Intellectual property (IP) might be one of the most valuable assets of your company. But if it’s not protected, you can be foregoing a significant advantage in the marketplace.
There are four major IP categories:
- Patents, which protect inventions;
- Copyrights, which protect artistic forms of expression;
- Trademarks, which protect brands; and
- Trade secrets.
Generally, the types of IP small businesses may be interested in protecting are unique to the kind of company and its core competencies. For example, businesses that are predicated on developing new products or technology will be interested in patent protection, while another business may be identified by its brands and would want to protect those through trademarks.
However, John P. Cornely, of counsel at Fay Sharpe, LLP, says it’s important to take a close look at everything — from catalog photographs to manufacturing processes — to ensure the security of all of your IP.
Smart Business spoke with Cornely about successful strategies to identify and protect IP.
How does a small business identify and track its IP?
In a small business, to some extent, you have IP being created by many people in your organization at many points in the workflow cycle. You want to be systematic about identifying your IP. When it comes to patents, consider using an invention disclosure form. These forms can be made available to employees, especially those involved in the invention creation process, and are used to collect the data necessary for completing a patent application — inventor’s names, the date the invention was created, a description and/or drawings of the invention and the location of records that support the invention, such as a hard drive or lab notebook.
Encourage your inventors to use the forms and have regular sessions to review inventions and the potential for protection. Regular review meetings can also assist in identifying and/or ranking the relative importance of multiple inventions.
This form system can be used with other types of IP to identify creations and have a way to systematically collect information about them.
What are important inventions to protect?
It’s most important to protect those that make a product stand out in the market. As a small business, maybe you don’t have the resources to file 100 patent applications and might only be able to do a couple each year, so it’s critical to identify where to best apply your resources. Find the aspects of your products that make them more valuable and desirable in the marketplace. Think of it in terms of what features of your products your competitors would like to copy and select strategic patent protections that will keep your competitors from doing so.
Should companies federally register their trademark?
Yes. There are procedural benefits to registering your trademarks that will help in potential infringement actions.
When you start using a trademark in commerce you naturally gain common-law rights whether you’ve registered the mark with the federal government or not. However, one of the problems is those common-law rights are limited to the geographic area in which you’re doing business. So if you’re selling a product in Cleveland, Ohio, under a specific mark, you only have common-law rights in Cleveland. A federal trademark registration extends your rights nationally. Further, federal registration of your trademark provides you with procedural benefits if there’s an infringement action.
And, much like patents, you want to register those marks and brands that are most important to you if your resources are limited.
What can a company keep as a trade secret?
Sometimes there may be an idea that’s not a good fit for patenting or that you don’t want to disclose, for example, like a process of manufacturing a product. Trade secrets are great tools for protecting some ideas because, theoretically, the protection can last forever while patents commonly expire after 20 years. However, the secret generally has to be something no one else can easily discover, for example through reverse engineering; you have to treat it cautiously and control its dissemination. Many small businesses may think they have trade secrets, but since they are not effectively treating them as such that information won’t enjoy the legal status of trade secret, which has certain advantages.
Some things are easy to keep secret, such as formulas and manufacturing processes, because only a few people have or can discover that information. If the information can be discovered from viewing or reverse engineering your product, you won’t be able to keep that a secret. One risk is that if your secret is discovered legitimately then you’ve lost your trade secret status, but if someone were to uncover your trade secret through theft or breach of contract, then you have a case.
How does a small business secure rights to the company’s IP from its employees and contractors?
While this is important, it’s also often overlooked. You want to have some language in your employee or contractor agreements that details ownership of any IP rights. Contrary to what some might think, it’s not always the small business that owns the rights to IP developed by contractors. For example, when hiring a contract photographer to take pictures for your website, the copyright for the work (i.e., the photographs) stays with the photographer unless you have a written agreement that says otherwise. That also extends to contract programmers who can retain the copyright for developed software absent a sufficient written contract to the contrary.
In general, it’s a good rule to have your agreements explicitly spell out IP ownership rights in writing up front.
John P. Cornely is of counsel at Fay Sharpe, LLP. Reach him at (216) 363-9000 or email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe, LLP
Smaller businesses often don’t have the wherewithal to enforce their patent rights because pursuing this type of litigation is very expensive, and they lack the expertise. However, the rise of nonpracticing entities (“NPE”) — organizations that enforce patents against alleged infringers with no intent to manufacture or market the invention — have made this an area that businesses need to take seriously.
“When you are a company that has one or two patents in an area and you’re fighting against an entity with hundreds in that area, it’s difficult to win,” says Michael G. Craig, a patent attorney with Brouse McDowell.
If you don’t have a standalone IP protection program, you’re losing revenue now, have lost it in the past and will continue to do so in the future.
“In the past, people assumed patents were a trophy for smart people to hang on their walls,” he says. “Now companies are monetizing their IP. Studies have shown that some 50 to 60 percent of a company’s worth comes from trademarks alone. These are commodities that need to be monetized. If you don’t have a strategy to do that, you are losing revenue.”
Smart Business spoke with Craig about NPEs and the importance of IP protection strategies.
What is a nonpracticing entity?
There are different types of nonpracticing entities. Generally, NPEs own and enforce patents but don’t intend to manufacture the products or provide the services associated with them. They instead enforce the patent rights in other ways. Some NPEs purchase patents from companies that don’t have the wherewithal to enforce those rights, doing so through licenses or lawsuits against infringers. These are groups created solely to buy up the intellectual property of others and enforce those rights without any other business plan or means of revenue.
Some entities hold defensive patents. Companies can partner with them for protection against lawsuits, and collectively, they become a harder target because they’re part of a group. There is also the purchase of patents for offensive purposes, such as buying patents to take over a segment of the market and force others to leave or enforce their rights.
Patent trolls are another aspect of NPEs. They hold patent rights, wait for someone to monetize the idea and then pounce. EBay’s one-click purchase — which allows buyers to bypass the bidding process and buy the item instantly — was a victim of a patent troll, as was BlackBerry, which had a patent troll sue it for its technology, worth hundreds of millions of dollars.
Why are NPEs significant?
They can drive the way a company’s patent strategy is developed. NPEs don’t have anything to lose when enforcing their rights. When you are sued, you have to allocate resources to defend your rights, which takes money away from your core processes. NPEs’ resources and business models are designed to enforce patents. You need to understand what NPEs are doing because they change the landscape of IP, and you need to develop an R&D strategy to navigate it and determine where you fit in.
You can join an aggregator, which is an NPE that aggregates IP property for the benefit of having safety in numbers. Those that join them can use the IP of others, as well as the aggregator’s resources for protection, offensively or defensively. And because the cost of a lawsuit is so deleterious, most will give up their IP rather than pursue a lawsuit. Also, when you practice in an area, particularly one that utilizes an industry standard, such as wireless networking, there is likely to be an NPE from whom you, or your parts supplier, may need to license the technology.
What can companies do to protect themselves from NPEs?
There is an overarching concern in the industry that there is no protection against an NPE. The reality is, under the current legal system, NPEs are not doing anything wrong. They would say they are just protecting the rights of inventors. IP is actually property that can be bought and sold and infringements against that need to be protected.
Err on the side of overprotection. Managing IP may seem expensive at first, but as far as costs associated with patenting or licensing, in the long run, the payback is tremendous. Further, you need a strategy to deal with NPEs in areas in which you do business, such as licensing agreements and hold harmless agreements.
IP programs should have the use of legal professionals to help them determine what is worthwhile to patent and how to go about it. A lot of companies have brainstorming sessions to come up with a list of ideas of what to patent, then flesh them out and go to their legal professionals with a list of ideas to determine which are worth protecting and the costs to do so.
Also, every company needs to have a strategy on how to protect their IP when certain situations arise, such as a potential infringer or infringement.
What should companies do when they are in a potential infringement situation?
That can be an anxious time, particularly if it is a product that drives your business. Your first call should be to an attorney who specializes in that area to analyze the claim to see if it has merit. They could contact the other party and negotiate because you don’t want to reach litigation. The worst thing you can do is put your head in the sand, because after you have been notified, it becomes willful and the penalties can add up.
You don’t need to reach that point. If a company is unsure of what the next step should be, contact a professional to manage the process. All you need is a little help to point you in the right direction and periodic management from an attorney to help along the way.
Patents are assets that need to be exploited and monetized. The IP landscape is changing, and those who don’t recognize this and look at the other way are going to be left behind.
Michael G. Craig is a patent attorney with the Intellectual Property Group at Brouse McDowell. Reach him at (330) 535-5711 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Brouse McDowell
The risks for companies using social media are plentiful, from employees who reveal trade secrets to being held responsible when outside users post copyrighted material to company-operated web pages. To avoid legal ramifications and lost business opportunities, you need to be aware of potential pitfalls.
“Social media increases the ease with which information is communicated and it does it in a permanent and attributable way,” says Robert Sieg, a Partner with Fay Sharpe LLP. “This can make it easier for confidential information to be leaked out of a company and create a potentially more harmful situation when such a leak occurs.”
Smart Business spoke with Sieg, as well as Fay Sharpe attorneys Mark Rogge and Sean Weinman, about how social media can impact your company’s intellectual property and image.
What security issues can arise with the use of social media?
With many people conditioned to post almost anything on the Internet, confidential company information such as upcoming product releases and acquisition plans are more at risk. With information posted online, that creates a record that can be found by a routine keyword search and that is directly attributable to an employee of the company, giving it more credibility. This can give the media a much stronger lead to dig into what is going on in your company. Information could also be posted that would compromise a company’s ability to obtain patent protection on new inventions or that reveals trade secrets.
As a safeguard, make sure that only those authorized to do so post to your company’s web site and social media sitesthat your legal department reviews posts before they go live and that patent attorneys review materials to make sure confidential technical matters aren’t being released.
What ownership issues arise in the context of social media?
While the ownership of a tangible item such as a company car can be clear, when it comes to social media, the distinction becomes blurry. In many cases, employees are creating pages on sites such as Facebook for company purposes using their own names and information.
That is something that you need to monitor. If you really want that site being used to represent your company, you need to make sure that it’s clear that you own that site. This can mean opening the account in the company’s name and having documentation, such as an internal social media policy, that describes ownership and proper use of the site, as well as addressing contingencies such as severance issues.
However, sites such as LinkedIn can make it difficult to distinguish between work and personal use, as many companies encourage employees to set up accounts to network with and build business contacts. But if an employee leaves for a competitor, he or she may take that LinkedIn account upon departure, and all of those contacts created as a result of employment with your company go with the employee.
While a company can argue that the account was created on company time as part of the employee’s assigned work, this can be difficult to prove, so you need to proactively set up policies to establish guidelines to ensure employees don’t walk out with your property.
What should be considered in deciding what can be posted to a company’s social media site?
If you allow visitors to post to your site, consider that it could open you up to liability. The Digital Millennium Copyright Act offers some protections against copyright infringement by providing a 'safe harbor' notice and takedown procedure in some cases in which owners of copyrighted material ask for posts to be removed. Companies should be familiar with these policies and have someone monitor posts to the company’s site to ensure that improper material is not posted.
Many companies have a dedicated employee policing their site, but with that approach, you might already be in trouble before that person becomes aware of an issue on the site. To prevent this, companies can implement a moderated system, which allows the host to queue comments for review before they go live.
What are the dangers of using social media for promotion?
While social media can be used to drive awareness and generate sales, you need to avoid misleading and deceptive advertising such as false blogs that appear to be independent but that are actually operated by someone working for the company.
In 2009, the Federal Trade Commission established guidelines concerning the use of endorsements and testimonials in advertising, which require the disclosure of connections between advertisers and endorsers. If you have third-party endorsers rating products on your web site, but they’re misleading the public, your may be liable for that false or misleading practice. But beyond any legal considerations, it's just not good advertising for your company if people discover that you’re misleading them.
How can social media impact the branding of a company?
The growth of social media has brought with it problems that can affect trademark management and the preservation of goodwill associated with a company’s brand. Practices such as cybersquatting, which involves parties purchasing Internet domains related to brands or company names, is a rising trend. Cybersquatters hold companies hostage and try to sell them those domain names for a price. In other cases, squatters may post explicit material under the brand name or company banner, or using your good name to drive traffic to their own sites.
Registering your company or brand trademark can go a long way toward stopping a cybersquatter, but the problem is exacerbated as new social media sites continue to appear. As a result, once a brand new social media network arrives, register whatever space you can that could be associated with your product to make sure that no one else does so.
Robert Sieg, Mark Rogge and Sean Weinman are attorneys with Fay Sharpe LLP. Reach them at (216) 363-9000 or email@example.com, firstname.lastname@example.org or email@example.com.