* Top 10 Things Smart Companies Should Know About Intellectual Property

Smart businesses should use all laws – including IP laws – to their advantage.

Before I launched Clock Tower Law Group in 2001, I worked for 6+ years in non-legal positions for various Internet companies. So I have seen how intellectual property works – or fails to work – in the real world. I advise my clients based on this real-world experience. My firm always puts your business goals first. For example, many patent lawyers view “the patent” as the client. But the patent is not the client. The business is the client. And sometimes the patent is not right for the business.

I have worked for startups that failed, I have worked for startups that succeeded, and while intellectual property (IP) is not just for startups, the IP decisions that startups make have long-term consequences (for better or for worse). So any time your company is thinking about launching a new anything (e.g. company, product, service, brand), you should include IP in your launch plans.

In short, smart companies can become wealthier by (1) acquiring their own intellectual property, (2) protecting their own intellectual property, and (3) avoiding infringing the intellectual property of others. Here are the top 10 things those smart companies should know.

1. Intellectual Property“Intellectual property” is an odd name for an important business asset. There are several types of “property” and several types of property law:

  • Personal property includes tangible items such as cars and boats.
  • Real property includes all flavors of real estate such as houses and condos.
  • Intellectual property (IP) includes patents, copyrights, trademarks, and trade secrets.

2. Intellectual PropertyThe Founding Fathers included patent and copyright protection in the Constitution. Article 1, Section 8, of the Constitution states that “The Congress shall have Power To … promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” So you are entitled to patent and copyright protection for your inventions and creations. In other words, intellectual property law exists. Just like tax law exists. And just as you can itemize your personal tax deductions to maximize your tax refund, you can take advantage of IP law to make your business wealthier. Or you can file the short form.

3. CopyrightsYou don’t have to register works in order to get a copyright. However, registering copyrighted works with the Copyright Office does provide additional remedies if a dispute with a copier arises at a later date. Copyright rights exist as soon as works are in a fixed form. Also, if you are creating copyrightable works, then you should mark them with a copyright notice as soon as they are in a fixed form to put others on notice. Something like this: “Copyright 2001-2010 Clock Tower Law Group. All rights reserved.”

4. PatentsIf you have a product or service that is better/faster/stronger than the competition’s, then you should be able to get a patent for it. At least this is how patent law is supposed to work. Note that improvements to existing products can also be patented. You should think about patents before launching new products or new versions of existing products.

5. PatentsTiming is everything. Don’t file too early, don’t file too late. To protect both US and foreign patent rights, keep your product secret, file the patent, then launch the product. Under US patent law, you must file a patent application within one year of selling, offering to sell, publicly using, or publishing your invention. The one-year “grace period” for these events starts whether you or somebody else discloses the invention. If you want to file for foreign patents, you must do so (1) before any public disclosure and (2) within one year of your earliest patent filing. One common mistake that inventors make is to file a Provisional Patent Application to get “patent pending” status for one year. But if you are unable to turn your idea into money during the “patent pending” year and can’t continue with the patent process, then you will have lost the benefit of the earlier filing date.

6. Patents vs. Trade SecretsTrade secrets can last forever and are sometimes a better choice than patents. Is it impossible to reverse-engineer your invention? Can you make sure your employees and vendors keep the invention secret? If so, then consider trade secret protection instead of patent protection. Also, if you only want to file for US patents, then you can keep your US patent application a secret by filing a “nonpublication request” at the time of filing. This way, if your patent application fails to result in an issued patent, then you can abandon the patent application and fall back on trade secret protection.

7. TrademarksCompanies, on average, have four unregistered trademarks. Trademarks, like trade secrets, can last forever – or at least as long as the trademark is used. The general rule is that (1) you should register the trademarks that you use and (2) you should use the trademarks that you register. You should register your company name, product names, service names, logos, slogans, taglines, icons, favicons, and anything else that you use to identify your company’s offerings (e.g. sounds, colors, numbers).

8. Trademarks and BrandingIt’s easier for owners of registered trademarks to protect their brands on the Internet. Owners of registered trademarks can more easily recapture (1) domain names from cybersquatters (via the UDRP or otherwise) and (2) social network identities (e.g. Twitter usernames and Facebook pages) from impostors. Indeed, cybersquatting and usernamesquatting are to businesses what identity theft is to individuals.

9. Domain NamesDefensively registering multiple domains is cheap insurance against possible infringing use. You should register you company name, product names, and trademarks as domain names in all of the generic Top Level Domains (gTLDs) (including .com, .net, .org, .biz, .info, and .us). You should also register common misspellings, including singular and plural variations. You should register domains in the name of your company using the exact same contact information for each domain. Better yet, use a trusted third party to hold your domain names in escrow, since many domain name thefts are inside jobs.

10. Prevention vs. CureIt is much easier to prevent IP problems than it is to fix them. Both patent law and trademark law provide the first-filers with advantages over second-filers. Monitoring services, such as the Mark Alert service from DomainTools, can help you find misspelled domain names, parody and commentary domain names (such as walmartsucks.org), and any misspelled domain names that you might have missed.

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Erik J. Heels writes about technology, law, baseball, and rock ‘n’ roll. He is @ErikJHeels on Twitter.

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5 Replies to “* Top 10 Things Smart Companies Should Know About Intellectual Property”

  1. Greetings Grok,

    Yes, patents do prevent competition, by giving the patent owner the right to exclude others from making, using, and selling the patented thing for a period of years. But there are real requirements for getting them. In the US, the basic requirements are that the thing to be patented must be new, useful, and nonobvious. I think that “better, faster, and stronger” is a better (and more narrow) requirement than “new, useful, and nonobvious.”

    Regarding the drug example. I brought this up in my class recently. In short, the US Government may use any US-patented invention without permission of the patentee. Under 28 USC 1498, a patentee may then sue the government in the United States Court of Federal Claims for “reasonable and entire compensation for such use and manufacture” but may not get an injunction. So it is possible, although unlikely, that the government could choose to manufacture (or license the manufacture of) an important drug if a patentee chose not to do so. Interestingly, some governments in other countries have been ignoring patents, without compensating the patentee, in the name of public health.

    I agree that there are software patents that are overly broad and should not have issued. The proposed “patent reform” favored by big business, however, does not solve this problem. See, for example, the poorly named “America Invents Act” passed recently by the Senate and now pending in the House: http://en.wikipedia.org/wiki/America_Invents_Act.

    As the 2010 Bilski decision showed us http://erikjheels.com/2222.html, and as my recent article on patent ideals underscores http://erikjheels.com/2627.html, US courts are unlikely to make major changes to patent law, including adding or subtracting subject matter eligible for panted protection. So I think software (and so-called “business method”) patents are here to stay.

    So given that we have a patent system, what are we to do?

    One reform that I have repeated suggested, which puts me squarely in the minority (within the patent bar), is requiring a formal patent search: http://erikjheels.com/627.html. One of the reasons that early software patents were broad in scope is because there is no affirmative duty on the part of the patent application to do a patent search, only (under rule 56) to disclose information that is “material to patentability.” So applicants can, and do, bury their heads in the sand. Big companies are opposed to mandatory patent searches because they file thousands of patent applications per year, and thousands of applications times $1000/search equals millions of dollars. But for startups who are trying to get patents for defensive reasons, searches are essential.

    Finally, most arguments against software patents are, in fact, arguments against patents in general. Here’s an article where I spell out some the problems that are unique to software:

    * Software Patents: Examples Of Principled Arguments (Part 4)

    * Software Patents: Final HERTS (Hypotheticals, Examples, Rants, Thoughts, And Stats) (Part 8)

    * Software Patents Epilogue

    Reform of the patent system typically has to come from those inside the system. From people like me. I think you will find, if you follow me on social media, that we agree more than we disagree on these issues.

    Thanks for adding value to the conversion.


  2. Don’t mistake my attacks and feelings about the patent system as an ad hominem attack, even if I disagree with your line of work.

    Many of the articles you write (and linked) however don’t say “Patents harm the industry”, but rather that patents are getting more expensive, and that it’s a negative change in the industry, and how to avoid extra expenses and insure success by writing more narrow patents.

    Patents do one thing very well – they prevent competition. The problem is that they do it too well, for too long of a time, and without any requirements on the person who files. I can file a patent for a drug that cures cancer (assuming I have a sufficient method to actually accomplish such) and then just never produce it. I could just sit on the patent and either let my competitors suffer, sue them, or sell them a piece of the patent pie. It’s great for my business of course, but it doesn’t due a thing for the people dying from cancer.

    Now, software isn’t usually as critical, but just by coming up with a reasonable implementation that’ll make it past the USPTO (and by your own stats, it has a 56% chance of that), I can own that idea. If the idea is really unique, that’s not really a bad thing. The problem is that these ideas are rarely unique, but instead too common, and yet still get passed. For example, look at the patent brawl associated with the MP3 codec. A lot of the companies who hold a lot of MP3 patents did little in the realm of design or improvement, but instead sit on their patents and sue people to hell.

    What patent law is “supposed” to do is a decent thing. In reality, patent law is terribly broken and easily abused.

  3. Greetings Grok,

    I tell my clients that while ideas are important, execution is essential. Great execution of a poor idea beats poor execution of a great idea every day of the week. So I agree with you that focusing on IP, alone, is a bad idea.

    I disagree that patent law isn’t designed for products that are “better/faster/stronger than the competition.” This is precisely what patent law is supposed to protect: innovative new products and services that enrich the public. Unfortunately, those who write patent laws and “patent reform” legislation all too frequently lose track of the ideals of our patent system:

    * Men Of Great Genius: Venetian Senate, Patent Act of 1474

    And while it is true that I make my money, in part, from helping smart companies use IP laws to their advantage (including filing patents), it may surprise you that I spend a good deal of effort trying to talk my clients out of filing patents:

    * Stop Wasting Money On Patents

    * Patent Reform Turns Patent Attorneys Into Patent Pending Attorneys

    * Drawing That Explains Patent Costs

    * How To Get And Defend A Patent Without Going Broke

    * Software Patents: Good Or Evil? (Part 1)

    Which is why I allow comments on this blog.

    In other words, I believe in the patent system for the ideals it stands for. I suspect that patent trolls do not.


  4. Patent law isn’t about something “better”, it’s about something innovative. Unfortunately, IP law is usually abused and used only as a money making racket. There’s plenty of trolls out there that survive purely off of patenting the obvious and suing those who implement anything close.

    IP law has in the past hundred years become extremely abusive, especially in the software industry.

    Doing well as a business, especially a small business, isn’t about abusing IP law and spending all your money on legal fees, which ultimately only benefit lawyers and people such as the writer of this post, and tie up courts and the judicial system in trivial matters, but it’s about building something innovative and effective.

    If your business is more concerned with IP then creating something new, your business is dead.

  5. This is a darn good post, and something every business person should read. (I’m going to forward it to my business clients ASAP.)

    Number 10 may be the most important (and it has application beyond the IP world). It reminds me of the old Fram oil filter commercials–you can pay me (a little) now or pay me (a lot) later.

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