Intellectual Property Primer for Startups

by Revision Legal
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Many startup companies do not realize that their intellectual property (IP) rights are often their most valuable asset. Few startups have portfolios of real property or vast quantities of retail inventory and other physical assets. What startups usually have are ideas, and ideas are valuable if they are properly protected.

The Basic Intellectual Property Inventory

There are five main types of intellectual property rights:

  • Trade Secrets
  • Trademarks
  • Internet Domain Names
  • Copyrights and
  • Patents

Trade Secrets

Many startups succeed in a crowded and competitive marketplace because of some trade secret. This might be a simple as a secret ingredient in Grandma’s buttercookies or a secret method for making a machine part or engine lubricant. Protecting that secret and preventing your hostile competitors from discovering that secret can be vital for seizing market share.

To establish trade secret protection, you and your startup company must take active steps to keep the information secret and prevent disclosure to the general public. Among the steps to take:

  • IP Auditing to identify what trade secrets are in need of protection: Be careful of overprotecting; it is Grandma’s secret ingredient, not the entire recipe.
  • Identifying and labeling documents that contain the trade secrets: Limit and count the number of copies; maybe require your staff to sign out copies; not just paper — confidentiality applies to computer disks/flash drives/laptops and other means of data storage.
  • Monitoring and securing storage locations: Physical locations (like locked cabinets or safes) and electronic storage (secure and pass-coded access to computers, data, and files).
  • Providing adequate security: Maybe a locked file cabinet is sufficient; maybe you need locked floors, coded keycards and armed guards.
  • Maintaining secrecy with non-employees and third parties: Outside vendors, licensees, potential purchasers, lenders, investors, and others involved in financing; non-disclosure agreements are essential.
  • Being careful with the public: Avoid public tours and other visitations (i.e., news reporters) that might accidentally disclose trade secrets.
  • Training your employees: Handbooks and written company policies; confidentiality and non-disclosure agreements; sufficient and periodic training on the “dos and donts” of accidental disclosure; collecting copies of confidential documents on exit.

Aside from your own efforts to keep your trade secrets confidential, be aware that state law also provides protection. The Uniform Trade Secrets Act has been adopted in most states in part or in whole or with additions and/or modifications. You should be aware of what statutes are in effect in your state.

Trademarks

You can register a trademark for your company’s descriptive name, designs, or logos that you are using in the marketplace. Having unique and easily recognized marks and logos gives your startup a competitive advantage. It also protects you from copy cats and pirates.

For startups, it is crucial to register, at a minimum, the company’s name and the name that will be used as the domain name for your website (assuming such are unique enough to be registered). (Registering for the domain name itself is a separate process; see below).

Gaining market share takes time. If you wait to trademark until your startup has significant market share, a competitor might already have registered trademarks to your business name or logos or designs. At that point, it might be too late or too expensive to obtain your legal protections. At the very least, you will have a lengthy legal battle trying to prove that your startup had common law trademarks, had marketplace priority and that your competitor registered in bad faith, etc.

Internet Domain Names

Many place domain names in the same classification as trademarks. However, it may be better to treat them as separate and distinct. Trademarks are about commercial use of marks and logos and are registered through government agencies. If you don’t use your mark, it can be lost.

By contrast, legal challenges and issues related to domain names have little to do with business use and domain names are registered through companies that have been accredited by the Internet Corporation for Assigned Names and Numbers (“ICANN”). ICANN is a private, non-profit organization formed specifically to control web domain name registration, use and management. In contrast to registering for a trademark, registering for a domain name is easy, nearly instantaneous and is very low cost. Moreover, in general, you cannot lose your domain name through non-use (although non-use can be a factor in resolving, for example, a cybersquatting dispute).

As discussed above, where possible, trademarking your domain name is important. Under ICANN’s Uniform Domain Name Dispute Resolution Policy, a trademark owner can inexpensively challenge a confusing or deceptively-similar domain name that is interfering with its business. Among the elements that must be shown is that your startup is, in fact, the owner of the original trademark. Confusing and/or deceptive domain names is a larger problem than you might think. Yes, you have a “dot com” domain name, but remember that there are a lot of other “dots” such as dot net, dot org, etc. There are also internet addresses for non-US based websites. So, you may have GreatBusiness.com, but who has GreatBusiness.com/au? And who has GreatBizness.com?

You can read more about the interplay between trademarks and domain names here.

Copyrights

Copyrights protect any creative works like books, movies, and music. Sometimes, certain creative works need more protection than what is provided via trademark registration. Copyright lawyers can help you complete an audit of all your intellectual property, and can help you copyright logos, product designs, slogans, graphic designs, moving images, audio, etc., that your startup is using for your products and services.

Patents

Patents are about inventions. If your startup has a new invention, a new technology, or a new device, then you might be able to obtain a patent. A patent prevents others from making, using, or selling your invention for a period of 20 years. An experienced patent lawyer is needed since the process is complex and certain legal requirements must be met. For example, your invention must actually be new and cannot be obvious based on inventions already in existence.

Many people are surprised to learn that there are six different types of patents that can be issued by the USPTO. You can read more about the different patents types here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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