What you don’t know about intellectual property…
Long ago and far away, IP concerns were reserved for well-heeled companies like Polaroid, which sued other well-heeled companies, like Eastman Kodak, for selling products that infringed their patented products. Then along came the computer and garage-geniuses who began to invent things. The Old Guard lost their stronghold and the Gates, Jobs and Berners-Lee (to name a few) created things we could use.
Today, a current crop of garage-geniuses with their smaller companies employ small armies of business strategists and lawyers. Armed with a fist full of patents, they troll the high tech seas looking for larger companies using their intellectual property. Sometimes they spot a whale and attack, demanding millions in compensation. Example: NIP, Inc., an IP holding company that never made anything, sued Blackberry-maker Research in Motion Ltd. for infringing its wireless email patents. In the end, RIM’s pocketbook was over $600 million lighter.
Intellectual property (IP) is information or knowledge owned by an entity. Ownership comes in different forms: Patents protect inventions; copyrights protect creative or artistic works; trademarks protect brand names and logos; trade secrets protect internally developed confidential or proprietary information.
Unfortunately, small businesses which could have ignored intellectual property 30 years ago, today often find themselves the middle of IP disputes. Companies of all sizes brand their products and services accruing trademark rights. A company’s web site and other marketing materials are protected by copyright. Simple assets like customer lists or sales strategies may be protectable as trade secret. Services and products offered by a company may be subject to patent protection.
Even the smallest companies now have a national presence on the web through their websites or through third party directories. Through this presence competitors can easily find information about a business – information that could be used against them. Moreover, the hyper competitive market brought about by new and more accessible advertising venues have local competitors doing whatever they can to grab an edge.
Let’s say a restaurateur opens a small deli in the Denver Pavilions under the name Arcadia Deli. Business is good and an online presence at www.arcadiadolmathes.com is established to sell the owner’s regionally famous dolmathes nationwide. Soon thereafter, the deli receives a cease and desist letter from a New York attorney claiming that its name is infringing the federally registered trademark rights of his client, Arcadia Family Restaurant, that operates in both Greece, New York and Athens, Pennsylvania and has been in business longer than the deli.
The Denver deli is faced with several alternatives: engage in an expensive lawsuit if it does not give in to the restaurant’s demands; negotiate a license with the restaurant requiring it to pay a substantial fee; or change its name and lose its domain and years of hard-earned good will. In all cases, the total value of the loss could easily reach six figures potentially challenging the viability of the deli.
Let’s say the deli’s head chef quits and goes to work for another Greek eatery down the street. He takes with him a copy of the signature dolmathes recipe which had been kept on a 3×5 card in an unlocked recipe box in the kitchen. The original deli loses business to the other eatery as the other eatery prices its dolmathes at a lower price. To compete, the deli is forced to lower its prices.
Here’s the deal: If the deli had paid attention to its intellectual property issues early on, it would have had conducted a clearance search and the original New York restaurant’s name would have appeared. They would have easily been able to chose another, unencumbered name, developed the value of that name – all without risk of a “senior user” showing up after the fact.
And if the dolmathes recipe had clearly been marked as “proprietary,” and kept under lock and key accessible only by those responsible for the making the dolmathes, it would have been a properly protected trade secret. A non-compete agreement with a trade secrets clause would have prohibited the chef from taking a job at another Greek eatery for several years.
It’s not that complicated – but ignoring IP issues (and nearly every business has them) – can be costly on many fronts: financially, psychologically, emotionally and even physically. Paying attention early on greatly minimizes risks.
You’re a business owner. You have assets. Intellectual property is one of them and adds significant value to your company. Protect your assets, early and thoroughly. It can mean the difference between peace of mind and paying for an unnecessary and expensive lawsuit.