Intellectual Property Considerations for Business Startups

Steven M. Lutz

Author: Steven M. Lutz

POST DATE: 7.20.16
Ccha  Business Services

We work with business start-ups frequently to both organize their business entities and to facilitate additional start-up activities. Startups face a variety of critical issues including entity formation decisions, tax matters, service and product development details, real estate decisions, employment decisions, and financing issues. As part of the startup process, new business owners should also take time to evaluate the protection of the new company’s intellectual property (IP) rights and assets. While there are a whole host of specific issues and rights related to a company’s IP rights, generally speaking, IP rights include patents, trademarks, tradenames and copyrights.

Trademarks and tradenames typically protect brand names, slogans, logos, symbols and related design elements, used on your goods and services to identify you as the source of those goods or services. Trademark owners can protect their marks from competitors or others using the same or similar marks in a way that is confusing to the public. Trademark (and service mark) registrations are issued by the United States Patent and Trademark Office (USPTO) after the submission of a trademark application and rigorous review of that application by a USPTO reviewing attorney. Some limited trademark protection can also be obtained through a state registration process.

Copyrights typically protect original artistic or literary works from being copied, including everything from advertising copy to computer software codes to original images. While copyrights are generally automatically created upon creation of an original work, registration of copyrights with the United Stated Copyright Office is strongly recommended for significant copyrighted materials as the registration provides the copyright owner with additional, exclusive rights including the right to sell, publicly display, reproduce and distribute the copyrighted material.

Patents can cover original inventions, including designs, machines, compositions, products, processes and methods. Generally speaking, for something to be patentable, it must be both inventive and original. Patents are also issued by USPTO after the submission of a patent application and rigorous review of that application by a USPTO patent examiner. In addition to these basic IP forms is the concept that your IP rights include various internal agreements and documents, including agreements among members of your company related to idea formation. The failure to properly secure a company’s various forms of IP in the early stages of a company’s existence and to otherwise consider available protections can result in disaster for the business in the future. Properly identifying and protecting IP rights as part of your company’s start-up process is just good business.

Why IP Protection is Important

Properly secured IP rights protect your startup against others who like what you do and who may attempt to unlawfully use your assets for their benefit. Failure to take appropriate steps to secure your IP rights may result in your IP entering the public domain where your information may become available for use by others without significant legal restrictions. By taking the appropriate legal steps to protect your IP rights, you are protecting your company against competition in the marketplace because other companies will be prohibited from using your protected assets and profiting from unlawful use. If they do, you will have certain legal rights and may be entitled to additional legal remedies not otherwise afforded those who neglect to properly protect their IP rights. Additionally, properly secured IP rights make your business more attractive to potential investors, adding value to your startup. Savvy investors will seek evidence of a well-considered and executed IP strategy when making investment choices and decisions.

Here are a few IP strategy considerations as you work through your business startup process:

  • Consider Conducting a Trademark Search. Before using a new logo, brand name, or company name in the marketplace, you should consider conducting a comprehensive search to determine whether your logo, brand name, or company name might infringe on others already in use. A trademark search can identify similar marks already in use and provide some insight to help prevent using resources on marks that are already in use.
  • Avoid Using Intellectual Property of Others. Creating your own works and protectable marks is as important as protecting the works themselves. Be careful not to use copyright works or trademarked symbols of others as you develop your business, your website or your products. Simply because a phrase, a picture, or a music file you find on the internet does not have a copyright symbol (©) attached to it does not mean it is free to use or incorporate in your own business materials. Avoiding infringement is an important component to any successful IP strategy and it starts with conducting the appropriate research and reading all terms and conditions related to materials you intend to incorporate in your brand.
  • Establish Ownership Rights Early. To the extent your startup intends to engage employees, contractors or other third-party collaborators to participate in the development of your IP materials, you should have appropriate agreements in place to sufficiently protect your ownership interests in any resulting IP. Employees, contractors and collaborators should be asked to execute appropriate IP assignment agreements and work-for-hire agreements, and where appropriate, license agreements to establish ownership and use rights related to the startup’s IP.
  • Implement Procedures to Protect Trade Secrets. Trade secrets are another important component to a new company’s portfolio of IP protection that do not require any formal registration or procedural formalities. Trade secrets are, broadly speaking, any confidential business information that provides a competitive edge to your business, including marketing strategies, sales methods, customer lists, supplier lists, pricing information and lists, distribution methods and processes, and manufacturing processes. Unauthorized use of another’s trade secrets is typically considered an unfair business practice and can be a violation of applicable trade secrets laws. In order to be afforded protection for trade secrets, the information must (i) actually be secret and not readily known or accessible to others in the industry or market, (ii) possess some form of measurable commercial value, and (iii) have been the subject of reasonable steps to keep it secret. Trade secrets are unique in that they may be protected indefinitely and are not subject to the time limitations generally imposed on patents or trademarks.

Intellectual property is one of the most important legal issues facing startups in today’s marketplace. Taking steps to secure and protect your rights is, therefore, a decision a startup owner cannot afford to overlook. You must understand your IP rights in order to develop and implement your IP strategy. Seeking appropriate advice from professionals early in the process to help you navigate these important decisions that will shape the success of your business for years to come.

For more information or for assistance in developing an IP strategy for your startup or existing business, or to discuss other issues related to your business operations, please contact us.

For more information about Steve and his practice, please visit his profile.