The three biggest, and most costly, IP mistakes businesses make Featured

9:24am EDT January 31, 2014
Jeffrey N. Zahn, Attorney, Fay Sharpe LLP Jeffrey N. Zahn, Attorney, Fay Sharpe LLP

You’ve just launched your product, which has taken months of research and development effort to bring to market. Soon after its debut you receive a notice that you’re infringing on an existing patent or trademark.

You’re now left with a decision: License the technology that you’ve infringed, which you may or may not be able to do, or wind up with a costly infringement suit. You could fight the suit, retreat and try to design around the patent, or scrap the whole thing and start again. Any of those choices come with substantial costs. All the while knowing that with a little bit of due diligence up front all of it could have been avoided.

“Don’t undervalue your business’s IP,” says Jeffrey N. Zahn, an attorney with Fay Sharpe LLP. “Do what’s required to make sure it’s protected and not potentially infringing a third party’s IP rights. This will help you protect your investment in your IP and avoid unnecessary third-party, IP-related expenses down the road.”

Smart Business spoke with Zahn about the intellectual property (IP) mistakes companies most often make.

What IP mistakes do businesses make most often?

The three biggest IP mistakes, in no particular order, are the failure of a business to adequately protect its IP, failure to avoid infringing the IP of other companies and failure to seek the advice of an IP attorney.

There are many ways a company can leave its IP exposed. Those include not using nondisclosure agreements when working with outside parties; forgoing patentability investigations to determine if a patent would suitably protect company technology; failing to file provisional and regular utility and design patent applications when appropriate; allowing trade secrets to leak; not ensuring employees, outsiders and third parties maintain the confidentially of the company’s critical technology; and failing to federally register trademarks to protect brands.

Another major problem is failing to avoid infringing on another’s existing IP rights. This is often the result of not conducting freedom to operate searches for issued patents, as well as published pending patent applications, and trademark clearance searches.

But the one mistake that often leads to all others is failing to seek the advice of an IP attorney. This is a critical aspect of due diligence and developing a solid and secure IP strategy.

Do large or small companies typically make these mistakes?

Smaller companies are more likely to make these mistakes. Smaller businesses often believe an IP attorney is a service they can’t afford, or one is only needed when filing a patent or trademark application. In most cases, it comes down to not recognizing the value of IP to their businesses.

In contrast, the larger a company is the more likely the company is educated about IP and has in-house counsel and/or a relationship with an IP firm to address these issues.

Is there a particular time when a company is more vulnerable to IP issues?

Businesses are typically more at risk during the early stages of their existence. That’s why companies should take stock of their IP and look into the market to identify the IP of the relevant third parties, such as competitors, early on. This can save a lot of time and expense if it’s done up front.

Companies are also vulnerable during the early stages of a product development cycle. Bringing a potentially infringing product to market may require the company to license the infringing technology or trademark, or rebrand or redevelop the product if the technology or trademark can’t be licensed. That’s why it’s critical to conduct freedom to operate searches and trademark clearance searches during the initial stages of a product’s development.

What can help businesses prevent these errors from happening?

The best tool is education and a proactive IP management program. Have conversations with those who know the issues — someone who works in the IP field regularly, whether that’s an in-house attorney or an IP attorney at a firm — because affected parties must be aware of IP issues. Then continue to talk with an IP attorney as your business grows, new products are developed and new markets are served. Many businesses would be pleasantly surprised how valuable an initial consultation with an IP attorney is relative to the expense.

An ounce of prevention is worth a pound of the cure. This is especially true in the area of product design and branding where a little due diligence to investigate third party IP rights can help you develop your product and brand strategy so it doesn’t potentially infringe existing rights. This can help you avoid potential infringement issues, such as a costly patent or trademark infringement suit.

Jeffrey N. Zahn is an attorney at Fay Sharpe LLP. Reach him at (216) 363-9168 or jzahn@faysharpe.com.

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