 Legal Best Practices
Magazine
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.
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.
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