5 Things Every Entrepreneur Should Know About Intellectual Property
You’ve put all the pieces in place to make your start-up dream a reality. You have a brilliant concept, developed a solid business plan, and obtained the funding you need to get your business off the ground. After all this hard work, it would be a shame if a competitor or someone else came along and took one of your most important assets – your intellectual property – and used it for their own benefit. But if you don’t understand what intellectual property is, what intellectual property assets you have, and how to protect those assets, you could be in for a rude awakening.
Almost everything your start-up creates – an invention, proprietary information, a logo, a writing or recording – can be classified as intellectual property (“IP”). IP owners have legally protectible rights in the works they create, and others can be prevented from infringing on those rights. But protecting your company’s rights in its IP does not happen automatically. Many entrepreneurs can be so focused on building their business that they fail to take crucial steps to secure their valuable intellectual property. Often, this is due to a lack of understanding of what IP is and how it works.
Here are five basic things about intellectual property that every entrepreneur should know:
1. Know What You’re Talking About. There are four main types of intellectual property, each of which applies to a different kind of asset and comes with its own set of rules and structures for protecting the owner’s rights:
- Trademarks: A trademark is a word, symbol, or phrase – such as a logo, company or product name, or slogan – that is used to identify and distinguish your business, goods, or services in the marketplace.
- Copyrights: A copyright is the ownership interest you have in a creative work fixed in a physical medium, such as writing, photos, artwork, computer code, or website content.
- Patents: Patents cover “inventions,” such as a new and novel product, method, process, or mechanical innovation.
- Trade secrets. A slightly different kind of IP, trade secrets are comprised of any type of confidential information that gives your start-up an advantage over your competition. This can include customer information and lists or special formulas or business processes that are unavailable to others.
2. Know Why Your IP is Important. According to the S. Department of Commerce, IP-intensive industries support at least 45 million U.S. jobs and contribute more than $6 trillion dollars (38.2% of the total) to the U.S. gross domestic product. For your start-up, your IP are assets that can be reflected on your books, can be key to obtaining financing, and can generate revenue through licensing and other methods.
3. Know What You Have. It is important for a start-up to do an inventory of all of its intellectual property assets. This can be tricky depending on who actually created the work. If an employee developed the work in the course of his or her employment, the rights in that work will automatically be the company’s. But if you hire an outside independent contractor to, say, design a logo or write content for you, you need to make sure that you have an agreement that the contractor is creating a “work for hire” and that they assign all rights in the work to your company.
4. Know How to Avoid Trouble. You would never intentionally infringe on someone else’s intellectual property rights, of course. Often, start-ups find themselves on the receiving end of an infringement claim because they failed to do the research up front to determine whether their proposed name, logo, or invention will run afoul of another company’s existing rights. Imagine that you’ve invested thousands of dollars and hours building consumer knowledge of your brand only to discover that your logo is substantially similar to a logo another company has been using for years. Not only may you lose your rights to use your logo, you will have to spend significant sums defending yourself from infringement claims and may even have to pay damages to the aggrieved party. This is why it is so important to first invest in due diligence, such as a complete trademark search, before proceeding.
5. Know How to Protect What You Have. Intellectual property rights are protected by a combination of federal and state (and international) law. These laws can be powerful weapons your company can use to stop others from infringing on your rights as well as to recover damages from infringers. However, the ability to use those laws often requires registering your intellectual property with the appropriate authorities, such as the U.S. Patent and Trademark Office or the U.S. Copyright Office. This can be a complicated process. There are very specific requirements for registration, and both the government as well as others can object to and challenge your right to registration. Hiring an experienced intellectual property lawyer to assist you with registering your IP or taking legal action against infringers is one of the best investments your young company can make when it comes to protecting these crucial business assets.