Recognizing and Protecting Your Company’s Intellectual Property
Companies often fail to protect their valuable intellectual capital because they do not understand that even noncomplex items such as customer lists, names of products, and anticipated marketing plans are protectable. The first step in protecting intellectual property is to identify protectable assets. Once those intellectual capital assets are identified, they can be protected and used to generate income.
The Value of Intellectual Property
Until the 1990s, nearly all business owners could readily point to their company’s valuable assets. Those assets usually consisted of real estate, referred to as real property, or durable goods, such as trucks, manufacturing facilities, or equipment, referred to as personal property. The past several years have seen tremendous growth in another type of property that is very different from real or personal property: intellectual property. It is called intellectual property because it is the product of human creativity, thought, and inventiveness. Although much of intellectual property is intangible, it can be more valuable than real or personal property.
Because the U.S. economy is witnessing a dramatic surge in the growth of technology-related services and products, the field of intellectual property is undergoing explosive growth. In fact, some companies own few assets other than intellectual property. Whereas it is easy to understand the value of real estate or tangible assets, such as inventory, it is more difficult to understand the value of intangible assets, such as a method of doing business, one’s Internet domain name, a list of potential acquisition targets, the know-how of key employees, or the marketing materials used in a business. All these assets provide a competitive edge to their owner, and the loss of such assets can be just as devastating to a company as the loss of its equipment, inventory, or other physical goods.
Moreover, because of the ease of global communications today, such valuable information can be disseminated to millions of people with a simple keystroke. According to one expert, the estimated economic loss caused by misappropriation of intellectual property, including copyright piracy, theft of valuable trade secrets, and employee raiding, is $50 billion each year.1 For example, a disgruntled employee may post a company’s list of customers on the Internet, irreparably damaging the company’s business. Thus, just as intellectual property is becoming more valuable, protecting it has become more challenging.
Intellectual property is legally fragile, meaning that once an owner’s rights are lost or compromised, it is extremely difficult, if not impossible, to recover those rights. Thus, a license granted to another to use a trademark that does not allow the trademark owner to verify the quality of the goods produced under the trademark may well result in a complete loss of the mark. Similarly, marketing an important invention without seeking a patent for it may preclude one from later seeking patent protection. Employees who take valuable company information to a competitor without any restrictions imposed by the first, or original, employer on the use of the information may cause the information to lose its protected status.
Intellectual property can also be used to generate revenue. Trademarks and patents can be licensed to others for periodic license or royalty fees. Software can be sold to third parties. Companies can market and sell unneeded logos, trademarks, inventions, and processes. These assets cannot be mined for their revenue-generating possibilities if a company does not understand what assets it owns, however. Once a company identifies what it owns, it can protect the assets to ensure that it maintains its competitiveness and increases revenue through the strategic licensing and sale of its intellectual property capital.
The Four Key Types of Intellectual Property
Before discussing the specific types of intellectual property that are likely to be developed and used by various business departments, a brief introduction to the key types of intellectual property is useful. Intellectual property generally is viewed as comprising four separate but often overlapping types of property rights: trademarks, copyrights, patents, and trade secrets.
Trademarks
The names, designs, slogans, or other devices by which a company identifies its products and services can be among the most valuable assets a company owns. Most American consumers can readily fill in the blank in the following slogan: “Just Do ___.” Nearly all consumers can easily hum the tune that accompanies the words “You Deserve a Break Today.” Just a glimpse of aqua and orange at the edge of a highway lets consumers know there is a Howard Johnson’s nearby. How did these businesses achieve such national and even international recognition for their goods and services? By selecting and then vigorously protecting their trademarks. In fact, the Coca-Cola Company estimates the value of its portfolio of trademarks at more than $30 billion.
The Term Defined
A trademark is a name, symbol, device, or combination thereof that identifies and distinguishes one’s goods and services from those of another. Technically, a trademark is used to identify a good or product, such as WINDOWS® or CAMRY®, whereas a service mark is used to identify services, such as H & R BLOCK® or FLY THE FRIENDLY SKIES OF UNITED®. In practice, however, most people use the term trademark to refer to both goods and services.
How Trademark Rights Arise
Trademark rights arise through use of a mark. Thus, the owner of a small car repair service in Kansas City operating as TENDER, LOVING CAR has rights in and to this mark against any later users who use a confusingly similar mark in Kansas City and a reasonable area of expansion beyond, even if the owner has not registered the mark with any federal or state agency. Rights to trademarks are not contingent on registration, but registration does afford the trademark owner certain advantages. For example, a federal registration of TENDER, LOVING CAR would protect the mark nationwide against later confusingly similar uses.
What Marks Are Protectable
Not all names or slogans qualify for protection. A mark cannot be generic, such as SODA for a beverage or TV for a television. Furthermore, marks that merely describe the goods or services offered under the marks generally are not protectable. For example, the name Tax Preparation Software for a software program that enables its users to prepare their tax returns probably would not be protectable.
Trademark Registration
If a mark is used in interstate commerce, its owner should seek a federal registration for it to achieve the greatest protection for the mark. An application for registration is filed with the U.S. Patent and Trademark Office (PTO), located in Washington, D.C. The filing fee is $325, and it generally takes about a year for the registration to issue. Thereafter, the PTO requires periodic filings to ensure that the mark is in use. Marks not in use become available to others. Once the mark is registered with the PTO, its owner can use the federal registration symbol ® to identify that fact, although use of the registration symbol is not required, and alternative forms of registration notice may be used.
Trademarks are powerful tools for achieving consumer recognition and market share. It has been estimated that most American consumers encounter more than 1,000 trademarks during a day. The marks are found on the clothes they wear, on the packaging for the foods they eat, on the cars they drive, and in the ads they encounter in magazines and on the radio and television. If properly protected, trademarks can last forever and can provide a business with a unique and immediately visible identification to its customers and the world beyond.
Copyrights
Copyright is a form of protection available to a wide variety of works, including literary, musical, dramatic, graphic, sculptural, and architectural works, motion pictures, and sound recordings. The majority of copyrighted works are literary works, meaning works that can be expressed in words or numbers. The use of the term literary does not imply that only critically acclaimed works are protectable. Even advertising brochures and copy are protectable as literary works. Similarly, because computer programs are expressed in words and numbers, they are protectable as literary works.
How Copyright Rights Arise
Copyright protection exists from the moment a work is created. No registration with the U.S. Copyright Office, the government agency charged with copyright registration and searching, is required, although registration affords the copyright owner certain advantages. Copyrights can be registered only at the federal level; there is no state protection for copyrights.
What Is Protectable
Copyright protects works of original authorship, and a wide variety of works are protectable, including books, magazines, promotional materials, music, posters, movies, slide presentations, dance routines, and Web site content. Not every work of authorship is protectable. Copyright protection does not extend to ideas, procedures, processes, systems, or concepts, and mere slogans, titles, and blank forms cannot be protected under copyright law. Copyright gives the owner the right to reproduce, distribute, perform, and display the work, and the right to create derivative works based on the original work, such as preparing a sequel to a book or movie or an upgrade of a software program.
Copyright Registration
Copyrights can be registered with the U.S. Copyright Office, a division of the Library of Congress, located in Washington, D.C. Registration is inexpensive and easy. At present, the filing fee is $30. Moreover, the process is fairly rapid, with the U.S. Copyright Office generally reviewing the application and issuing the registration within four to eight months. Once registered, the copyright need not be renewed, and the registration lasts for the author’s life plus 70 years (or in the case of works created by employees for their employers, for 95 years from publication of the work or 120 years from its creation, whichever is shorter).
Patents
A patent is a grant from the U.S. government allowing its owner to exclude another from making, using, or selling his or her invention. There are three types of patents: utility patents, which protect new and useful inventions and processes; design patents, which protect new and ornamental designs for articles; and plant patents, which protect new and distinctive plant varieties that are asexually reproduced. Utility patents are the most common type of patent, accounting for more than 90 percent of all patents granted in 1999.
What Is Protectable
Utility patents are available to anyone who invents or discovers any new, useful, and nonobvious process, machine, or invention. The category is broad enough to cover the cotton gin, the Wright brothers’ airplane, King Gillette’s safety razor, pharmaceuticals, genetically altered mice, and the one-click system patented by Amazon.com allowing its online users to place orders without having to reenter mailing and credit card information.
Registration of Patents
Unlike trademarks, rights to which arise upon use of the mark, and copyrights, rights to which arise upon creation of a work, patent rights arise only upon issuance of a patent registration by the PTO. There are no state laws relating to patents, and patents are governed exclusively by federal law. Utility patents are valid for twenty years from the date the inventor files an application. After this period the invention falls into the public domain, and anyone is free to make, use, or sell the invention. The inventor is given the twenty-year monopoly to market and sell the invention in return for giving up all rights after the twenty-year period of protection. Patent registration is expensive and complex. The application filing fee is $710 ($355 for small entities), and the process generally takes about eighteen months.
Trade Secrets
Trade secrets consist of any valuable information that gives its owner a competitive advantage. Nearly any kind of information is protectable, including customer lists, recipes, formulas, marketing plans, employee rosters, financial information and forecasts, and methods of conducting business. Trade secret protection arises as soon as the information comes into being and lasts as long as the owner makes reasonable efforts to keep the information secret. No registration with any government authority, whether federal or state, is required. If properly safeguarded, trade secrets can last forever.
Types of Intellectual Property Owned by Business Professionals
Intellectual property is not the exclusive province of the dot.com companies. Nearly all business enterprises have valuable intellectual property assets. The names of planned products or goods, anticipated advertising slogans, valuable forms and checklists, and training materials should all be protected. Each division or department within a company probably is using valuable intellectual property assets, and each should conduct a thorough audit of its assets. Although Chapter 20 provides information on conducting an intellectual property audit, a brief introduction to the types of intellectual property used by various business groups is helpful.
Sales and Marketing Departments
A company’s sales and marketing department may possess a wide variety of intellectual property assets, including names, slogans, marketing materials, advertisements, and similar materials. A name by which the department refers to a product or service may be protectable. For example, if the sales and marketing group is informally referring to a planned financial service the company will offer as “Capital Ideas,” the name should be considered for trademark protection. Slogans such as “We Bring Your Savings Home” can be similarly protected. Sales and marketing professionals should be encouraged to review the company’s letterhead, marketing brochures, and any other literature to determine whether the company is already using trademarks, designs, logos, and slogans.
Brochures, ad copy, anticipated radio and television promotions, and other materials that are in the planning stage should be identified to ensure that they are protected against inadvertent disclosure or leaking to competitors. Such materials should not be released to focus groups or others without a nondisclosure agreement by which the reviewer agrees not to disclose the information. Similarly, new products, such as snack foods or computer programs, should not be test-marketed unless nondisclosure agreements have been signed. Those who assist the sales and marketing group in developing materials, such as independent contractors developing a new company logo, should be required to assign any rights in the work product to the company and to agree to protect the product from disclosure. During the planning stage, these materials are protectable as trade secrets. Once created in a fixed form, they are subject to copyright protection.
Power Point® presentations and other slides, movies, and audiovisual materials used by a company are protectable as copyrightable works. Although live sales pitches and presentations are not protectable under copyright law, written materials that accompany those presentations are.
Human Resources Departments
A company’s human resources group may have a wide variety of forms and materials that can be protected through copyright. The company’s employee handbook is subject to copyright protection, as are any forms the company uses, as long as those forms are more than blank template forms. If a company uses written materials explaining its mentoring program or termination procedures, they can also be protected. Similarly, forms and checklists used by recruiters in qualifying and hiring candidates ...