Intellectual Property Protection For Small Business Entrepreneurs
Most minority business entrepreneurs own and operate small businesses. However, some minority small business entrepreneurs are unaware of the need to protect their intellectual property assets in the same manner as other assets used in their businesses. There are many pitfalls awaiting the small business entrepreneur who ignores the importance of protecting his or her intellectual property assets.
This article provides small business entrepreneurs with helpful suggestions for protecting their intellectual property assets while simultaneously shielding their businesses from liability due to infringement of intellectual property rights owned by others.
II. Definition of Intellectual Property
Intellectual property is a product of the mind. For example, intellectual property may be any useful, new and nonobvious apparatus, process, article of manufacture, chemical composition, product design or biological plant. These forms of intellectual property are protected by the patent law. In addition, useful, new and nonobvious improvements made to existing apparatus, processes, articles of manufacture, chemical compositions, product designs and plants are also protected by the patent law. Patent law permits the owner of the patent to exclude all others from making, using, offering for sale, selling or importing what is patented.
Intellectual property may also be books, magazine articles, music and other works of authorship. These forms of intellectual property are protected by copyright law. Copyright law protects the owner of the copyrighted work with respect to unauthorized copying of the copyrighted work by others.
Furthermore, intellectual property may be a product name, product color, company logo, or other identifier of the source of a product or service. These forms of intellectual property are protected by trademark law. Trademark law protects the owner of the trademark with respect to unauthorized commercial use of the trademark, or a confusingly similar trademark, by others.
Yet another form of intellectual property pertains to trade secrets. A trade secret is any confidential formula, pattern, process, device, information, or compilation of information that is used in oneâ€™s business and that gives the business owner an advantage over competitors who do not know or use the trade secret. Trade secret law protects the owner of the trade secret with respect to theft of the trade secret.
III. Identifying Intellectual Property Assets: The Intellectual Property Audit
An intellectual property audit is a process by which an intellectual property attorney identifies intellectual property assets owned or licensed by a business and assesses potential infringement liability to which the business may be exposed. The audit also examines procedures for perfecting intellectual property rights and identifies improvements to those procedures.
Identifying strengths and weaknesses of intellectual property assets and potential infringement risks can enhance the financial health of the business.
IV. Types Of Intellectual Property Assets
If patent protection is desired, a â€œpatentability searchâ€ should be performed to determine whether or not the invention is new and nonobvious, so as to qualify for patent protection. The search should be performed either by an intellectual property attorney or a professional search firm that specializes in patentability searches.
Also, under U.S. patent law, an inventor has one year to file a patent application after the first public disclosure, public use, offer for sale or sale of a product embodying the invention. An inventor who does not file for patent protection within this one year window may lose all rights to obtain patent protection covering the invention. Thus, the small business entrepreneur should be leery of publicizing the invention to friends, venture capitalists and potential licensees without an obligation of confidentiality on their part, such as a written confidentially agreement. To do otherwise may start the running of the one year clock.
Total costs to obtain and maintain patent protection can be a significant investment for the small business entrepreneur. Nonetheless, a patent creates a barrier to market entry by competitors and may well be worth the cost. Therefore, a patent can serve as a useful tool to protect market share or create a dominant position in the marketplace because a patent acts as a â€œmonopoly.â€ Also, a patent can be a useful tool for raising venture capital because the financial risk to the venture capitalist is reduced due to the market â€œmonopolyâ€ the patent provides. In addition, banks may be willing to lend credit using intellectual property as collateral. Depending on the financial health and market strategy of the business, a well thought-out patent portfolio could be a wise strategic investment.
Copyright law protects a creator of an "original work" of authorshipâ€ from unauthorized copying of the original work of authorship. Examples of copyrightable works include books, magazine articles, newsletters, marketing materials, engineering drawings, music, pictures, Internet web pages, etc.
Many small business entrepreneurs have the misconception that a work must bear a copyright notice and/or be registered in the U.S. Copyright Office in order to receive copyright protection. This is not the case. A copyright to an original work of authorship is automatically perfected the instant the work is fixed in a tangible medium of expression, such as written on paper, saved on computer disk, completed as a sculpture, completed as music recorded on tape, etc. Although a copyright notice on the work is not required in order to obtain copyright protection, a proper copyright notice nonetheless obtains certain legal advantages. A proper copyright notice allowable by statute is the word â€œCopyrightâ€ followed by the year of first publication of the work and then the name of the owner of the work. For example, a hypothetical copyright notice might read as follows: â€œCopyright 2007 John Doeâ€. Other acceptable forms of copyright notice are provided in the copyright statute.
Also, there is confusion among small business entrepreneurs as to whether or not a proper copyright notice requires the words â€œAll Rights Reservedâ€, such as â€œCopyright 2007 John Doe. All Rights Reserved.â€ The words â€œAll Rights Reservedâ€ were once required. However, the words â€œAll Rights Reservedâ€ are no longer required for works first published in the United States and practically all foreign countries. However, due to the intricacies of various treaties with foreign governments, the few countries where the words â€œAll Rights Reservedâ€ are still required are Honduras, Bolivia and Nicaragua for works published in those countries.
Trademarks may be in the form of distinctive packaging, color combinations, product designs, sounds and other indicia of the source of goods or services. Trademark rights prevent others from unlawfully using a mark that is the same or confusingly similar.
A service mark is the same as a trademark except that it distinguishes the source of a service rather than a product. The terminology "trademark" or "mark" is commonly used to refer both to trademarks and service marks. Trademarks which are used in interstate or foreign commerce may be registered with the U.S. Patent and Trademark Office. Trademarks may also be registered in individual states if the trademark is predominately used within the state. However, many trademarks and service marks are not registered either federally or at the state level.
Before the small business entrepreneur decides to use a mark to distinguish his goods or services, he should first perform a trademark search to see if the exact or confusingly similar mark is being used by another business or individual. A search for federally registered marks can be made by contacting the U.S. Patent and Trademark Office. Access to state registered marks can be obtained by submitting a request to the Secretary of State of the state where the exact or similar mark might be registered. Unregistered marks can be found by searching other sources, such as yellow page and white page telephone directories, the Internet, and the Thomas Register of American Manufactures. Searches for marks used as Internet domain names can be made by visiting the U.S. Patent and Trademark Office website or by visiting other on-line websites, such as ICANN.org. Because trademark searching can be involved and time consuming, the small business entrepreneur may want to engage the services of an intellectual property attorney or commercial search firm to perform the trademark search.
The small business entrepreneur may use the symbol â€œTMâ€ for a trademark, or the symbol â€œSMâ€ for a service mark, to put the public on notice that he or she claims ownership in the trademark or service mark. For example, a hypothetical trademark might be the word â€œAcceleronâ„¢â€ for a faster computer chip or the phrase â€œYour First Choice for Computer Repair ServicesSMâ€ for a computer repair service. However, the symbols â€œTMâ€ or â€œSMâ€ should only be used when the mark is unregistered. If and when the mark is registered in the U.S. Patent and Trademark Office, the symbol Â® (the letter â€œRâ€ in a circle) should be used. That is, after the mark is officially registered in the U.S. Patent and Trademark Office, the mark should be displayed as follows: â€œAcceleronÂ®â€ or â€œYour First Choice for Computer Repair ServicesÂ®.â€ There is no symbol or designation to indicate state registration.
D. Trade Secrets:
Trade secrets are also referred to as â€œconfidential information.â€ In this regard, trade secret law protects the owner of the trade secret with respect to theft of the trade secret. Trade secrets are not protected by patent, trademark or copyright law. Trade secrets are only protected by trade secret law. Trade secret protection lasts forever, as long as the information is kept secret. With regard to maintaining secrecy, a trade secret should be kept under lock and key or otherwise kept from public scrutiny. However, a competitor is not prevented from independently obtaining, such as by reverse engineering, and using the secret information.
Examples of trade secrets include customer lists, product pricing, marketing strategies, unpublished company profit and loss statements, manufacturing processes, recipes, an invention for which a patent application has not been filed, and chemical formulae.
One who steals or misappropriates a trade secret is liable for damages in civil court. Theft or misappropriation of trade secrets is also a federal crime and subjects the guilty party to fines and imprisonment.
However, what should a small business entrepreneur do if he or she needs to disclose the trade secret to others in order to obtain venture capital or sales? In this case, he or she can ask the other party to sign a confidential disclosure agreement (CDA), also known as a nondisclosure agreement, confidential information agreement or secrecy agreement. Under the CDA, the parties agree not to disclose information covered by the CDA. In fact, the CDA may state that the existence of the CDA itself cannot be disclosed.
V. Infringement of Patents, Copyrights and Trademarks and Theft of Trade Secrets
A. Patent Infringement:
The small business entrepreneur can avoid infringing anotherâ€™s patent by asking an intellectual property attorney to perform a â€œclearanceâ€ study as early as possible, such as during the product development stage. The purpose of the clearance study would be to discover issued patents that cover the product the business plans to market. Early identification of a patent issued to another and that covers the businessâ€™ product may provide an opportunity to design-around the patent and avoid infringement. If it is not feasible to design-around the patent, then a clearance study might alert the business owner as to whom to approach for a license.
B. Copyright Infringement:
The small business entrepreneur should seek permission to copy a copyrighted work before copying the work. If it is not clear from the copyright notice (if there is one) as to whom should be contacted for obtaining permission to copy a copyrighted work, the small business entrepreneur may look to several sources to discover the identity of the author, such as the U.S. Copyright Office, the Copyright Clearance Center (CCC), the Publication Rights Clearinghouse (PRC) and other sources. In addition to civil damages, infringement of a copyright can carry criminal penalties, as well.
C. Trademark Infringement:
If use of an identical or confusingly similar mark is likely to confuse or deceive the public, then the trademark owner may have a claim for trademark infringement. Not only are trademarks protected by federal law, trademarks are also protected by state law and common law. Common law trademarks are trademarks that are not registered either at the state level or at the federal level.
Monetary and injunctive relief for trademark infringement are available to the owner of the trademark. In addition, knowingly copying another's trademark is considered counterfeiting and is a felony punishable by fines and imprisonment.
D. Theft of Trade Secrets:
Theft or misappropriation of a trade secret occurs when one knowingly acquires the secret through improper means or discloses the secret without consent. Trade secret documents used in the business should be clearly marked as such preferably on each page. For example, a hypothetical trade secret document may be marked as follows: â€œACME Co. Proprietary.â€
It should be noted that civil action for theft of trade secrets is governed by state law. Therefore, one should consult an intellectual property attorney regarding current law in a particular state.
Theft or misappropriation of trade secrets is also a federal crime. Conviction for theft of trade secrets can result in fines and imprisonment. Thus, federal prosecution permits those who cannot afford to initiate civil litigation against another engaging in the theft of trade secrets to ask the government to bring a criminal action.
VI. Charitable Donations of Intellectual Property
A small business entrepreneur may want to consider donating intellectual property to a non-profit institution, such as a charity or university. This is particularly true if the business no longer sells the product or provides the service covered by the intellectual property. Such a donation can have tax advantages for the donor. In this regard, donors may deduct either the amount they spent to create the item of intellectual property or its fair market value, whichever is smaller. The non-profit institution benefits from the donation because the non-profit institution may be able to license the intellectual property to generate royalty income.
There are other reasons to donate intellectual property in appropriate circumstances. For example, donation of intellectual property, such as patents, allows the small business entrepreneur to avoid maintenance fees and internal administrative costs associated with keeping a patent active. The small business entrepreneur should consult his tax advisor and intellectual property attorney in any particular situation.
Knowledge about intellectual property protection can enable the small business entrepreneur to lock-out competitors while simultaneously shielding his business from liability due to infringing intellectual property rights owned by others.
Finally, laws and regulations governing patents, copyrights, trademarks and trade secrets are complex. Although this article provides a useful summary, an intellectual property attorney should be consulted in any particular situation.
About the Author
Walter S. Stevens, PhD., is a registered patent attorney with the U.S. Patent and Trademark Office and practices intellectual property law in San Diego, California. He is the managing member of Premier IP Protection, LLC based in San Diego, California. If further information is desired, he can be reached at email@example.com. or Toll Free 1-888-654-3869.
The commentary contained in this article is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
Copyright 2007 Walter S. Stevens
Urban League Diversity Works! Magazine
Fall 2007 Diversity Summit Edition, Pages 50-52
Published by the Urban League of San Diego County, 720 Gateway Center Drive, San Diego, California 92102