J. Jordan Scott
J Scott Law Firm, Boston
Intellectual Property is often one of the most important assets that a business possesses. Particularly in startups or early post-revenue stage firms, the “special sauce” tangible or intangible product developed by the entrepreneur can be synonymous with the net worth of the company.
In scenarios wherein the owner wishes to sell all or part, merge or acquire funding, it is critical to have the intellectual property assets identified, valued and protected. For the buyer or investor, this becomes a key part of the due diligence & risk assessment process.
The term “intellectual property” is broad, covering patents, copyrights, trademarks, trade secrets, and other forms of creative expression. The purpose of this article is to provide an overview of intellectual property, along with a brief discussion of ways to protect such property.
Of all intellectual property, patents are the most complex, and arguably the most important. Any reader who believes they have a patentable invention should consult with a qualified patent attorney at their earliest convenience, as being “first” matters. In order to secure a patent, an invention must be useful, new and non-obvious to an average person.
Specifically, there are three categories of patents: utility, design and plant. Utility patents cover new and useful processes, machines, or improvements. Design patents cover new, original ornamental designs. Plant patents cover new and distinct varieties of plants. While any individual is permitted to file a patent application, the law is complicated enough that a professional should be consulted. It is important to note that nearly all patent lawyers practice solely patent law; due to the highly technical nature of patents there are few general practitioners that handle patents, and any attorney claiming to be such should be viewed cautiously.
Copyright Law provides legal protection to the creator of a work of creative expression created in a tangible medium (books, magazines, websites, etc.). However, copyright protection is not available for ideas, concepts and algorithms (although a patent may be available). Technically, copyright protection attaches when the work is created. However, in our modern, litigious society, it is advisable to seek formal copyright protection within a few months for first publication, and before any infringement. An important caveat is the concept of “fair use.” Copyrighted material can be legally used by other parties in certain circumstances, such as for criticism, parody, in a news report, or incidentally. A qualified copyright attorney will be able to advise when and how fair use should be interpreted.
Trademarks are distinctive words, phrases or logos that identify the source of a product or service. Trademarks should be formally registered as soon as possible to ensure legal protection. A qualified attorney will be familiar with trademark law and be able to advise a client through navigating the trademark registration process.
One of the most important aspects of intellectual property is that of trade secrets. Trade secrets can also be difficult to protect, as there is no government agency to register the secrets with, as there are for patents, copyrights and trademarks. A trade secret is information that has independent economic value derived in part from not being known to the general public, and is also subject to reasonable efforts to maintain its secrecy. A classic example is the Coca-Cola formula. Many companies have trade secrets they wish to protect, but as stated above securing protection is not as straightforward as applying to a government office.
In order to fully protect trade secrets, companies must work to maintain this secret. This can be done in a variety of ways. All employees and independent contractors should sign a nondisclosure agreement (NDA) that will prevent those individuals from sharing the proprietary information that they have learned. Nondisclosure agreements are relatively standard and many are found in the public domain. A company should also safeguard the information by limiting access to those that need it, and keeping any documents (paper or electronic) in a secure location (a physical safe for paper documents; encrypted files for electronic).
With any intellectual property, the important first step is to identify what branch of intellectual property law applies, and then immediately take initial steps to secure legal protection.
Remember: The client can take many of the initial steps, but a qualified attorney should be consulted early on, especially when dealing with a patent or any questions or issues regarding IP protection.
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Note: Value Staging LLC is not a law firm, does not practice law and any guest blog posts are solely the opinion of the author and are not to be construed as legal advice.