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Avoiding Intellectual Property
"A word beginning with X …the more we thought about it, the more we were ready to try it." -- John Hartnett, Former Chairman of Xerox Corporation.
So you think you've got a good business idea. So did Google, when they created a new email system they called "GMail." All too often business owners fail to protect their greatest asset- their intellectual property - and end up spending budgetary line items intended for product development, healthcare or marketing on legal fees instead. In Google's case, the company failed to research and protect the name of its new invention, and a small British investment research firm instead scooped up the rights to the name for just a few thousand dollars.
The increasing value of intellectual property in today's idea-driven economy makes it worthwhile for business owners to consider measures to protect and prevent the unfair use of their intellectual property. But what exactly is intellectual property?
Intellectual property - or IP for short - takes a number of forms, including trademarks, copyrights, patents and trade secrets. Business owners beware: the litigation process is not the place to learn lessons about intellectual property protection. Any business owner could, and should, follow a handful of relatively simple preventative measures as part of his or her ordinary business practices to avoid disputes or, at the very least, to improve one's legal position. It's all too common that business people regret, in retrospect, that they have only oral understandings and no written agreement setting out their intellectual property rights.
Here are some key measures to keep in mind:
Trademarks - Trademarks are source identifiers. Think of KODAK® or GOOGLE®. They communicate to customers a source of goods or services of a consistent quality and reliability. Trademarks are sometimes chosen through great planning, supported by market research, committee meetings and other resources. Other times they arise by happenstance.
When considering trademarks, there are two important steps to follow. The first may seem obvious, but is often overlooked. Search your trademarks before using them to make sure that you are not using a mark that is already being used by somebody else. This will also assist in avoiding any claims down the road that you have infringed or unfairly competed with a more senior user.
Second, you should consider registering trademarks that are important to your business, especially if the business is making a significant investment in those trademarks. Distinctive trademarks are much more powerful than descriptive marks. Registration, particularly on the federal level, brings with it remedies for unauthorized use of your marks, including the ability to seek protection against infringement and unfair competition in the federal courts.
Trademarks aren't limited to names either. The bullseye logo used by the Target department stores is a trademark. So is the distinctive pink color of Owens Corning Fibreglass. The NBC sound signature (think "bum bum bummmm.") is also a trademark
You should also take care to use the trademark properly. The superscript symbol indicates that you're claiming rights in the mark, either under state or common law; whereas the ® indicates a federal trademark registration.
Copyrights - Copyrights are sometimes the most misunderstood, but frequently the most valuable of the bundle of intellectual property rights that your company has. Copyrights do not protect ideas but rather protect expressions of ideas. For example, anybody can write a fictional account about star-crossed lovers whose cruise ship hits an iceberg in the North Atlantic. However, borrowing plot lines or dialog from James Cameron's movie, The Titanic, is off-limits. Copyrights exist in creative expression once the expression is in fixed form, but in order to maximize remedies under Federal law, should be registered as soon as possible after the work has been created and put into a fixed form. Remember to secure copyrights for creative work such as signs, websites or computer programs as well as publications.
One of the most frequent traps for the uninitiated arises when obtaining creative services from an outside consultant. Unless you have an agreement in writing, the consultant may very well have a legitimate claim that it, and not you, owns the copyright in any work it created under your commission. A written agreement with an independent contractor must address the parties' respective rights, granting your business either the ownership or the license in the copyright in the work generated under the consulting contract. Unless the work is produced by an employee acting within the scope of his or her employment, copyrights cannot be transferred in the absence of a written agreement.
Patents - Patents cover unique processes. If an employee will be creating patentable inventions, such as building a better mousetrap, you should have a written "assignment of inventions agreement" for the employee. Under this agreement the employee agrees to assign his or her rights in inventions to your business. Again, the preventative act of putting agreements in writing can save you from litigation in the future.
Trade Secrets - Trade secrets can be your company's competitive edge, the "secret sauce," and are valuable company assets as well. Most businesses believe that proprietary information is naturally protected. However, just because this information is unique and valuable to your company it is not automatically protected. Genuine trade secrets must be maintained with limited access by company employees and appropriate security safeguards.
The Washington Post, some years back successfully defended a lawsuit brought by the Church of Scientology by showing that so-called "trade secrets" of the Church were available on the Internet. In addition, for key employees you should consider a "non-compete agreement," which commonly includes a non-disclosure agreement. Such agreements have to be narrowly tailored to the specific needs and markets of your business, but, if properly drawn, are generally good measures of protection.
As with all valuable assets, your company needs to protect its intellectual property. Getting agreements in writing and registering products as soon as possible are the best ways to avoid future disputes. For your company, it is also important to be aware of the agreements and registrations of others. Being on either side of a litigation process is costly and time consuming. Nonetheless, if the day comes when you feel your intellectual property rights have been infringed you will want a clear, documented position from which to argue your case.
Many more articles in The Legal Refresher in The CEO Refresher Archives