Crash Course in Intellectual Property

By Jonathan M. Purow

From the moment that your startup comes up with a company name, you are creating intellectual property. While every single dollar counts when you are first launching your company, it is important to understand that if certain steps aren’t taken to protect your intellectual property from the onset, it can cost you a lot more down the road. Every potential investor is going to want to know if your company has protected its IP properly, or if your startup faces the risk of a lawsuit that could stop it in its tracks.

The first step is to understand what the different types of intellectual property protection are, so that you can determine the optimal means of protecting the various components of your startup. Intellectual property is split into four general fields—trademarks, copyrights, patents and trade secrets, each of which covers different materials and offers different benefits.

Trademarks are anything that can serve as an indicator to consumers that you are the source of your goods or services. This of course includes brand names and slogans, but can also include more unconventional items such as sounds (the NBC chimes for television services) and colors (the color brown for UPS shipping services) if they gain sufficient fame to function as source indicators. One common mistake made by entrepreneurs is believing that registering a company name with a state division of corporations is the same as obtaining trademark protection. It is not, and that is why it is extremely important to conduct trademark searches to ensure that there are no companies using your desired trademark, because US trademark law grants priority to the party that used the mark earliest. There would be nothing worse than picking a great company name, starting to sell your product and building momentum and a following, only to get a cease and desist letter from someone who has prior rights to the name. Trademarks can be federally registered, which grants the registration owner greater ability to enforce against infringers. Once you have settled upon a properly cleared trademark, it is important to remember to preserve evidence of your use of the mark.

Copyright law is commonly used to protect photographs, music, movies, and other creative output. However, it can also be used to protect items such as textile designs and software code (which can be submitted in an application with important sections redacted so they remain private). Copyright registrations are cheap to obtain and last for an extremely long period of time. They give their holder the ability to sue for infringement in federal courts and get heightened “statutory” damages, among other benefits.

There are three different types of patents—utility patents (which protect inventions and methods), design patents (which protect the ornamental design of a product) and plant patents (which protect….plants). One very important tip to remember regarding utility patents is that you must file your application for a utility patent within one year of public disclosure of the material to be protected. A utility patent is the most expensive type of intellectual property registration to obtain, generally costing at least a couple thousand dollars and frequently over $100,000 depending upon the application subject matter. Design patents are less expensive to obtain and can provide good protection against infringers attempting to copy your company’s aesthetically appealing product design. Design patents garnered additional visibility when they were the main basis for Apple’s $1 billion judgment against Samsung.

Trade secret protection can cover virtually any information. Famous examples of trade secrets include Coke’s recipe and KFC’s blend of herbs and spices.  Some companies prefer trade secret protection over patent protection because patent registrations expire, leaving the subject matter in the public domain and thereby enabling your competitors to start making the same product (e.g. generic drugs). Trade secrets, on the other hand, can last perpetually, so long as the secret is maintained. Any information that is to be treated as a trade secret should always be accompanied by text to the effect of “CONFIDENTIAL TRADE SECRET”, be it in an email or on hard copy, and all employees of your company should have employment agreements governing the confidentiality of designated trade secrets.

The information above is merely the tip of the iceberg when it comes to the many laws governing the different forms of intellectual property protection. While it is tempting to skimp and attempt to obtain IP registrations through DIY legal websites, a mistake in the application process can compromise your ability to obtain a registration, or render any registration worthless from the start. There are also a number of mistakes that you can make in the usage of your intellectual property that can undermine your rights down the road. The best means to ensure that you are taking the proper steps to protect your intellectual property is to consult with an attorney who specializes in the field as early as possible.