The ABCs of IP
Intellectual property protection can make or break your company in today’s marketplace. How can you protect your most vital assets?
BY ANNE RAWLAND GABRIEL
Every successful business constantly surveys the landscape for new ways to stay competitive. For small and mid-sized businesses (SMBs), one commonly overlooked strategy is maximizing the potential of intellectual assets.
As simple as your business logo and as complex as a joint development agreement, intellectual property (IP) can make or break your company in today’s global marketplace.
“For example, licensing technology has become extremely important for all businesses,” says Michael Cohen, an IP attorney and software licensing expert with Merchant & Gould, a Minneapolis-based law firm that specializes in intellectual property work. “It’s not just about leveraging your own technology, but also about taking appropriate advantage of technologies offered by others.”
Not surprisingly, many businesses haven’t considered protecting and licensing their assets because they never thought of their business as unique. “Even your manufacturing processes can be intellectual assets worth protecting,” says Madeline Harris, deputy director of the Minnesota Small Business Assistance Office, which is a division of the Minnesota Department of Employment and Economic Development (DEED). Remember, developing countries such as China are still using technologies we abandoned years ago. It’s common for us to find Minnesota businesses of all sizes with processes that are valuable as commodities on the international market.”
On the flip side, be certain that you’re complying with the licenses or other agreements owned by your business partners. “The ‘software police’ have been targeting small businesses where a disgruntled former employee reports a possible licensing agreement violation,” says Cohen [see “Software Piracy 101,” page 31]. “Any business that uses computer software should conduct regular audits to avoid an infringement action.”
In short, think of intellectual property as both offensive and defensive. Whether you set out to purposely develop a patentable asset, or you simply license technologies from others, establishing IP policies is critical. “What if you’re approached with an unsolicited idea?” Cohen asks. “To avoid legal tangles, be sure you have an updated policy for handling such requests.”
One strategy that bigger companies sometimes use is to create a form, signed with a fictitious name, stating something along the lines of: “Our company only entertains unsolicited ideas that are already patented.”
To ensure your bases are covered, it pays to review the four main types of intellectual assets and consider which ones may apply to your business:
1. TRADEMARKS
The most commonly recognized trademark is a logo. However, there are many overlooked assets in this category, including any marketing tag lines you regularly associate with your logo or your business. Technically, this category includes trademarks and service marks, both of which are defined as a “word, name, symbol, or device” for identifying your goods or services. In the past, trademark rights could only be established by actually using a trademark. Today, a trademark can be “reserved” prior to actual use by filing a federal trademark application.
2. COPYRIGHTS
The U.S. Copyright Office defines a copyright as a form of protection provided by U.S. laws to the authors of “original works of authorship,” including literary, dramatic, musical, artistic, and other intellectual works. The protection is available to both published and unpublished works.
The person who creates materials usually owns the copyright. In addition to written communications such as marketing documents, computer programs developed for even very basic business processes may be eligible for a copyright. Web sites and original photography also fall into this category.
Since a work’s creator generally remains its owner, you can’t necessarily assume that your business owns an employee’s project. Specifically laying out copyright ownership in employment contracts is worth exploring, regardless of your business type.
3. PATENTS
Often thought of as a synonym for intellectual property, patents are just one important intellectual asset. Patents are granted by the federal government, which defines them as property rights given to inventors “to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States for a limited time in exchange for public disclosure of the invention when the patent is granted.” Because both processes and products may be patented, it pays to review your operation for patent possibilities. Patentable assets often arise from the growing use of technology transfer projects—whether partnering with another business or with, say, a university, technical college, research lab, or a national security lab.
Always discuss patents early in the process of exploring a tech transfer arrangement. And be sure to get all agreements in writing before any of the development activities begin.
4. TRADE SECRETS
The poster child for this underappreciated category is the formula for Coca-Cola. The legendary Coke vs. Pepsi wars demonstrated that any business has a shot at worldwide fame and runaway fortunes—if it stringently protects every asset that may be considered a trade secret.
What qualifies as a trade secret? In a nutshell, a trade secret is anything of “peculiar value” to its owner which isn’t patent protected and isn’t known, or accessible, to others. The Minnesota Uniform Trade Secrets Act (MUTSA) defines it as anything that has independent economic value because it is not widely known or easily obtained. Under that definition, it can include everything from strategic plans to customer lists, new product ideas, software code, and the like. The MUTSA definition and others do note, however, that owners of trade secrets must make reasonable efforts to keep the secrets secret.
So beware of boasting about your latest innovation before first considering whether some of its components may be prove valuable as a trade secret. If you don’t, the information may be used by others without any consequences.
Another point to keep in mind: Trade secrets are protected indefinitely, as long as you keep them locked up. In contrast, patents expire after 20 years.
Chasms to cross Naturally, protecting intellectual assets doesn’t happen overnight. Each type of intellectual property requires negotiating a sometimes-lengthy protection process. Some processes occur at the state level and some are federal. Still others also require compliance with international law. “The details required to protect a particular asset is very well established and documented,” says DEED’s Harris. An SMB-friendly and comprehensive booklet is “A Guide To Intellectual Property Protection,” jointly authored by DEED and Merchant & Gould.
What’s less well established is the amount of resources you’ll need to dedicate to the task. “Generally, the level of effort required depends on how well you understand and honor the protection processes,” notes Cohen. “In other words, being detailed, organized, patient, and timely will exponentially improve your chance of success.”
If these aren’t your strengths, consider bringing someone on board with the necessary skills. Most importantly, remember that any partnership arrangement—whether it’s a tech transfer or an R&D agreement—is far more complicated than a simple handshake agreement. “Intellectual property just doesn’t lend itself well to being split in half,” Cohen says. “Agreements need to go beyond who pays royalties to whom. Key considerations include the costs of policing intellectual assets globally, and who bears those costs.
The good news is that protecting intellectual assets is far less difficult than the creative or R&D processes themselves. “We generally provide clients with a self-audit checklist to get started,” says Cohen. “We can also recommend consultants who specialize in auditing your existing computer technologies for licensing issues. DEED offers useful tools as well.”
In the end, you also might want to make sure a legal expert has got your back. “Even if you’re an accomplished do-it-yourself entrepreneur, there’s nothing more valuable than running applications and contracts past a good IP attorney,” Harris says. “We assist hundreds of businesses annually, and those who are successful know when to seek professional advice.”