicates that the original and creative content on our website is protected under copyright law. The duration of copyright protection is, in general, the life of the author plus 70 years. You can and should register your copyright with the United States Copyright Office.

Trademark

This form of IP protects a word, name, symbol, or device, or any combination, used or intended to be used, in commerce to identify and distinguish your goods or services.  Usually, it is how you are recognized in the marketplace and distinguishes you from your competitors. The tricky part of trademark protection is that not every word, symbol or combination of words or symbols is protectible.  For example, a business that sells apples cannot trademark, and thus prevent others from using, the generic phrase “sweet apples” when it sells apples.  However, a well-known technology purveyor has trademarked the term “Apple” when used in connection with the sale of its iPhones, iPads, and Macs.  Thus, if you decide to likewise use the mark “Apple” to sell your own business’s smart phones, tablets, or computers, you will quickly become subject to an enforcement action. (If you have any doubt, Apple provides clear guidelines for use of its IP.)

The protection afforded by a trademark lasts 10 years with 10-year renewal terms.  Once you use a protectible trademark in commerce (that does not infringe other trademarks), you can assert ownership rights over it. Your rights are strengthened by registering your trademark with the United States Patent and Trademark Office (USPTO). 

When analyzing whether your mark is protectible, trademark law provides some guidepost definitions ranging from least protected (generic) to most protected (arbitrary or fanciful).

• Generic Marks: Generic marks use common, everyday terms that everybody has the right to use and typically describe the good or service you are trying to sell. Using the Apple example, Apple can prevent others from using Apple to sell computers, but Apple cannot prevent apple-sellers from using “apple” to sell apples. Generic marks are typically not protected. 

 

• Descriptive Marks:  Descriptive marks use terms that merely describe the good or service. For example, the term “soft” when used to describe towels is descriptive.  Descriptive marks cannot be registered unless they acquire distinctiveness. To achieve any kind of distinctiveness, marks must be highly used in commerce for at least five years. It is time-consuming and expensive to work to gain distinctiveness for a descriptive mark.  

 

• Suggestive Marks:  Rather than describe the good or service (like descriptive marks), suggestive marks suggest the quality or attribute of a particular good or service and require the consumer to pause a beat to appreciate the meaning or significance of a suggestive mark. For example, Greyhound for bus services is a suggestive mark. The term greyhound describes a fast dog and so I must pause a beat to appreciate that Greyhound for transportation purposes refers to a bus and not a fast dog. 

 

• Arbitrary or Fanciful Marks:  Arbitrary or fanciful marks are real or made-up words that have no relationship to the good or service supplied. These are the strongest types of marks.  “Apple,” for example, is arbitrary as it relates to computer products and therefore very strong: apples have nothing to do with computers. Another example is Amazon.  Amazon refers to a river in South America but as it relates to the online retailer giant, it is arbitrary and fanciful, and thus protected.

Trade Secrets

The term “trade secrets” refers to any information that provides economic value that is not in the public domain and that has been reasonably kept secret. Trade secrets can include formulas, programs, devices, methods, techniques, processes, and customer or client lists. Trade secrets can be protected under state or federal law for as long as they remain secret. Businesses must take special care to ensure their trade secrets are kept secret.  If they are not kept secret, they cannot be protected.

Patent

A patent is a specific grant of property rights by the USPTO.  A business or person that invents or discovers something “useful” may obtain a patent. The system is set up as a quid pro quo: if you agree to disclose your useful invention to the government in specific terms, you gain exclusive rights to that invention. If granted a patent, you have powerful enforcement rights. However, at some point, you lose the right to that patent’s exclusivity and the enforcement heft that comes with it. For that reason, certain businesses choose not to patent their inventions but rather keep those inventions secret through other methods.

Take Steps to Protect your IP

Once you have identified and catalogued your IP, the next step should be to implement policies and procedures to ensure your IP is protected.  This can be accomplished with the following:

Identify Who Has Access Where

The goal is to limit access to your IP to only those stakeholders and workers who need it to operate and grow your business. Once you have limited access to certain people, you then need to identify the systems and devices on which the IP will be accessed and implement appropriate security measures. What are your core IT systems? Do those systems limit IP access to only authorized users?  Will authorized employees use their personal smart phones for work and to access IP?  Do employees use cloud applications and file sharing services that may contain IP?  If the answer is yes to any of these questions, make sure you are appropriately limiting access through multi-factor authentication, encryption, or other privacy protection methods as part of your data security strategy. 

A Written IP Policy: Required Reading

Your business should have a written policy that generally identifies its IP and proclaims it as confidential. For those with whom you work, this can be included as part of your new hire packet, employee handbook, and contractor agreements. This policy should be stated in sufficiently broad but specific terms and be required reading for all who have access to your IP. For example, new hires, current employees, and independent contractors should execute an acknowledgement that they have read and reviewed your IP policy.  (In the next post, in addition to employee safety, Dempsey Foster will discuss different strategies to fairly implement non-compete and non-solicitation policies to further protect your business.)

Non-Disclosure Agreements (NDAs) and Virtual Data Rooms (VDRs)

There will likely come a time when the strategic growth of your business requires that you share your IP with third parties. You may decide to sell your business or join with another. NDAs and VDRs are standard fare when businesses are negotiating certain transactions or acquisitions. Like your internal written confidentiality policy, an enforceable NDA must identify generally your IP, proclaim it as confidential, and be executed by any party that will have access to your IP.  VDRs-secure online repositories for storing and sharing confidential and sensitive files including IP-should employ controls to restrict user access, document confidential materials (through, for example, watermarking), and create activity and access audit trails. 

Intellectual Property Transfer and License Agreements

Finally, your business may elect to monetize its IP by licensing either its trademark, patent, or other IP to another in exchange for royalties or other benefits. An appropriate contract will allow you to transfer IP while still protecting its confidentiality and maintaining your property rights.

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Because IP is likely an integral part of your business, proper attention and care must be paid to capitalize on its ability to carry your business to its next stage.