Business owners tend to underestimate their intellectual property, says Lee Fraley, a partner in the Phoenix office of law firm Snell & Wilmer who specializes in IP and works with many entrepreneurial businesses in acquisition transactions. “They think patents is all of IP, but it’s much more than that — it’s anything that gives a company a competitive advantage.”
The four primary types of IP are patents, trade secrets, trademarks and copyrights. The first two protect things that have practical use, the second two protect expression, explains Shane Olafson, a partner in the Phoenix office of law firm Lewis Roca Rothgerber whose practice specialties include trademarks and copyrights.
A patent is a grant by the government of exclusive rights to a specific knowledge for 20 years, in exchange for expressly describing the item invented. A trade secret, such as the formula for Coca Cola, is the polar opposite — knowledge kept secret from everyone except those who need to know and for which there is no legal recourse if the secret does get out. “Some things are not well-suited for trade secrets, for instance anything that can be reverse-engineered,” Olafson says. However, some technologies have a very short shelf-life. Referring to semi-conductors, Olafson says it would not make sense to spend money patenting something that will be obsolete in a few years.
A trademark is the name a company gives a product or service so customers can differentiate it from competitors, explains Flavia Campbell, an attorney who also practices in the Phoenix office of Lewis Roca Rothgerber. The company name, itself, can usually not serve as a trademark. A business owner may choose to not seek federal registration of a trademark, but, she says, “Even if he’s not worried about securing exclusive rights for himself, he needs to be sure he’s not infringing on someone else.” Should the item become successful and come to the attention of another business that has registered the trademark, the other business could issue a cease and desist order requiring signage to come down and products be taken off the shelf.
A trademark can be any logo or name or tagline, and is an important asset. But Fraley cautions care in selecting the name. “If it’s too descriptive, it may be difficult to register — to keep others from using the descriptive terms.” Names that are suggestive, on the other hand — such as Greyhound and Coppertone — are the easiest to protect. “They are more distinctive, easiest to register, less likely to find in conflict with another, and easier to enforce if someone copies you.” Fanciful or arbitrary names, such as Apple for computers, can also be strong — but it’s an eventual rather than immediate result.
Once a trademark is established, Fraley emphasizes it is important to maintain appropriate use of it to not weaken trademark rights and significance. Don’t use it in descriptive or generic fashion, abbreviate or hyphenate it. Do be consistent in its spelling. “You don’t want it to become a household name,” he says, pointing out that “aspirin” was once a trademark name.
Fraley suggests also checking for domain names that are available, and securing reasonable variations — including Web extensions. Businesses should make sure the domain names are registered by the company and transfer them if they are not; if the domain name is registered by an outside contractor or individual in the company, that person owns the registration. Simply registering the domain name, however, reserves its place on the Web but does not give exclusive rights to the name, Campbell notes.
Copyright is more applicable to artistic expression, such as photographs, music and architectural works. It is important to note that copyright attaches as soon as the item is created in fixed form, and the owner of the copyright is its creator. “You can use the copyright symbol to give notice to others that you created it,” Campbell says. To be able to sue in court against someone else’s unauthorized use, however, the copyright must be registered with the federal government. “You can obtain this registration at any time,” Olafson says, “but the timing may affect the damages you can recover.”
“You don’t necessarily own it just because you paid for it,” Fraley notes. This applies not just to outside contractors, including website developers, but also to a company’s natural employee who is working outside the scope of his or her job description. For the company to own the copyright, it needs to have an assignment of interest. Avoid ambiguous verbiage such as “the contractor agrees to assign.” There are no specifically correct words, Fraley says, but the company needs to make clear what it is discussing.
Correcting ownership issues ahead of time avoids the potential for someone to hold ownership rights as leverage against a business. Businesses may find it beneficial to do an intellectual property audit “to be sure you actually own what you think you own,” Fraley says.