Intellectual Property 101 for Business Owners
Although many business owners have a general idea of the concept of intellectual property, most are not as familiar with the different types of intellectual property and what can be protected. This can be an expensive learning curve given that intellectual property often represents one of the largest asset classes a business owns.
Intellectual property is generally defined as "creations of the mind." The law protects certain of these "creations," including creative works, brands, inventions, and proprietary information. Importantly, intellectual property law does not protect mere ideas. Rather, it protects the expression of those ideas. For example, you cannot sue someone for stealing your idea for a movie, but you could sue them for stealing your written movie script.
The four primary types of intellectual property are copyrights, trademarks, patents, and trade secrets. The following is a general overview of each.
Although ideas cannot be protected, the expression of an idea, when fixed in a tangible form, can be protected. Copyrights protect "original works of authorship." Copyright law covers a broad range of works, including two- and three-dimensional works of art (sculptures, drawings, paintings, graphics, and designs), photographs, books, manuals, articles, poems, scripts, movies, songs, recordings, video games, logo designs, architecture, choreography, website content, presentation materials, software code, and the like.
The creator of a work automatically obtains copyright ownership in that work upon creation and is immediately entitled to protection under copyright law (although enforceability largely depends on copyright registration). Copyrights grant the owner the exclusive right to reproduce the work; distribute copies of the work; publicly display, perform, or broadcast the work; and to make derivative works (for example, a movie sequel with the same characters from the original movie or new version of a website). Copyright ownership entitles the owner to authorize others to exercise any of these exclusive rights, usually done through licensing.
Copyright protection of a work published after 1977 lasts for the duration of its creator's life plus 70 years if the author is a natural person. If the work is created by a business entity, is anonymous, or is a work-made-for-hire, it lasts the shorter of 95 years from the date of publication or 120 years from the date of creation.
Copyrights may be registered with the U.S. Copyright Office, which is strongly recommended as this comes with various benefits. These include public record of ownership, the presumption of ownership, and the ability to enforce the copyrights by filing an infringement lawsuit. If the copyrighted work is registered before infringement occurs, the copyright owner can also recover statutory damages and reasonable attorney fees in an infringement lawsuit.
A trademark is a word, name, phrase, symbol, design, sound, color, or even smell that identifies and distinguishes the source of the goods or services of one party from those of others. A trademark is a company's brand. It is the embodiment of its reputation. Over time, a trademark can accumulate significant goodwill and economic value for the company.
The primary goal of trademark law is to prevent consumers from being confused as to the source of goods and services on the market. Thus, trademark owners may exclude others from using the same or confusingly similar marks in a manner that is likely to cause consumer confusion. By granting exclusive rights in a trademark, the law also provides strong incentive for trademark owners to develop and offer quality goods and services.
Trademark rights arise automatically when a seller uses a trademark in commerce (i.e., in connection with the sale of goods or services). Subject to certain requirements, such rights grant the trademark owner the right to exclude others from adopting and using that exact mark, or any confusingly similar mark, in the owner's geographic area. Unlike copyrights and patents, which eventually expire, trademark rights can exist indefinitely so long as the mark is used in commerce and continues to distinguish the trademark owner's goods or services from those of others. For example, the Coca-Cola® trademark has existed since the late 1800s and is still protected today.
Trademark law recognizes varying levels of trademark strength based on the level of distinctiveness—i.e., a trademark's ability to set itself apart from other marks. The more distinctive the trademark, the greater the legal protection it will enjoy.
Trademarks may be registered with the United States Patent and Trademark Office, which comes with a number of important benefits. These include evidence of ownership and validity of the mark; nationwide priority over all other parties who later seek to adopt or use the mark; significant reduction in the cost of enforcing trademark rights; and enhanced legal remedies against infringers, counterfeiters, cybersquatters, and importers of infringing products. Additional advantages include qualifying the trademark owner for participation in programs that make it easier to enforce trademark rights on certain social media platforms and e-commerce websites like Amazon (e.g., the Amazon Brand Registry) and as a basis to register the same trademark in numerous foreign countries.
Patents are exclusive, limited-duration rights relating to inventions. To qualify for patent protection, the invention must be novel, useful, and non-obvious. The three types of patents are utility patents, design patents, and plant patents. Utility patents protect the way an item is used and works, such as a new machine or assembly-line process. Design patents protect the way an item looks (they cannot be functional), such as the shape of an iPhone. Plant patents protect new varieties of plants, such as a new species of grape. Examples of patentable items include machines, manufactured goods, processes, and chemical compositions.
Unlike trademarks and copyrights, patent rights are not automatically created upon invention. Patents must be applied-for and are granted by the United States Patent and Trademark Office in exchange for public disclosure of the invention. Once issued, a patentholder can preclude all others from making, using, offering, selling, or importing the same patented invention without the patentholder's permission. Applying for a patent is a highly technical endeavor that is time-consuming and expensive compared to applying to register copyrights or trademarks.
The duration of a patent depends on the type of patent. Utility patents and plant patents last 20 years from the date the patent application was filed. Design patents last 15 years from issuance of the patent.
Trade secrets consist of information that derives independent economic value from not being generally known and is the subject of reasonable efforts to maintain its secrecy. One famous example is the recipe for Coca-Cola. Trade secrets can include formulas, patterns, compilations, programs, devices, methods, techniques, or processes.
There is no way to register trade secrets. Unlike copyrights, trademarks, and patents, trade secrets are valuable because they are not publicly known. The owner of a trade secret can file a lawsuit for misappropriation against anyone who improperly obtained, disclosed, or used the trade secret without the owner's consent.
Intellectual property can be highly valuable to a business and its owners. It often provides a competitive advantage and can represent one of the largest asset classes a business owns. As such, it is important that business owners acquire a working understanding of intellectual property and how the intellectual property can and should be protected. Business owners should always discuss their particular situation with an experienced intellectual property attorney.
Michael B. Dvoren is a partner at Jaburg Wilk, where he assists clients with various intellectual property matters. He has helped numerous clients navigate the complexities of intellectual property in litigation, pre-litigation disputes, and transactions.
This article is not intended to provide legal advice. Always consult an attorney for legal advice for your particular situation.