How ignoring intellectual property rights can hurt your business Featured

9:01pm EDT September 30, 2012
How ignoring intellectual property rights can hurt your business

Intellectual property (IP) is an area regularly overlooked; however, this is a pivotal area of law, especially for entrepreneurs and mid-size businesses.

“We often get calls once a client has already landed in some sort of IP trouble, but many of these issues could have been averted through some simple diligence early on,” says Salil Bali, an Intellectual Property Litigator at Stradling Yocca Carlson & Rauth.

Bali says many people are overwhelmed by the topic and might think it to be in the purview of larger companies.

“Surprisingly, for small businesses, this is an area we have seen affect them the most, and often this impact is significant,” he says.

Smart Business spoke with Bali about the importance of protecting your intellectual property, regardless of the size of your company.

What types of businesses are most at risk when it comes to IP?

Most people, when they think about IP, assume it pertains just to tech-based innovations. However, at some level, every company has IP rights to protect. In today’s world, fewer companies have tangible assets such as equipment, manufacturing facilities or real estate. Instead, the vast majority of companies today have most of their assets based on IP rights. This includes the ‘mom-and-pop’ yoga studio that needs to protect its name, all the way to the biotech company that has inventions to protect. No matter what type or size company you have, there are aspects of IP law that touch your company and those rights need to be protected.

What are some common intellectual property issues entrepreneurs should recognize?

The four main areas of IP affecting business today are trademarks, copyrights, patents and trade secrets. Companies need to be aware of all four areas and how to protect themselves with regard to each.

Trademark law deals with the protection of a word, name, symbol or device used to indicate the source of the goods or services. The purpose is to distinguish from other similar goods or services and prevent public confusion. When determining your brand or company name, you should perform trademark clearance to ensure you don’t infringe on pre-existing marks and that your desired mark is strong and protectable. Discussing such issues with a trademark attorney early on can minimize exposure and create IP assets for a company right out of the gate.

Copyright law deals with the protection and permissible uses of original works of authorship, including photographs, videos and written documents. These issues often arise with hastily launched websites, when companies start loading copyrighted images or text without first getting permission or the appropriate licenses. This could lead to cease-and-desist notices and claims for damages. Similar issues can arise with the use of personal likenesses, especially those of celebrities.

Patent law grants an inventor the right to exclude others from making, using or selling his or her invention. If you have an innovative idea, it’s important to talk with an attorney to determine what is patentable and whether or not your idea infringes on other patents. Doing this early diligence can protect your idea from being abandoned to the public domain or help you sidestep and minimize potential litigation exposure.

As far as trade secrets, companies need to be mindful about how they manage information to make sure secrets stay protected. Early-stage companies often aren’t careful about employment contracts and what information is being divulged to whom. This lack of discipline can adversely affect the company’s ability to claim trade secret protection. If you share sensitive information without outlining the recipient’s duties to hold it in confidence, you can lose the ability to protect your trade secrets.

What are the potential consequences of ignoring intellectual property issues?

The risk of not protecting your mark is that someone else assumes a similar name and thus limits or destroys the value of your brand. Though there may still be recourse, it becomes an uphill battle. An infringement lawsuit by a trademark holder for your use of a confusingly similar mark could cost your company its brand and/or logo, the goodwill associated with them and subject you to potential damages.

The risk with copyright infringement is financial penalties. Unlike patent and trademark laws, there are express damages written into the copyright statute that can be considerable.

The consequence for infringing on a patent is litigation, which may result in an injunction preventing further sales or use of the infringing product. Damages and costs in such cases can quickly add up. Conversely, if you fail to seek patent protection for your innovation, you could permanently lose your ability to protect your invention. When you have a new idea, there are key timelines you should be aware of that can be impacted by public disclosure and sale. You must act quickly to secure your idea or you could lose your rights, even if your invention is otherwise patentable.

With trade secrets, it’s simple: If you don’t protect them, you lose them. As soon as a secret enters the public domain, it’s gone.

How could these problems be avoided?

Often, talking with someone who is knowledgeable can help you understand how to protect yourself from infringement. The costs associated with protecting yourself are proportionately low and can have a big impact on your company’s valuation when you’re looking for funding. The stronger your IP portfolio is, the stronger your company is. However, if these issues are ignored, it can become a costly distraction for you and your company. Taking steps early on to make sure your IP house is in order can pay dividends.

Salil Bali is an Intellectual Property Litigator at Stradling Yocca Carlson & Rauth. Reach him at (949) 725-4278 or sbali@sycr.com.

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