Protect Your Idea$
Turning Intellectual Property Into Value

By Brent C.J. Britton
Published: February / March 2008

In our capitalist economy, management is expected to fiercely seize every lawful opportunity to increase company valuation. Intellectual Property (IP) law provides many such opportunities of which the wise entrepreneur should be aware.

Dubious? Here are just a few of the things that effective use of IP can do for your company: forestall competition, reduce risks, generate cash, and perhaps most importantly, create new assets where none had existed before. IP is the ROI on R&D – it’s how you turn innovative ideas into assets! Effective use of IP can contribute substantially to the bottom line.

What exactly is IP?

IP refers generally to exclusive ownership rights in creative assets. IP rights are rights of exclusion, meaning they can be used to exclude others from copying and competing certain ways. Trademarks, patents, copyrights, and trade secrets are the best known types of IP. In a nutshell, here is what you need to know about each of them:

Trademarks

Trademarks protect brand names, logos, taglines, and other marks that identify the source of goods and services in the marketplace. Trademark rights begin to accrue in a company’s geographic territory just by using the mark in commerce, but federal trademark registration at the U.S. Patent and Trademark Office (PTO) provides stronger protection that covers the whole country. Trademark rights last for as long as the underlying brand is continuously used in commerce. One infringes a trademark by using a similar mark on similar goods in a way that is likely to confuse the consuming public as to the source of those goods.

Some trademarks cannot be owned. Brands that describe the goods with which they are used, for example, are out of bounds. It is perfectly okay to own trademark rights in the word “Apple” if you are selling computers; it is not okay if you are selling apples, however, because other apple sellers need to use that word too. The strongest trademarks, therefore, are so-called fanciful marks – words that are made-up or have no rhetorical relationship to the underlying goods. “Kodak,” “Xerox,” and “Google” are the oft-cited favorites in the fanciful department.

Before committing significant resources to developing a brand, it is always a good idea to run a trademark search to ensure that someone else doesn’t already own the trademark in that brand. You would be surprised to learn how often people neglect to clear trademark rights before they name their company, purchase a domain name, print business cards and letterhead, and even begin selling products, all under a new brand. They are often shocked when the cease & desist letter arrives from the senior owner of the trademark claiming the inevitable likelihood of consumer confusion.

Patents

Patents protect new inventions (and methods and processes and a few other things, but for simplicity let’s just call them all “inventions”). In fact, other than secrecy, a patent is the only way to prevent others from copying your inventions. And when it comes to inventions, secrecy is not always an option, especially if their inner workings are apparent to anyone who takes a moment to peek inside the products that embody them.

Unlike with trademarks, not filing is not an option. To own exclusive rights in your invention, you must file a patent application with the PTO and wait for the patent to issue, which can take years and a lot of money. Once issued, a patent lasts for 20 years from the date it was originally filed. One infringes a patent by making, using, or selling a product that is described by the patent.

Any enterprise that is innovating or creating or advancing the state of the art in any area should be protecting those advancements by obtaining all available IP rights. Aggressive attention to IP is a conservative business practice.

IP rights, especially patents, have lately become a thriving form of currency among a large and growing number of market participants. An entire subculture of IP “investment banks,” speculators, traders, “trolls,” auction houses, and the like, has arisen to make a market in IP. Underlying the dynamism of this market is a shared understanding of the fundamental principle that IP generates licensing revenues when asserted against potential infringers – who often agree to pay royalties as a much cheaper and more predictable alternative than the exorbitant expense of IP litigation – and can ultimately result in large damage awards against competitors who refuse a license. This, in turn, means that more applications to secure IP rights are being filed every year as more companies attempt to establish exclusionary beachheads in what they imagine to be the important technologies of the future. It also leads directly to more IP being asserted more aggressively than ever against potential infringers. It is not hyperbolic, then, to suggest that viable participation in modern commerce requires careful attention to IP.

And make no mistake: IP is not just for technology companies. Items as prosaic as a brand name or a customer list can be protected by IP; even if these are all you have, you can use IP to fatten your company’s valuation.

Though costly and time consuming, patents are an important part of every innovative company’s IP portfolio. A thoughtful patent strategy can effectively eliminate competition in a particular market sector. In the next BABM issue, we will cover copyrights and trade secrets, and we’ll explore some strategic and transactional issues.

About the Author
Brent C.J. Britton is a lawyer at the Tampa office of Squire Sanders & Dempsey LLP, a global law firm. He practices intellectual property and corporate law.