Built into most small business plans is the protection of the company’s tangible assets, for example, its equipment, land and money. Companies spend tens of thousands of dollars configuring their place of business with security equipment. Or perhaps even more money on accountants and internal auditing systems to protect itself from product loss by the public or employees. Unfortunately, most businesses, particularly small businesses, overlook or believe that the protection of their intellectual property assets would be too costly to invest in their safeguard. Not so.
Lawful protection of intellectual property predates the U.S. Constitution. Now more than ever, businesses must take the appropriate steps to ensure that their intellectual property is kept safe from competing companies, defecting partners and even employees. Being properly informed as to the available legal tools, can mean the difference between a business’s success and failure.
While wrought with confusing terms and rules, both state and federal governments recognize that a company’s intellectual property is often worth more than its tangible assets and have created laws to protect them. The following paragraphs are short descriptions of the common intellectual property and their role in small business.
Trademarks: To a business, a trademark may be one of the most valuable forms of intellectual property. A trademark is any word, combination of words, or symbol attached to a product or service (service mark). It is the way a customer identifies a product or service, and when marketed, becomes a brand. In that the success of most businesses depends highly on customer recognition of the product or service, protection of these trademarks or service marks becomes critical. The roar of the MGM lion, the pink of the insulation made by Owens-Corning (who uses the Pink Panther in advertising by permission from its owner!), and the shape of a Coca-Cola bottle are familiar trademarks.
In order to establish rights in the use of a particular trademark or service mark, the owner must establish the legitimate or actual use of the mark. Rights called "common law rights" arise from the actual use of a mark. Generally, the first to either use a mark in commerce or to file an "intent to use" application with the United States Patent and Trademark Office (the "USPTO"), or make application to the California Secretary of State, has the ultimate right to use and register the mark. While registration of the mark is not necessary, it does provide a number of advantages including constructive notice to others of your claim of ownership of the mark, and a legal presumption of ownership and the exclusive right to use your trademark on or in connection with particular goods or services. Additionally, where application is made to the USPTO, the jurisdiction of the federal courts may be invoked.
A company can use the symbols "TM" for trademark or "SM" for service mark to indicate that it claims rights to the marks without having federal registration. However, use of the TM and SM symbols may be governed by different local, state, or foreign laws. The federal registration symbol ® can only be used after the mark is actually registered in the USPTO. Even though an application is pending, the registration symbol ® may not be used before the mark has actually become registered. And unlike copyrights or patents, trademark registration rights can last indefinitely if the owner continues to use the mark to identify goods or services. The term of a federal and State of California trademark registration is ten years, with ten-year renewal terms.
Patents: A patent is the grant of a property right to the inventor issued by the USPTO on new, useful and non-obvious inventions. While statutory exceptions and time limitations may apply, a patent holder has the right to exclude others from making, using, or selling the invention described in the patent deed. The intent of a patent is to give the creator of a new product time to recover the costs of startup and developing the product without having to fight competition. Patents can be granted for an number of creations, including designs, plans, or even a new and useful improvement of an established process.
Generally, the term of a new patent is 20 years from the date on which the application for the patent was filed in the United States. The patent grants are only effective within the United States, U.S. territories, and U.S. possessions. Extensions and exceptions may be available.
In the case where an invention is created by an employee for the employer within the scope of employment or specially ordered or commissioned, the employer may be able to receive or share in the patent and all the protections attached to it. Employers can minimize ownership disputes by including clear language in their employment agreements identifying what property and/or work shall be considered within the employees scope of employment as well as identifying any or unusual work conditions, hours or locations that the employee shall be performing. This will aid an employer in any future disputes.
Copyrights: A copyright is a form of legal protection, governed by the Copyright Act of 1976, for original works of authorship, such as music, books, paintings, employee handbooks and commercial brochures. The protection is provided by laws of the United States and includes both published and unpublished works. The owner of the copyright enjoys the exclusive right to reproduce, to prepare derivative works based upon the original, to distribute the work and to perform or display the work publicly. Additionally, the mere transfer of the work does not in of itself transfer the copyright. And while the protection to the author may seem vast, the law has carved out exceptions of "fair use" where the copying is for socially important endeavors, such as teaching, criticism, news reporting and research.
A copyright, and its protection, exists from the time the work is created in fixed form and immediately becomes the property of the author who created the work. The Library of Congress will register copyrights which last the lifetime of the author plus an additional 70 years. As in the instance of a patent, it is wise for an employment agreement to specifically identify the employee’s scope of work to minimize future ownership disputes.
Trade Secrets: A trade secret is any piece of information used by a business that is not known to the general public, including formulas, business plans, designs and procedures. State and federal laws protect trade secrets when other areas of intellectual property law, such as patents, do not offer protection. For example, the formula for Coca-Cola remains secret despite being over 100 years old. Because it is considered a recipe it cannot be patented, but it can be protected under trade secret laws. However, while the law may prohibit a competitor from stealing trade business secrets, in the case of patents, they may be able to figure out the secret by using reverse engineering. If trade secrets are "reverse engineered" and made public, protection is lost.
Another issue of genuine concern arises when an employee terminates employment and it is necessary to prevent the employee from using or sharing "secret" information with his or her new employer or the public. Although there is no easy way to prevent such conduct, requiring employees to sign employment agreements wherein they are required to maintain the secrecy of the organization’s trade secrets is a good start. Also, consider a covenant not to compete that has a reasonable geographic, scope and duration limitation. Ideally, these terms would be included in an initial employment agreement. It may be hard to go back later and add these terms later in that there must be adequate consideration in exchange for post-employment obligations. However, if you will be paying the employee anything more than he or she is absolutely entitled to receive, you may be able to condition the "bonus" on him or her signing an agreement to maintain the trade secrets as confidential and acknowledging that he or she no longer has any proprietary or trade secret material. Obviously this should be accomplished through written assurance.
While avoiding litigation all together may be impossible, small business owners can decrease their exposure by taking the proper steps to protect their intellectual property assets. An ounce of prevention is worth a pound of cure. Safeguarding your business name and trademarks by making legitimate use of them as well as registering them will enable you to keep them indefinitely. Registering a patent or copyright will give you a number of exclusive rights during a fixed time period. And though attorneys are still searching for the "iron clad" contract, employers can help protect themselves by being explicit in their employment agreements as to any expected property rights in works produced within the employee’s scope of work.
While the use of an attorney is not required to register a trademark, patent or copyright, the processes are very complicated and require knowledge of not only each agency’s registration procedures, but also the laws pertaining to each type of intellectual property sought to be protected. KIRK & SIMAS would be happy to meet with you and discuss your small business needs to protect your intellectual property rights.
