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IP Tips for Potential New Businesses

Wednesday, December 18th, 2013

Posted on December 18, 2013

Many new businesses are founded at the beginning of the year. Below are a few tips for prospective new businesses regarding intellectual property (“IP”) issues. They are not comprehensive or customized for any kind of business.

• Educate yourself about IP basics, namely patents, trademarks, copyrights and trade secrets. Read information about patents and trademarks on the U.S. Patent and Trademark Office website (www.USPTO.gov), and information about copyrights on the U.S. Copyright Office website (www.Copyright.gov).

• IP issues apply to every kind of business. Your company name, the names of your products and services and your key advertising slogans each are likely to be trademarks. Any information you keep secret and that gives your business an advantage could be a trade secret. Common trade secrets include customer lists and internal financial information.

• Before you commit to launch, consider hiring an IP attorney to have a general discussion about likely IP needs and issues, and about the order of magnitude of expense you will face to address them. Perhaps your business idea won’t fly for IP reasons. Perhaps the talk will change your view on which IP tasks are most important, because you’ll have to prioritize on a limited legal budget.

• Make certain you don’t have entanglements with your current or past job that would hamper your new business. This also applies to potential employees of your new company. You might have signed something that limits what you can do, or what you can use from your old job. Even if you don’t have any contractual entanglements, your legal obligations to your past or current employer could create issues.

• After getting educated about IP, budget realistically. Almost all startups I have encountered did not know before launching what IP needs they would have or the magnitude of associated legal expense. They almost never have the money to do what needs to be done. In most situations, to handle a new business’s IP needs even modestly, you’ll probably spend several thousand dollars upfront and perhaps much more.

• Handling IP issues in a new company is not a once-and-done affair. You will have a continuing stream of IP management/maintenance issues and IP legal expense during the life of your company.

• Contractually nail down IP and confidentiality issues with co-founders, employees and contractors at the beginning of those relationships. If you don’t, you might create problems that may be nearly impossible to fix later.

• Have a lawyer vet potential trademarks before you commit to them. Merely getting incorporated under a name, getting a business license in a name, or registering a domain name does not secure your ability to use those names in business.

• When picking a trademark, generally speaking, the higher you go on the ladder of strength, the more you can keep competitors from adopting similar trademarks. In descending order, the strongest mark is a made up word (e.g., EXXON), then a word that has nothing to do with the product (e.g., APPLE for computers), and then a word that merely suggests something about the product (e.g., CHAMPION for sporting goods). If you go yet lower to a merely descriptive trademark (e.g., U.S. NEWS AND WORLD REPORT), you can’t get full trademark rights immediately or perhaps ever. If you go even lower and use a name for what the product is (e.g., CAR for an automobile), then you can never have trademark rights.

• Understand how the world of patents works before you commit to seeking a patent. Most people don’t appreciate how long and expensive the process is or how narrow patent protection can be. Also, regardless of whether you seek patents, explore whether your products or services might infringe on the patents of others.

• Sometimes trade secret protection is the least expensive but most important protection a small business can build. Learn about ways to identify and keep confidential your new business’s most sensitive and important information.

• Your new business probably will sign contracts with other individuals or businesses to get things done. Many contracts will bear on your IP situation, such as hiring advertising agencies, website developers, computer programmers, design engineers, and consultants. Read the contract and fully understand it. Try to negotiate. Assume any contract you sign will be applied as written. Fix any ambiguity, vagueness and incompleteness. Assume that, if it’s not on the contract, it’s not in the deal.

May your new business live long and prosper. Good luck!

Written on December 18, 2013
by John B. Farmer
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