Disclaimer: This article is intended to be general information and nothing in this article constitutes legal advice. Please consult with an attorney before making any intellectual property or other legal decisions.
Does your business have intellectual property?
If someone asked whether or not your business has Intellectual Property (IP) and your answer is “I do not know” or “I doubt it,” you are not alone.
Initially, many startup businesses focus on creation and inception tasks: forming an entity, reserving a domain name, signing up for online accounting services or hiring an accountant, and, in some cases, consulting with a business lawyer. Furthermore, solo inventors or creators generally wear all the hats and adopt the DIY mode of operation without consulting anyone.
If you are among those who are aware that you have IP, but cannot necessarily articulate or produce an IP listing with protective steps, your valuable intangible assets may also be at risk. It is difficult to be in a business situation completely devoid of IP worth identifying and protecting.
How many times have you heard someone refer to IP, ideas, and patents, using the terms interchangeably? Many technology startups are aware of IP issues, but focus on patents. It is critical to understand that IP falls into four distinct categories: Copyright, Trademark or Servicemark, Patent, and Trade Secrets.
IP is a not just a legal issue
Not understanding your IP can not only lead to lost IP or business, but serious missteps may occur when trying to take the business to the next level. When fundraising, preparing for due diligence upon exit or acquisition, or hiring employees and contractors, it is critical to have both a complete IP inventory and a strategy to monetize and protect your IP.
Simply put, properly identified and protected IP increases the financial value of your company.
IP rights give businesses a competitive advantage: excluding competitors from a market, creating a revenue stream from licensing or cross-licensing, improving the market’s perception of a product or brand, or in some cases using the IP offensively to request injunctions, sue for damages, or prevent counterfeit knockoffs.
IP is a strategic business issue. For example, IBM generated $1 billion licensing technologies that are unrelated to their core business in the 1990s. Many are surprised to learn that Texas Instruments’ licensing revenue from unused patent rights is more than the regular income from its products.
Trademark and copyright defined
The old adage that “a little knowledge is dangerous” can easily apply to IP. Trademark—or service mark—and copyright are often ignored and sometimes confused or used interchangeably.
The United States Patent and Trademark Office (USPTO) defines a trademark as:
A brand name; a trademark or service mark includes any word, name, symbol, device, or any combination, used or intended to be used to identify and distinguish the goods/services of one seller or provider from those of others, and to indicate the source of the goods/services.
The goal of the trademark is to protect consumers from brand confusion. In other words, the product is tied to a particular brand.
When you buy a Pepsi product, you are guaranteed that it is Pepsi brand, not a generic store brand cola or Coke product.
The United States Copyright Office defines copyright as:
A form of protection grounded in the U.S. Constitution and granted by law for original works of authorship fixed in a tangible medium of expression.
Once you type, draw, write, text, or otherwise create so that someone can see it, such as video, you have “fixed in a tangible medium of expression” and have copyright protection.
For example, the words in this article are protected by copyright as they are typed and appear on the computer screen. It can be confusing because a slogan, when typed or displayed in an advertisement, is protected by copyright but also can be trademarked. However, one is not a substitute for another.
Use it first—and prove it!
Suzanne, a US businesswoman, learned a difficult lesson about building a brand without first using or securing trademark. She formed a Limited Liability Company (LLC) using the brand name, but did not register that name with the state or with the USPTO.
When Suzanne attempted to trademark her brand name with the USPTO, she was surprised to see a very similar trademark application in progress. Unfortunately, the previous fall she had disclosed her brand name to the same group who filed this particular trademark application.
In the US, if the brand or name is used in commerce, the “TM” can be placed after the name. Then, the business has common law trademark rights on that date of use without filing with the State or USPTO, as long as the continued use in commerce can be demonstrated.
If a business is not yet using the brand or name in commerce, an “intent to use” application can be filed with USPTO and in essence reserve the name or brand. In both instances, you need to check if someone else has trademark rights for that name before starting to use the mark.
In Suzanne’s case, she had first used the brand in the fall during early advertising for her company. Unfortunately that use did not predate the date of the first use in commerce filed by the rival applicant. Otherwise, Suzanne could have demonstrated that she was using the brand name in commerce before the other organization. She then would have had grounds to challenge the rival trademark or file her own trademark application with an earlier date of use.
The takeaway is that the time to file a trademark was when Suzanne conceived the brand, and definitely before telling others about her concept and brand name.
In addition, Suzanne now realizes that a record of the date when the brand name is first used in commerce is important.
This case also had copyright implications because Suzanne considered writing a book using the brand name as the title. It may be logical to think that an independently created book name will receive copyright protection once it is written down. However, the rival applicant could send a cease and desist letter to Suzanne asking her to stop using the name. Consumers may be confused and think a similarly titled book is part of the rival brand. At this point, Suzanne cannot proceed with her original brand name under either trademark or copyright.
Know your rights
The following example played out in a young entrepreneur’s favor, but the end result simply should not have happened.
Years ago, Lexie started up a pool company and filed with the State to operate under “Crystal Clear Pools.” She gathered about 30 pool customers and was doing well for a nineteen-year-old.
A local competitor came to Lexie and showed her that he was operating with the same company name, without any state or USPTO registration, or any use of the TM symbol. His Crystal Clear Pools had been servicing some 300 pools for 10 years.
Using her state “doing business as” name registration as proof of ownership, Lexie negotiated an annual payment for his company to continue to use the “Crystal Clear Pools” name. She later sold her company to him.
Unfortunately, he did not know his rights. He was using Crystal Clear Pools in commerce long before Lexie had even graduated high school, and was therefore entitled to a common law trademark. That common law trademark protection should have trumped Lexie’s later State registration. This is a perfect example of why seeking legal counsel when these issues arise can be critical.
The next article in this series will focus on some additional misconceptions in the area of trademarks. Subsequent articles will discuss common misunderstandings when deciding whether to patent your IP, IP ownership strategies, special copyright concerns when developing software, and patents versus trade secrets. But please remember, when in doubt, consult an attorney.