Intellectual property considerations for entrepreneurs
Posted on 11/03/2017 at 12:00 AM by Amy Plummer
Do you write and create software for your start-up business? Have you developed a new and unique invention? Maybe you hope to operate your own photography studio, open a bakery with a catchy name or sell graphic design services. Regardless of the products or services you intend to offer, all entrepreneurs should be thinking about how to protect the intellectual property of their start up business.
Intellectual property, also known as “IP”, is a common term used to describe several different types of property rights that apply generally to concepts or inventions including brand names or creative works.
There are primarily four categories of intellectual property rights, including: (1) trademarks; (2) copyrights; (3) patents and (4) trade secrets.
A trademark is a word, symbol or phrase used in connection with the sale of goods or services. Think “Crock-Pot,” “Hacky-Sak”, and “Photoshop.” The reason an entrepreneur should take steps to protect trademarks is so consumers can distinguish the goods or services that your business sells from those sold by other businesses.
Though you may be able to obtain common law rights to a trademark within a certain geographic area by simply using such mark, there are advantages to obtaining registration of your mark with the U.S. Patent and Trademark Office. These advantages include: (1) the exclusive right, throughout the United States, to use the mark in connection with the type of goods or services that your company sells; (2) establishing a basis to bring an infringement lawsuit against a third party using the same or similar mark; and (3) providing notice of ownership to the public within the United States.
A copyright is a type of intellectual property right that protects creative work, such as music, literature, photography, illustrations, architecture, computer programs and photography. Copyright is unique in the sense that it is automatically created as soon as the work is fixed in some form of physical medium. For example, copyright exists the moment an author prepares a written work, when an artist or illustrator designs a drawing, a photographer takes a photograph or a computer programmer types computer code. For a crash-course on the importance of copyrights to start-ups, see The Social Network.
That said, there are benefits to registering your copyrighted work with the U.S. Copyright Office. Among other things, registration with the U.S. Copyright Office establishes conclusive proof of your ownership in the work, creates additional statutory damages that may be available to you in
the event of infringement and provides notice to the public that you are the original creator of the work.
A patent is a type of intellectual property right that provides legal protection for new and useful innovations and processes. The U.S. Government grants patents to inventors, which essentially create a monopoly for a certain period of time allowing the patent holder to sell products protected by such patent. To see how patents can be instrumental in helping a start-up grow into an empire, look no further than Google, Dropbox and Spanx. There are three different types of patents including (1) utility patents, which protect useful processes; (2) design patents, which protect original manufacturing designs; and (3) plant patents, which protect new varieties of plants. Because a patent registered with the U.S. Trademark and Patent Office is a valuable type of intellectual property right, preparing and filing the patent involves a significant amount of time, money and patience. Inventors interested in seeking patent protection should consult with a patent attorney to obtain more information about the process and whether his or her invention might in fact be protected by a patent.
Trade secrets can be blamed for our inability to mimic McDonald’s “special sauce” and understand how the New York Times calculates its bestsellers list. A trade secret is a type of intellectual property which protects any type of confidential information that gives a business an advantage over its competition and may include such things as secret information, formulas or processes that sets your business apart from others. The key distinction for trade secret protection is that the confidential information must be kept secret and undisclosed, as opposed to being registered with any public agency. Types of trade secrets include advertising lists, customer lists, chemical compounds, formulas, product materials and data.
When starting your business, it is essential that you protect the secrecy of all types of intellectual property before publically disclosing it. Prior to pitching your idea to potential investors and business partners, each should be asked to sign a Nondisclosure Agreement which states that whatever is disclosed by you during your meeting or interactions must be kept confidential and not be used for any other purpose other than a potential business relationship. It is also crucial that any information shared that you deem confidential be marked as such and you retain records of what specific information is shared.
Employee/Independent Contractor Considerations
One final consideration relates to ownership of intellectual property rights between a company and its employees and independent contractors. By definition of law, most intellectual property created by an employee of a company within the scope of their employment belongs to the company. However, so there is no confusion, it is often beneficial to require employees to sign employment conditions which require the employee to acknowledge and agree that such intellectual property rights do in fact belong to the company for which they are employed. Independent contractors may be treated differently since they operate independently and do not fall under the company umbrella of an employee. Generally speaking, without a written agreement that states otherwise, any IP that an independent contractor creates belongs to that independent contractor by default. It is crucial, therefore, that if you expect to continue to own all intellectual property rights to a product or service provided in part by independent contractors, that the independent contractor sign an Assignment Agreement to assign all rights and ownership to the business and a Confidentiality Agreement ensuring that s/he does not disclose such information to others.
Given the important and potentially lucrative rights that intellectual property law affords a business, it is crucial for you to take steps to protect your ownership rights to such property and consult with an attorney regarding how best to do so. This will ensure maximum value of your business both in the initial stages and as it grows.
If you have questions about your business’s intellectual property rights, please contact the Dickinson Law Firm at (515) 244-2600 to speak with an experienced attorney.
This material is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.
- Amy Plummer
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