The Top Ten Things You Need to Know About Intellectual Property

By Rick Kosakowski, Diane Sabato & John Diffley

Entrepreneurs can be faced with an overwhelming amount of information and guidance when they plan their business startup. One area that is often neglected is the business’ intellectual property. In fact, it is critical to attend to the protection of their business’ intellectual property early in the startup process. Business owners need to know what to protect, when, and how to protect it.

1. What is IP?

Intellectual property (IP) is anything that is a creation of the mind used in business. It can include inventions, brands, artistic creations, domain names, website content, proprietary information and software. IP represents valuable intangible property with monetary value.

Your business strategy should involve your IP strategy and will evolve over time.

It is important to understand the four related, yet different, types of legal protection:

1. Patents
2. Trademarks
3. Copyrights
4. Trade Secrets

2. Why pursue IP Protection?

You should protect what you have created and your investment in time, money, and energy. IP protection will deter and/or stop theft or “knock-offs” by others.

Your IP sets your business apart with a unique value proposition and competitive advantage. Your IP can determine your business model and generate income from licensing or selling it. It will add value and increase the selling price of a business and make it more attractive to investors.

3. Patents – what do they cover?

Patents protect inventions, improvements to things (products) or processes, including machines, articles of manufacture, and compositions of matter. Inventions typically solve problems by improving upon an existing product or process that benefits society. 

Patents exclude others from commercializing your invention and are governed by U.S. federal laws. It gives the patent owner the right to exclude others from making, using, selling, offering for sale, and importing into the U.S. the patented invention. They are territorial and there are no worldwide patents, so consider where you do business and produce your goods.

You should apply for a patent at the point when your invention works, not during the process, so that all elements and modifications are included in your patent application and you are confident that your invention will work properly. Patents generally take at least a year or more to issue and the rights begin at that time and last for 20 years from patent filing date.

There may be circumstances where you don’t apply for a patent. You need to determine if your business would benefit from the rights of exclusion. If not, don’t bother trying to get a patent, they are expensive and time consuming to obtain. Patents don’t cover abstract ideas (e.g., math), laws of nature (e.g., Newton’s Laws of Motion) or natural phenomena (e.g., electromagnetism).  They do, however, cover inventive devices or processes that operate according to these laws of nature or natural phenomena.   

4. Patents – how do I get one?

The purpose of the patent is to teach the public how to make and use your invention; you must disclose your proprietary information (cf. trade secrets).  Apply online to United States Patent and Trademark Office (USPTO) at www.uspto.gov.

There are two ways to file:

(1) Provisional application:

This application has relaxed requirements, is less expensive and there is no examination for patentability. The provisional application lasts for one year, and is a good option as it buys you time as you determine viability of your product, business, etc.

(2) Non-provisional application:

This application has more detailed content requirements, and is more expensive to file (ranging from $2K – $20K). The non-provisional application will be examined for patentability; the invention must be novel and non-obvious over prior art. It is good practice to conduct a patent search before you apply to see if there is an existing patent or prior art that already discloses your invention. 

If you intend to be using your IP for longer than 20 years (the life of the patent), you should instead consider keeping your underlying technology as a trade secret. Once the patent has expired, it cannot be renewed.  Thus, anyone can then commercialize your invention without penalty or paying a royalty to the patent owner. 

5. Use non-disclosure agreements (NDA).

A non-disclosure agreement (NDA) is a valuable tool to use during product development. It protects your proprietary information from idea theft, improper use or disclosure and is governed by state laws. You should have a recipient sign an NDA before you disclose your IP to them. The NDA will preserve secrecy and the value of the information and your ability to file for patents. If you are sharing your idea(s) with a large group of people, for example giving a speech or publishing a paper, you may not be able to use an NDA to maintain confidentiality. The U.S. has a one-year grace period for filing a patent application after an invention has been disclosed to the public.

Consider not disclosing your IP information until the patent application is filed. When in doubt, don’t share your ideas!

6. Trade secrets.

Trade secrets are any information that provides economic value and gives a business a competitive advantage over others who do not know that information. This includes manufacturing processes, customer names and buying preferences, supplier names and pricing, computer algorithms, recipes and formulas; includes possibly patentable information such as the Coca-Cola formula.  They are governed by state and some federal laws.

A trade secret begins immediately upon the creation of the information. It can theoretically last forever as long as you take prescribed steps to maintain secrecy. Trade secret legal status is lost once information becomes generally known through reverse engineering, independent development, or authorized disclosure.  Thus, you should decide whether to seek a patent on your proprietary information or instead keep that information as a trade secret. 

7. Trademarks – what are they?

Trademarks are valuable legal rights that protect brands. They are a word, phrase, symbol, or device that identifies and distinguishes the goods or services of your business from those of your competitors. They communicate brand information to the public and enhance public awareness of brands. File for trademark registration with the USPTO at https://www.uspto.gov/trademarks. 

Traditional trademarks include names, slogans, and logos or designs.  However, non-traditional trademarks are increasing in popularity and include colors, sounds, scents, and “trade dress” which includes product configuration and product packaging.

When choosing and utilizing your marks (logos, slogans etc.) you should pick a distinctive mark: the more distinctive the mark, the stronger it is. Conduct a search for existing usage on similar goods/services. The first user wins. Use the symbols TM, SM and ® when using your mark.

8. Trademarks – what are the rights?

A trademark can be protected by federal common law rights, which automatically begin upon use of the mark on goods or services. They stop others from using a confusingly similar mark on the same goods or services in the geographic area of the U.S. where the mark is used.

When you file for federal registration rights and receive a federal registration, you get stronger, more expansive rights, which cover the entire U.S. Federal rights theoretically last forever if the mark is still being used properly. You may need to file for trademark registration in other countries when you consider where your goods or services are marketed or sold. U.S. trademark registration gives the owner the right to record the registration with U.S. Customs and Border Protection (“CBP”) to help prevent importation into the U.S. of infringing foreign goods. 

Most states afford their own state registration trademark rights. It is relatively quick and inexpensive to obtain a state trademark registration. In Massachusetts you can file online at the MA Secretary of State website: https://www.sec.state.ma.us/.

9. Copyrights – what are they?

Copyrights protect fixed expressions of ideas (“works”), “original” works of authorship. This includes a wide variety of different types of works including: artistic, literary, photos, musical (both music and lyrics), software, website content, as well as both published and unpublished works. They do not protect what is covered by trademarks such as slogans, titles or names.

Common law rights begin immediately upon reduction of expression to a tangible medium or form of expression, meaning, for example, that you can’t copyright the concept of a painting, but you can copyright the painting itself as soon as you create it.

There is no examination or registration required to obtain these common law rights.

Authors are usually the owners, except in a “work for hire” scenario.  “Work for hire” is where a business who hired the person to create the work is considered both author and owner.

10. Copyrights – what do you need to know?

Exclusive rights are given to copyright owners to reproduce the work, distribute copies of the work, prepare derivative works, display the work publicly, and/or perform the work publicly. Copyrights are governed by U.S. federal laws.

Federal registration for copyrights is quick and inexpensive to obtain at www.copyright.gov. You must register in order to sue an infringer and possibly collect damages and attorney fees. You give notice of your copyright using the symbol © Copyright 2021, and the name of the copyright owner. Its use is optional, but puts the world on notice of claim of ownership of work. 

Copyrights are territorial with no international copyrights. However, most countries recognize U.S. copyrights.

The duration of rights varies. Examples of duration of copyrights: (1) Single author copyright is the life of the author plus 70 years; (2) Multiple authors copyright is 70 years after the last surviving author’s death.

“Fair Use” is a defense to copyright infringement, which permits unlicensed use of copyright–protected material in certain activities such as teaching, research, scholarship, news reporting, comment, or criticism. It does not work for pure commercial use. The factors in evaluating fair use include: purpose and character of use (non-commercial, non-profit); transformative use is fair use – was something new added to the work?; nature of copyrighted work; the quantity and quality of copyrighted work used; effect of fair use on market for or value of copyrighted work e.g., is it diverting sales of copyrighted work?

Your business intellectual property is an integral part of your business model and your business success. As you plan your startup and as your business evolves and grows, protect your ideas, your brand, your processes, and your creative work products to build your business value.

In case you missed it, the webinar recording for this event is available.

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About the authors:

• Rick Kosakowski, IP Attorney, Swiftwater Law | https://www.swiftwaterlaw.com/contact-us

• Diane Sabato, Professor, STCC, Intellectual Property Educator in Residence, National Association for Community College Entrepreneurship - Ask me about IP resources! 

• John Diffley, Professor, STCC,  Intellectual Property Educator in Residence, National Association for Community College Entrepreneurship - Ask me about IP resources!