21 min read
LegalGPS
:
Mar. 9, 2023
4.1 Overview to Intellectual Property
Goals: To make the startup know what they don’t know. Does this by assisting the startup in determining (1) if any IP applies to them or will apply to them (2) make them aware of common scenarios where IP applies so they’ll “know what they don’t know” and be able to act accordingly, and (3) provide enough background so that the startup will be able to know what other videos to watch to learn more.
Introduction:
Intellectual property law is the body of rules that protects the important aspects of your business. These could be anything from your business name, logo, product design, products, etc. If you design a great product, without intellectual property law then what would prevent your competitors from copying it and selling something similar? Intellectual property law is the holy grail of protection for various types of intangible assets. This may be in the form of a product, design, essentially what you created. Protecting your product, and your business is very important. This video will give you the basics of intellectual property. This video also defines the four types of intellectual property and the process of obtaining intellectual property protection. We will also cover why protecting your intellectual property rights are very important for your business.
What is Intellectual Property?
Intellectual property is a general term for creations of the mind protected by law. Ownership over intellectual property vests in the owner the right to control the use, distribution, and modification of these creations. The creator also has a right to be reimbursed for these creations if they are used by others. The four types of intellectual property are copyrights, trademarks, patents, and trade secrets which we will be discussing individually as we go through the video.
Protection Intellectual Property is Essential for Startups
Intellectual property needs to be created. The value of IP and the benefit from it depends mainly on its exclusivity. The benefit IP springs from being the only person who can use it. Just think about it, you spend so much to make something, and then in the end everyone can just use and copy your work without giving you anything for it or worse, it can even take a chunk out of your market share by using that exact thing. All the time and effort you put into it gets wasted. You’ve even done your competitors a huge favor.
Your identity, more specifically, the symbols and marks your company is known for is also intellectual property. If you don’t protect it, there will be nothing preventing other businesses to use these thing and pretend to be you who will either get the business that’s supposed to be going your way or do a really bad job pretending to be you, or both, which would, in the end, cause a considerable negative impact on your company.
IP Protection is not Impossible
But don’t fret; getting your IP protected is nowhere near impossible. Admittedly some, like patents, can get a little technical. You will have to do some extra paper work. But some like copyright and trade secrets are somewhat “automatic” and don’t really require any further steps like registration. But even in the case of extra paper work, it’s actually quite doable especially if you get the right help where necessary. We have several videos on each of the different kinds of intellectual property which details the process, you might want to see them.
Why is Intellectual Property Protection Needed?
Intellectual property protection protects ideas, creations, and assets related to your business like a name or a logo and more. This protects these intangible assets from undue use, distribution, modification, or being copied. This means your ideas and rights are protected and will not be unjustly taken advantage of by others. They are protected in the sense that in case that in case other people take advantage of your IP without your consent, you can sue them to make them stop and recover the damage caused by their use of your protected IP. Without intellectual property protection, a competitor could copy your product and sell it at a lower price. Another possibility is, your company name or logo could be copied and someone beats you to registering for a trademark. If this happens, you cannot use your name or logo anymore as trademark provides the owner of the trademark with the right to exclusive use.
Another important reason to get IP protection would be the appeal for capitalists and inventors. If they know that your company has IP rights protected it will be a positive note in their book. You know they are considering investing in other companies as well. It would definitely be a plus if they see that you have a knowledge of IP especially if you have some IP protection setup. Basically it is less of a risk for them because they know you have secured the rights to your company name, symbols, products, ideas etc. IP protection minimizes the possibility that their investment will go down the drain due to an Intellectual Property issue. This means that other parties are excluded from the unjust use of your intellectual property.
Trademarks
Trademark pertains to identity rather than a particular work product. It assigns an identifier, a logo for example, to your company to the exclusion of everyone else. Let us say you have a business, your business would have a symbol or some other identifier? Those things like your business name, products, logos, etc. are what make your business stand out from others. Since you have a registered trademark, you will be the only who will be able to use them. If you don’t protect that, what’s to stop a similar company from taking and using it? For example, you have a business with a catchy name that is gaining a substantial customer base but you have not secured your trademark. Your competitor uses your company name and banks on that to gain customers. What’s even worse is if your competitor checks with the USPTO and sees that the trademark for your name has not yet been taken and applies for one. If this gets approved you could end up not being able to use the name you came up with in the first place. Another possibility is they could copy your logo or the product packaging and claim it as their own. It is always better to play it safe and register your trademark. Before we briefly discuss how to acquire and maintain trademarks let’s take a quick look at what can be protected under a trademark.
Examples of What May Be Trademarked:
As mentioned earlier, what identifies your business can be protected under a trademark. This would include words such as your business name, business slogan, or possibly a commonly used tag or marketing line for your business. For business names, think of Kentucky Fried Chicken, Starbucks, there are several business names out there. Symbols and logos may also be protected under trademark, like the golden arches in the shape of an M, upon seeing that symbol, we automatically think: McDonald’s. That is where the value of a recognizable design and registering it applies. These trademarks serve to identify your business to your customers.
How Are Trademarks Protected?
For National/Regional Trademark Protection:
For International Trademark Protection:
For trademark, the main way you can obtain intellectual property protection is a registration. A registration may be either state or federal. However, before applying for a registration one should do a trademark search to make sure the trademark you will apply for is not in use. A trademark search is best done with the help of a qualified attorney to make sure you do not unknowingly register a used trademark. If you are unsure how to do a thorough trademark search we have a video regarding trademark searches that should be a great help.
If you want to protect your trademark on an international scope there are two ways to do it. The first way is you can file an application with the trademark office in the country where you need trademark protection. Applying individually is ideal if you only have one or a few countries where you seek protection. Should you need protection in several countries, a viable option would be to use the Madrid system. The Madrid system is a way for you to get trademark protection in several World Intellectual Property Organization member countries with just one registration and payment of fees. The first thing you need to do is make sure you already have a registration or filed for one in your home trademark office. Once that’s done you need to file an international application in that office and that office forwards the application to WIPO. Once this is done WIPO examines the application and once approved you will be issued a certificate of registration. WIPO also includes your approved mark in their International Register and Gazette so that member countries will be notified. Should you want to know more about registration and establishing trademarks right please refer to our video on Trademarks and Servicemarks background.
Exploiting Your Trademark Rights
These are income-generating aspects of having a trademark. In licensing you allow a third party to make use of your trademark usually in exchange for royalties. You would usually decide on the duration of the license, whether to grant it to just one party or more and whether it is exclusive or non-exclusive. The license will also include whether the recipient can pursue legal remedies in case of infringement.
Selling your business is not just limited to the physical assets. You may also sell a trademark to a buyer. Once this is completed you must submit documentation to the USPTO regarding the sale. Before you sell your trademark it must have been actually used in commerce and not just as a trademark for a future business.
Copyright:
Copyrights focus on the rights of the creator to his or her work. Copyright excludes other parties from the use of your work without your approval. If you are a copyright owner you are entitled to economic and moral rights. Economic rights means you may get compensation if others use your work for example, if you license your work. Economic rights regulate the distribution, reproduction, performance, broadcasting, translation or adaptation of your work. Moral rights would include the right to regulate modification and claim that you are the creator of the work. How long does copyright protection last? Currently, the law states that the duration is for the author’s lifetime plus seventy years. If there is more than one author then protection lasts 70 years after the death of the last surviving author. If the work done is by virtue of employment this is known as a “work for hire”. If the work is a “work for hire” or made under a pseudonym copyright lasts for 95 years after publication or it may be 120 years from when it was created whichever ends first.
Copyright Requisites:
These are the two requirements for you to acquire copyright protection. Once these two requisites are met, copyright protection arises immediately. The law defines that a work is considered original if it was independently created and meets a minimal creativity level. For a work to be deemed independently created, this means that it must not be copied from someone else’s work. Fixation means that must be set in a tangible medium. Some examples of these but not limited to would include paper, canvas, film, compact discs, etc. If your work meets both of these requirements then copyright protection arises immediately even without a formal registration. However, voluntary registration is recommended in case you get involved in situations like an ownership dispute, litigation, assigning, and transferring rights.
Rights Under Copyright
We will now discuss the rights that you have under copyright. There are five of them namely: reproduction, distribution, derivative works, public display, and public performance. Your right to reproduction means that another party cannot make a copy of your work as well as make money by selling copies of your work. This right prohibits the unjust sharing of your work be it selling, renting it out, or simply just letting people borrow it. Derivative works would mean creating a new work through modifying an existing work with a copyright. For example, you wrote a bestselling fiction book. Eventually this other author who wants to make it big modifies your story to make his own and eventually sold it. For public display a violation happens when another party displays your work without your authorization. . This may be through transmitting it to the public like on video or even on the internet through a website. The fifth right is public performance. This prohibits a person from performing works without permission. This could violated if someone performs through a dance, acting, etc. in public.
Any of these rights may be transferred by the copyright owner. Transfers are either exclusive or non-exclusive transfers. Exclusive transfers must be in writing and means that you allow the other party the sole right to exercise that right and authorize others to exercise that right. If it is non-exclusive it does not need to be in writing and you only allow them to exercise the right. The right to authorize others still remains with you and you can still exercise that right. You can do a transfer through one of two ways, an assignment or a license. When you do an assignment, this is essentially a sale of rights to another party. The third party now has exclusive rights and you no longer have control over how they use that right. If you want to allow a third party to use a certain right in relation your work but still keep ownership then a license is the way to go. A license, unlike an assignment is not absolute and will still allow you to regulate how they use that right and keep ownership
Examples of What Copyright Protects:
To date, there is no set list of what is covered by copyright, which is why it is best to consult an attorney regarding this. As a rule, these are usually things that, as the name suggests, copy and distribute for profit. Some examples of what copyright protects, these include books, movies and shows, advertisements and more. In some cases it remains to be determined if an object falls under the protection of copyright. As mentioned above copyright protects the use of a particular expression of the actual idea and not the idea itself.
How Is Copyright Protected?
Ownership of copyrights automatically vests in the owner the moment of fixation, like we’ve discussed earlier. It is protected from that point on. In fact, some people deliberately choose to register their copyrights due to the risk of making information public. However, it ownership over the copyright might be more challenging to prove if you don’t register it.
Why Should You Register Your Copyright?
For copyright, the law protects original works as long as these works are placed in a tangible form of expression. But in popular cases of copyright, like published works, you will want to register it just to have ownership over it established once and for all. Once your copyright has been registered then you now have conclusive proof of the exclusive right to the use of that trademark as well as the right to authorize the use by another party.
The main way to protect your copyright is through a voluntary registration with the United States Copyright Office. Once you register your copyright you get the sole right to use this copyright. You will also be able to allow others to use them and get payment for that use. The main purpose of registration is as a way to prove your right if you ever need to undergo litigation if someone else infringes your copyright. Should this happen and the court decide in your favor this registration will entitle you to damages the costs of legal counsel. Before we discuss infringement it is a must for you to know what rights you have as a copyright owner. If you would like to know more about copyright especially the benefits of registration and what rights you have please view our copyright background video.
Examples of Copyright Infringement
Copyright infringement is when another party uses, copies, modifies, displays, presents and distributes your copyrighted work without your permission. When your rights as discussed earlier are violated then this is copyright infringement. For example would be if another party copies articles you wrote and publishes them on his website without your consent. A common scenario is when someone burns a copyrighted movie or a song into a DVD or cd and distributes them. If your asset falls within the scope of copyright then registering it will help you avoid infringement. Should you need a deeper look at how copyright applications are made please view our drafting a copyright application video.
Patent:
Unlike the others, patents mostly protect inventions and do not allow them to be manufactured, used, sold, offered, or even imported to the United States by other parties. It gives you protection by restricting others from unjustly doing the activities mentioned earlier.
If your invention is a method, this method must be unique and novel while if it is a solution to a certain issue or problem, always remember the nature must be technical. For a solution to be considered technical it must be related to a certain practical field, like mechanical or applied sciences to name a few. If you are an owner of a patent, your invention gives you exclusive rights to the use, reproduction, distribution, etc of this invention. To put it simply, a patent ensures that no one can sell or take advantage of your invention without your approval. Once you have applied for a patent you now have a legally enforceable right to prevent others from the manufacture and distribution of your patented asset. If your patent is infringed you may bring legal action to federal district courts. Remedies for patent infringement may include a legal order to prevent them from infringing upon your patent, damages, or attorney’s fees.
What You Should Consider Before Applying For a Patent:
As a business owner no doubt you are concerned about protecting the rights to your product. That concern is warranted; after all you did spend time and money to develop your product. Before you decide to patent what your company developed, here are some essential considerations which you should take into account.
The primary one is: should you patent your invention? The obvious answer is yes. Patenting your invention gives you a right to exclude other parties from manufacturing and distributing your patented invention or process. Looking deeper however, you should ask yourself is it worth the cost and effort of applying for a patent? The first thing there is in applying for a patent you would need to spend time and effort, not to mention the fees. Generally acquiring a patent from the USPTO takes around 32 months. Fees will be discussed in detail on the steps in applying for a patent part of this video. Next would be how much is your invention worth especially if you start selling it? Will the value be enough to cover the costs of developing it and applying for a patent? As a business owner profit is one, if not the main, consideration you would have is if the profits can make up the costs of a patent. If you answered yes to everything then that’s good. Your next concern at this stage would be if your creation invention falls under the list of what can be patented. The scope of what may be eligible for a patent is machines, technical processes, articles of manufacture, compositions of matter and any modifications or improvements to any of them. There are two main requirements for your invention to be patentable, novelty and non-obviousness. Novelty means that the invention must not be a part of prior art. Prior art is generally any indication that your creation already exists and is known. Prior art is tricky because it encompasses any evidence that another party has previously manufactured, or presented something similar or related to your invention before you did. Prior art refers to any presentation or a disclosure of a certain invention. A very common form of prior art is a product that already existed before the creation of your invention. The second requirement would be the invention must be non-obvious. This is mainly done by comparing if the invention is very similar to prior art or if the techniques used to create or improve the invention are similar. Deciding whether the invention is obvious or not tends to be a bit subjective as there seems to be no hard and fast rule yet regarding if an invention is obvious. In this regard, it would be best to consult an attorney just to be on the safe side. You can also check out our patent background class for a more detailed discussion of this including timing strategies for filing a patent.
Patent Application Steps
The first step before you apply for a patent is to make sure no such patent exists and to avoid being liable for patent infringement. If the court should find you guilty of patent infringement you may be ordered to stop the infringement or liability for damages. This happens because the patent owner has the right to exclude others from the manufacture, distribution, and the use of a patented invention. These complications can be avoided by doing a thorough patent search. The best way to do this is to search on the United States Patent Office website. If your patent search shows that the coast is clear then you should be considering what type of application you should file. As mentioned earlier the three types of patents are Design, Plant, and Utility patents. The most common patent would be Utility patents. For applications there are two main types namely, provisional and non-provisional. A provisional patent costs less to file and is not subject to examination by the USPTO. A provisional patent remains valid for a year and allows an early filing date for a non-provisional patent if it is done before expiry. It’s usually used when you know what you will patent but do not necessarily have the prototype yet. This patent will usually lead to non-provisional patent when you finish making it. A non-provisional patent takes longer and is subject to an examination by the USPTO and is granted when it meets the requirements. A non-provisional patent also has a longer validity period of 20 years. The time needed to grant a patent would vary on the procedure of the country but generally patents that do not need examination usually take a few months. If patents need examination like in the case of non-provisional patents it takes longer at least a year or more.
Things to consider regarding the application for a patent:
When you file an application there are two ways it can be done. You may do it yourself or through the services of a patent attorney or agent. Both a patent Attorney and Agent are registered with the USPTO and are eligible to create patent applications for you. In fact, the USPTO recommends filing applications through either a patent attorney or agent as they have sufficient knowledge in patent law to do it. Both a patent Attorney and agent have passed the Patent examination and must be a registered engineer or taken an approved course. The main difference is patent agents cannot take part in court litigations. However, patent Agents often charge a lower rate than patent attorneys. So if you are conscious of your budget go for a patent agent when having your patent filed. Should you need legal advice or legal counsel for litigation, seek the help of a patent Attorney. In addition, having either of them draft your application could ensure that your application is correctly done as they are well versed in drafting applications. The next step is determining the application fees. There are a variety of fees you can see on the USPTO website. These would include patent search fee, reissues, international filing, issuance fees etc. The basic filing fee is $280 for utility patents and $180 for design and plant patents. The issuance fees are $960 for utility, $560 for design, and $760 for plant. Now that we have discussed the application process we will briefly cover the types of patents and how to differentiate them. Should you need a deeper look into patens we have a patent background class that should be helpful.
Types of Patents:
There are three main categories of patents as seen on the slide. Utility patents protect inventions that are unique, novel, non-obvious and have an actual function or use. Design patents also protect a new creation like utility but focus on products of manufacturing especially ornamental and aesthetic design. Design patents focus more on how a product looks like while utility patents focus more on what it does. Lastly, plant patents protect varieties of new plant life. This patent however does not apply to plant life cultivated with seeds. Plant patents only apply to plants discovered through asexual reproduction methods. A few examples of that would include runners, grafting and budding, layering and more.
Trade secrets
The definition of trade secrets is relatively straightforward. Essentially, it is information you want to keep away from your business rivals or any outsiders for that matter. It could be a top-secret ingredient, a revolutionary innovation, or a new product due for release in the market, or future business plans. You see trade secrets are subjective in terms of what you consider important. Trade secrets have become more important now since business have evolved from small family-run businesses into larger scale businesses. That is why a process has gradually come about to protect trade secrets.
Why Should You Consider Trade Secrets?
The main advantage of trade secrets especially for startups is that, it may cost less than copyrights or patents. This is because trade secrets can be protected without actual registration. The main thing you would do is just make sure the information remains within your company or circle. Only those who need to know are allowed access to this type of information. In other words, keeping a secret private is usually free.
Article 39 on Trade-Related Aspects of Intellectual Property Rights.
As mentioned previously trade secrets can be protected without formal registration. Trade secrets also do not have a validity period unlike patents which makes it a viable option for startups. In trade secrets, disclosure should be limited to a “need to know” basis usually to key people within your company. If there is a public disclosure then trade secret protection effectively ends. Trade secret criteria may differ but generally there are common elements. Article 39 of the TRIPS agreement says that the information must be secret and have commercial value. The key point here is that the commercial value of a trade secret comes from it being a secret. It’s not just any secret. For example: a special recipe for a drink that has a cult following. The recipe in itself is only valuable because you are the only one that has it. It is what brings the cult to you. If your next door bar gets a hold of this recipe, it can divert the crown to itself. If the special recipe is known to the public, it would be just another recipe for a drink like, the commercial value of this particular recipe will be lost. Lastly, the holder of the information must have taken necessary measures to keep the information a secret. Aside from an NDA some examples of measures would be not leaving files in the open, not posting information on a viewable list, keeping track of outsiders entering the company etc. Reasonable measures are the basic security precautions you would do to protect this information. These may be considered as continuing requirements because once the confidential or secret character of the information or if the commercial value of keeping it secret is los, it will automatically cease to be a trade secret. For a guide on how to protect and maintain your trade secret you should check out our class focused solely on trade secrets. Now that we have discussed the basics of trade secrets we will now go on to why trade secrets are becoming a viable alternative to patents.
Why Trade Secrets May Be More Cost Effective Than Patents
Now that you know what makes a trade secret we will now discuss why trade secrets could be a practical alternative for a patent in some cases. Firstly, unlike patents trade secrets may be protected without formal registration. This would save you a lot of dollars in registration fee filing costs. Another advantage of trade secret protection is it could potentially last indefinitely as long as measures are taken to keep it a secret. These measures would include NDA’s labeling files as confidential, securing these files, locks in your office, securing your computer network etc. These measures are very attainable. You may have been doing some or all of these methods already. Patents on the other hand will only last for twenty years and protection ceases. In a similar vein, trade secrets can also be transferred as well as used as collateral. Since trade secret protection lasts as long as measures are taken to keep it secret, the right to license it also remains as long as the requirement is met. Trade secrets also have less risk because you do not need to disclose anything unlike in patents. For example, you filed a patent for your invention this requires you to disclose some details as part of the application. If your application fails, this disclosure means that anyone can use this invention or process. Whereas if it was kept as a trade secret it could have remained undisclosed and others could not use it.
Common Mistakes Regarding Intellectual Property:
If you don’t consider IP protection someone else could use a very similar version of your brand name, packaging, or even logo and this would negatively affect your business and limit your hold on your target market. For example, if they register that name, packaging, or logo and file litigation against you for infringement. You could end up not being able to use that you came up with in the first place. This might confuse your customers and damage your reputation especially if you lose the case as it will seem like you were the one who infringed on another’s right.
Before doing that you should also check and do some research whether someone already has IP protection similar to yours. Normally, your concern is protecting your rights but making sure you do not violate another’s is equally important. It will save you a lot of trouble in the future. You would be able to avoid penalties like damages, injunctions preventing you from use of that copyright, patent, or trademark. You would also avoid litigation and the costs of attorney’s fees and court costs for you and the other party if the court declares that you should pay for it. These penalties can be avoided by doing a search to see if someone has already registered something very similar. For example, you named your company ABC not knowing that someone else already trademarked that name. You eventually file for a registration and it gets rejected as it is already registered. So you spent money for filing only to end up rejected. Not only that, this other company finds out and files litigation against you this could lead to injunctions, damages, and possible attorney’s fee expenses.
Another possible mistake is the time factor. Some tend to breeze through the process others take too long before doing it. Since we have discussed how long patent registration takes let us briefly cover the others. For copyrights, registration takes 10 months if it is not done electronically. Electronic applications usually take less time at about 3 months. Trademarks on the other hand generally take 6 months to a year. For example, in the case of an invention. If you were to apply for a patent, there would be criteria that needed to be met as discussed on our earlier slide regarding patents.
Lastly, some companies make the mistake of not consulting a professional regarding their intellectual property applications. There are some online sources for it but since IP is a bit complex it is better to seek advice from a legal professional. When securing your IP rights drafting an application whether it is for a copyright, trademark, or patent that meets the requirements of the law can be a challenge. Drafting and filing your own application is possible if you have the knowledge but it is not recommended. If you do not have the knowledge would you have the time to spend actually learning? Or would that time be better spent running your business? If you do it yourself chances are you may commit lapses in drafting the application which might cause your application to be disapproved. We already discussed how long they take if you make a mistake somewhere and your application gets rejected, that disclosure and rejection may cause you to lose your rights. Another important element where professional help is a must is when doing searches to make sure no one else has registered the same thing you are planning to. You can do it yourself on the USPTO website but an experienced attorney or agent are usually more thorough about it. At the very least, you would know whether it is worth filing an application before you actually spend for it. You might be spending a bit to get professional help but in the long run this would be less than actually spending for litigation for infringement.
How to Avoid These Mistakes:
Intellectual Property is a complex field which you should not do alone. However, there are some ways you can avoid some of the mistakes. The first thing you should do is get familiar with the basics of Intellectual Property. It will help you get an idea about how it works. However always remember to seek professional help. Seeking professional help will ensure that you are able to get the requirements for filing an application ready and correctly. Professional help will ensure your rights are protected and you do not violate another’s. This will save you from a lot of financial and legal trouble in the future.
The third tip would be to do a thorough evaluation of your company. This is important to determine which aspects of your company are worth protecting. For example, should you register your name or logo? Is no one else using it? You should also consider which products you should register for protection and what type. You should also consider if they are worth filing for protection. Intellectual Property is a complex field but with research, preparation, and qualified legal help you will be one step closer to protecting your rights. Again, for a deeper understanding of the specific types please view our respective classes on them. We hope our video helped you with understanding intellectual property along with the different types. Thank you for your time and I hope you join us in our future videos.
Chris Daming, J.D., LL.M.: Mar. 10, 2023
Have you ever heard the term “registered agent” and nodded along, even though you have no idea what it means? You’re not alone. For lots of new...
Chris Daming, J.D., LL.M.: Mar. 9, 2023
When it comes to setting up LLC, most people know the basics -- file a document with a state, become an LLC, maybe get an operating agreement, etc....
LegalGPS: Mar. 9, 2023
4.1 Overview to Intellectual Property Goals: To make the startup know what they don’t know. Does this by assisting the startup in determining (1) if...
