A Short Guide
For many businesses, intellectual property is the most valuable asset they own. However, many businesses also do not take adequate steps to protect their intellectual property. Below we will discuss the most common types of intellectual property that businesses may own and how to go about protecting them. There are essentially three types of intellectual property that can be registered in the United States: trademarks, copyrights, and patents. There are also other types of intellectual property that can be protected in other ways, such as trade secrets.
A trademark is a word, phrase, symbol, design, or a combination of these things that identifies someone’s goods or services. While a trademark is used for goods and a service mark is used for services, the term “trademark” is often used to apply to both trademarks and service marks. Generally, the best way for a business to protect its trademarks is to apply to register the trademarks with the United States Patent and Trademark Office (USPTO). Registration with the USPTO provides protection throughout the United States. A business can also register trademarks in specific states, often through that state’s Secretary of State, but such protection will be limited to that specific state.
Additionally, a trademark can be applied for through the USPTO if it is either currently in use in commerce or the owner anticipates using it in commerce within 3 years after applying for it. When applying for a trademark, the owner will need to identify the specific types of goods and/or services that the mark will be registered in connection with. A trademark can be applied for in connection with multiple types of goods and/or services, however, there is an additional filing fee for each basic class of goods and/or services included in an application, so an application should only include the goods and/or services the owner is using the trademark in connection with or anticipates using the trademark in connection within the next 3 years. Once an application is filed, generally additional goods and/or services cannot be added to the application, so if the owner later decides to sell additional goods and/or services under the trademark, they will need to file a new application in connection with the additional goods and/or services.
Moreover, prior to filing a trademark application, a search should be conducted to determine whether there are any existing registered trademarks or pending applications that are likely to conflict with the trademark. Applications are frequently denied on the basis that the applied for mark is too similar to an existing registration or previously filed pending application, and thus likely to cause confusion for consumers. For instance, Meghan Markle’s company Archewell Audio LLC filed an application for the mark “Archetypes” in 2022 in connection with podcasts and other related entertainment services. The USPTO initially rejected the application partially on the basis that there is a likelihood of confusion with an existing trademark for “Archetypes” related to blogging. A final determination has not yet been made regarding Archewell Audio LLC’s application, so it will be interesting to see if it can successfully argue that podcasting and blogging are sufficiently dissimilar such that consumers will not be confused by the use of identical marks in relation to both.
Furthermore, filing for trademark protection also helps provides both offensive and defensive advantages. If a trademark is in use but is not registered, the owner will likely have some common law rights to protect the trademark in the event someone tries to use the same or a similar mark in connection with the same types of goods and/or services the trademark owner uses it with. However, a trademark owner has a greater ability to pursue litigation against an infringing party if the trademark is registered. Additionally, registering a trademark provides notice of the owner’s use of the trademark and can provide some protection in the event another party attempts to pursue the trademark owner for infringement in connection with a trademark that is similar to the owner’s trademark.
A copyright is a type of intellectual property that protects original works of authorship as soon as an author fixes the work in a tangible form of expression. Thus, a copyright is technically created as soon as someone creates a work, however, it is still a good idea to register such works with the U.S. Copyright Office. Copyrights are for items like books, screenplays, software code, music, and photos. Therefore, businesses that create original works should consider applying for copyrights.
Copyright owners have the exclusive right to reproduce the work, prepare derivative works based on the work, distribute copies of the work through sale, rental, leasing, or lending, and perform or display the work publicly.
It is important to note that even though someone who creates an original work owns a copyright in the work as soon as it is created, the copyright owner can only sue for infringement on the copyright if registration for the copyright has been applied for. A copyright can be applied for after the owner learns of infringement, but it is better if the copyright is applied for prior to any infringement since, in that case, the copyright owner will have a presumption of ownership, and a successful plaintiff is entitled to statutory damages. Therefore, it is best to apply for a copyright promptly after a work is created, rather than waiting to see if there is any infringement.
Generally, if an employee of a company creates a work within the scope of their employment, the employer will be considered the owner of the work, which is referred to as “work for hire.” However, it is a good idea to specifically inform employees of this fact through an employment agreement or employee handbook. Additionally, when working with independent contractors, and when commissioning works, a contract should specifically state that a work is being created on a work-for-hire basis and that the work will belong to the party requesting it.
Additionally, when a business is creating work for a client, it is a good idea to stipulate in a contract that the work will belong to the business creating it unless and until the client pays in full for the work. This gives the business more leverage in the event the client does not pay for work performed or disputes an invoice.
A patent is an exclusive right granted for an invention, which is a product or a process that provides a new way of doing something or offers a new technical solution to a problem. Patents are granted for items such as chemical compositions for pharmaceutical drugs, mechanical processes like complex machinery, and machine designs that are new and unique. Patents are registered with the USPTO and the process of applying for a patent is very complicated. If a business wants to apply for a patent, it is highly advisable to retain a patent attorney to assist and prepare the patent application. Patent attorneys are very specialized and must pass a separate bar exam to be able to file patent applications.
The first step in applying for a patent is conducting a search to determine whether the invention is patentable. An invention is not patentable if it has already been publicly disclosed by another party or if the inventor themself publicly disclosed it more than a year before filing the patent application. If a search does not reveal any problems, the next step is filing the patent application. There are basically three types of patents. Utility patents are the most common type and are granted for inventions or discoveries of any “new and useful process, machine, article of manufacture, or composition of matter, or a new and useful improvement of any of these.” There are also design patents which are for the invention of “a new, original, and ornamental design for an article of manufacture” and plant patents for the invention or discovery and asexual reproduction of any distinct and new variety of plant. In some cases, a provisional patent application can also be filed which is much simpler than a nonprovisional application, but a provisional application will never result in a patent being granted and basically just allows the inventor to establish an earlier effective filing date. A nonprovisional application must be filed within 12 months of the provisional application being filed to obtain a patent.
Therefore, businesses that invent products, items or processes should consider applying for patent protection for their inventions and discoveries.
In addition to the types of intellectual property that can be registered, businesses should also consider protecting other intellectual property that they generate as trade secrets. Trade secrets can include information like a business’ processes, work product that is not public, certain information about a business’s customers, and a business’s plans and strategy. It is a best practice to have employees, and anyone else who may have access to a business’s intellectual property, like certain vendors, sign a Non-Disclosure Agreement, saying that they will not disclose trade secrets or use them for the benefit of anyone other than the business. It is also a good idea to clearly label information as trade secrets so that all parties understand how they should treat it and to make it harder for someone to take it and reuse it.
Trade secret laws vary in different states, but one thing to keep in mind is that generally the names and basic contact information of a business’s clients are not considered a trade secret. However, many businesses see their customer information as highly important and a core asset of the business. Additionally, many businesses are very concerned that certain employees with access to customer information might leave the company and then try to take the customers with them to a competitor. However, this is a difficult issue since the identities of clients are not generally a trade secret.
Some businesses try to prevent employees from taking customers with them when they leave by having the employees sign a non-solicitation agreement, saying that they will not solicit customers of the business to leave and go to a competing business. However, depending on the state where the employee is located, non-solicitation agreements may not be enforceable to employees. There are also currently possible new rules coming from the National Labor Relations Board that could affect the ability to use non-solicitation agreements throughout the country.
Additionally, non-compete agreements with employees are generally not enforceable, except in a situation where the employee sells their interest in the business and/or the goodwill of the business. However, even this exception has been called into question recently. In Kodiak Bldg. Partners, LLC v. Adams, 2022 Del. Ch. LEXIS 288 (2022), the Delaware Chancery Court refused to enforce a non-compete agreement between a business and a former employee who sold his interest in the business. The court based this decision on the grounds that the restrictive covenants in the noncompete agreement were more restrictive than the business’ legitimate interests justified and that it would be inequitable to enforce such unreasonable covenants against the former employee. Notably, the court deemed the entire noncompete agreement unenforceable and declined to modify it. Therefore, as there are questions regarding whether noncompete agreements can be enforced even against former owners of companies, it is even more important to adequately protect a company’s trade secrets.
In conclusion, intellectual property is often an important asset of a business. Businesses should consider taking steps to protect their intellectual property, including registering appropriate trademarks, copyrights, and patents, and taking appropriate measures to protect non-registerable intellectual property, such as trade secrets. Protecting intellectual property can help a business to prevent others from using the business’s intellectual property and protect the business from claims of infringement from other parties.
Please do not hesitate to reach out to TALG, Ltd. if you have any questions about intellectual property.