As we move into autumn in the Sierra, there are a number of things to consider.
It’s a good time to work on our businesses instead of in them. As founders, we often get so wrapped up in the day-to-day machinations of the operations, we lose sight of the other aspects of building and securing the company’s assets and future. I actually made this mistake recently in negotiating with a potential partner for one of my companies. I didn’t follow my own mantras and lost valuable assets to an unscrupulous scumbag posing as a legitimate small businessman … go figure.
That’s my lament. Don’t let it happen to you. Protect yourself, your family, your business and your future. I can tell you firsthand that every business has IP. From your name, tagline and logo, each should be your own and secured.
My buddy and fellow BizAssembly.org board member Jeff Sheldon is a world-renowned IP attorney who lives in the area, regularly gives back to local startups, and wrote the book The Manager’s Guide to Intellectual Property. No kidding, Jeff is the man. Here are his tips and insights.
We’ll both be at the BizAssembly.org monthly workshop from 9 to 11:30 a.m., Saturday, Oct. 14, at the Innevation Center, 450 Sinclair St., in Reno, to tackle your business challenges. —Matt Westfield
Do you want your success to be copied? Probably not. If not, then please read this.
Under U.S. law, anyone can legally copy anything, unless it qualifies for protection under intellectual property law. The following types of protection are available:
- Trade secrets
- Agreements prohibiting competition
Do you qualify for any of these? Let’s consider.
Can you get a patent? If so, that is great, because a U.S. patent grants the patent owner the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States, or importing the invention into the United States.
Unfortunately, obtaining a patent can take years. They can be expensive, and enforcing them can also be expensive.
There are two principal types of patents:
• Utility patents may be granted to anyone who invents or discovers a new and useful process, machine, article of manufacture or composition of matter; or a new and useful improvement of these.
• Design patents may be granted to anyone who invents a new, original and ornamental design for an article of manufacture.
So, a patent may be available to minimize competition.
Trade secret protection is an alternative to patent protection for inventions that can be kept secret.
For information to qualify for trade secret protection, it must meet three requirements: eligible subject matter, economic value, and secrecy. Eligible subject matter that can be protected under trade secret law is very broad. In many states, eligible subject matter is information, including a formula, pattern, compilation, program, device, method, technique or process. There is very little that goes on in a business that does not qualify as eligible.
Economic value is easily obtained. Secrecy can be more of a challenge, particularly if a product can be reverse-engineered.
Trademarks (including trade dress)
This is where I tell cash-limited clients to start.
Almost every business has a trademark. At a minimum, the name of the business usually serves as a trademark. Trademarks can be one of the most valuable assets of a business and thus need to be selected carefully and vigorously protected. How valuable is the Coca-Cola mark?
A trademark identifies the source of the goods or services of one company and distinguishes them from the goods of others. It can be product configuration or packaging. (Think of the Coca-Cola classic bottle.)
Trademarks take many forms. They can be word marks such as “Ivory,” letters such as “IBM,” symbols such as the Sun-Maid raisin maid, sounds such as the Microsoft Windows boot-up sound, or logos such as the Google logo.
When selecting a mark, the more distinctive the mark, the more likely that it is protectable. Marks are classified by their distinctiveness as follows, in descending order of inherent distinctiveness: (1) fanciful and arbitrary; (2) suggestive; and (3) descriptive terms, geographic terms, and surnames. Generic terms can never be a trademark.
Consider the following factors in choosing your mark:
• Is the mark available? Does someone else have the same or similar mark so that there a likelihood of confusion? And for trademarks to be used in foreign countries, is the mark available in those countries?
• How distinctive is the trademark? The more distinctive a mark, the easier it is to protect against infringers.
• Is the corresponding domain name available?
Copyright protection exists “in original works of authorship fixed in any tangible medium of expression …” according to the copyright statute. Thus, there are three requirements for copyright protection:
1. It needs to be the right type of “work.”
2. “Originality” is required. The “originality” requirement excludes from copyright protection such items as simple geometric shapes, short phrases and the famous “happy face.”
3. The work must be “fixed in a tangible medium.” This excludes from copyright protection mere ideas that have yet to be recorded, works such as oral presentations that are not recorded, and a whiteboard presentation that can easily be erased.
Good news—copyright protection exists from the time a work is created in a fixed form. It is automatic. No registration is required, although there are advantages of registration, such as collection of attorney fees, if the work has been registered before infringement began.
Copyrightable works include:
• Literary works, including books, manuscripts, plays, poems, software, databases, manuals, scripts, e-mails, tweets, blogs, and proposals
• Musical works and sound recordings, including any accompanying words
• Dramatic works, including any accompanying music
• Pictorial, graphic and sculptural works, including toys
• Motion pictures and other audiovisual works
• Architectural works
The copyright in a work becomes the property of the author who created the work. An exception is when an employer owns the copyright in a work created by an employee within the scope of the employee’s work. If the work is created by a non-employee such as an independent contractor, there needs to be a written assignment of the copyright.
It is possible to protect ideas and inventions by having someone agree not to disclose or use them. Examples of agreements that restrict the right of a third party with regard to an idea or invention include:
• Confidentiality agreements—these are commonly used when submitting an idea to a potential manufacturer, licensee, investor or the like.
• No reverse engineering—these are commonly included in software-license agreements and custom chemical-development agreements.
• No competition—these can be used to prevent a distributor or licensee from selling a competitive product, or to keep the owner of a business from competing after selling the business. Care must be used with noncompetition clauses. In some states, they are illegal in many circumstances.