Joe Johnson, Ph.D.
Entrepreneur. Investor. Startup Expert.
Too many business owners give short shrift to the legal aspects of business ownership. After investing time and equity in the creation of innovative products, processes, and services, they fail to seek the appropriate legal protections to ensure that nobody impinges on their intellectual property (IP). The importance of protecting one’s work cannot be overstated. Simply put, failing to do so places your company at risk and no business owner or investor wants that.
Obtaining Legal Advice
Every startup should have a lawyer on retainer with whom they can consult whenever necessary. Ensuring adequate protection for your company should never be an expense-driven decision; a failure to secure your IP will always cost more over time. Your business counsel should have a thorough understanding of both general business law and intellectual property law. Conduct your due diligence during the selection process and seek referrals from colleagues. You should select an attorney who specializes in your industry and adds value to your team by virtue of their knowledge. Soliciting legal advice prior to applying for IP protections can save you money in the long run. An experienced corporate lawyer will be able to guide the process and will help you to tailor your application to ensure that it meets all applicable requirements.
What is Intellectual Property?
Intellectual property refers to inventions, artistic and literary works, and the symbols and names used in business. As an example, consider Thomas Edison who was, for many years, the individual with the greatest number of personally-held patents. Although he and his employees at Menlo Park were constantly innovating and inventing, not all of those inventions saw the light of day. Despite that fact, Edison was keenly aware that his ideas were valuable in and of themselves and that, in order to ensure that others didn’t profit from them, he should patent every one, without regard to any individual invention’s disposition.
Songs, too, have considerable IP value. The Beatles, with one of the most extensive – and valuable – song catalogues in history found the hard way that their IP was inadequately protected due to a combination of their own naiveté and the malfeasance of some business management staff. Consequently, the copyrights and ownership of their many hits has been re-sold several times over the years and is still not in the hands of the group, their members, or their estates. All of the associated legal wrangling could have been avoided – and the profits generated by the music retained – if the IP had been secured from the beginning.
The ability to profit from one’s creations is a human right enshrined in Article 27 of the Universal Declaration of Human Rights because innovation is necessary for human success and essential for our shared culture. It bolsters economies and engenders an improved quality of life. By protecting intellectual property, the World Intellectual Property Organization states that we can “…strike a balance between the interests of innovators and the public interest, providing an environment in which creativity and invention can flourish, for the benefit of all.”
What Should Be Protected?
If you’ve created a product, a logo, or copy for your company, you must determine – in consultation with your IP attorney – whether it should be protected. Possible protections include patents, copyrights, trademarks, and nondisclosure agreements.
For entrepreneurs who’ve invented a product or process, a patent is a necessity. A patent prevents anyone else from producing your product, using your product or process in their product or process, or selling your product or process without your approval (and the payment of licensing fees). For a patent to be awarded, the application must show that the invention or process:
- Falls under one of the patentable categories.
- Is new or has some new aspect that differentiates it from what is currently available or known.
- Must be useful, meaning that it works and has a purpose.
- Is not something that is obvious to a normal person.
For example, the notion of electric light – the idea itself – is not patentable. However, a working model of an electric light bulb is.
A U.S. patent will be granted under one of three possible categories: utility, design, or plant. Utility patents cover processes, machines, manufacturing, composition of matter, or the improvement of one the categories. Design patents focus on designed goods like chairs, shoes, and other items. Plant patents are for new, asexually reproduced plants. Most individuals are interested in the first two types.
To obtain a patent, you must follow the steps delineated on the U.S. Patent and Trademark Office website. Depending on your status, you may choose to file either a provisional patent or a non-provisional patent. The former functions as a holding spot until submission of the latter, which begins the examination process. Both types can now be filed online. Prior to filing, it’s important to verify that your invention has not been previously patented. For companies intending to sell internationally, it’s wise to check the patent requirements of all other relevant countries, as well.
To appreciate the importance of patents, one need only consider the primary applicants pool. In 2015, the top ten patent owners were ten technology companies with IBM leading the pack (7,440 patents filed in 2015 alone). Note that patents (as with Edison’s) don’t necessarily lead to products. Sometimes a company will simply patent a product in order to prevent others from doing so without regard to whether they, themselves, ever intend to market it.
The process of obtaining a patent isn’t inexpensive. If you’re concerned about the costs, check out the Patent Pro Bono Program.
For companies that create original works such as music, books, advertising copy, software, etc., securing copyrights is an absolute necessity. A copyrighted work cannot be duplicated without the consent of the copyright holder. It protects your work and gives you the sole right to create derivative works (such as sequels) and to benefit from your work.
For a work to be copyrighted, it must be “fixed in a tangible medium of expression.” That includes not only written works, but movies, pictures, and architectural works. Copyright exists inherently upon creation, as long as the piece is otherwise copyrightable. Registering a copyright, while not strictly necessary, can be beneficial for businesses which intend to profit from a work, as it creates a public record of ownership and enables a copyright holder to bring suit if necessary.
Imagine if the Nike “swoosh” weren’t trademarked. The symbol would be utilized indiscriminately and its value would decrease accordingly. To protect your company name, symbols, or advertising slogans, you must trademark them. Registration with the U.S. Patent and Trademark Office enables you to protect your mark.
For a symbol, phrase, word, or design to be eligible for trademark protection, it must be identifiable. Essentially, its intended use must be to set you apart. The Nike “swoosh”, the Coca-Cola logo, the Target bullseye – all are example of trademarked symbols and designs that are uniquely associated with a particular brand or product.
If you’re considering trademarking a product name or company logo, consultation with an experienced trademark attorney can help you to determine whether pursuit of the trademark is worthwhile, whether others have registered a similar mark, and the likelihood of your application being approved. Additionally, it’s important to note that trademarks offer protection only within the U.S.
Nondisclosure agreements (NDAs) can be helpful when introducing others to your proprietary information. Vendors, business associates, employees, and freelancers may be required to sign an NDA to help ensure that your privileged business information is kept confidential. Requiring individuals exposed to sensitive information to sign NDAs provides a company with legal options should those individuals disclose confidential information. Nondisclosure agreements can be downloaded from the internet or, alternatively, be crafted specifically for your company by an IP lawyer. If you opt to download a generic version online, it would be wise to verify both its legitimacy and appropriateness with your lawyer.
It may feel as though obtaining the necessary legal protections for your business is too expensive a process to undertake and, consequently, you may neglect the task when first starting out. Such an omission, however, could jeopardize your entire enterprise. Take the time to learn about the range of protections appropriate for your business and include them in your budget from the beginning. Legal advice can be invaluable and will help you to protect the assets into which you’ve put so much work. In addition to IP considerations, legal assistance may be needed to draft agreements and contracts, to evaluate any documents you’re considering signing, and to assist with the creation of documentation limiting your own legal liabilities (e.g. Terms of Service or warranties).
About the Author
Dr. Joe Johnson is an entrepreneur, investor, and startup expert. He is the founder and principal of GoodField Investments and the GoodField Foundation (www.GoodField.com).
Joe has a Ph.D. in Entrepreneurial Leadership and an MBA. He is the author of the upcoming book on The Science of Why Most Entrepreneurs Fail and Some Succeed.
Most importantly, he is the incredibly blessed husband of one amazing wife and father of six wonderful children. He resides in Bradenton, Florida. For more information on Dr. Johnson and his work, go to www.JoeJohnson.com.