United States: Intellectual Property and Business Strategy

Intellectual property --- patents, copyrights, trade secrets and trademarks --- is extremely valuable to businesses in today¡¦s global economy and should be foremost in many businesses¡¦ planning. But many attorneys do not understand how and why their clients should obtain intellectual property protection.

To maximize their return on investment, businesses need to take a strategic view of their intellectual property. The decision to protect an invention needs to take into consideration what type of protection is most effective, how the invention fits into a business¡¦ overall strategic plans, the market life of the invention and whether other inventions under development are better candidates for protection. Attorneys also need to anticipate, and develop strategies for, the inevitable law suits that are a reality of conducting a business. This may require regular searches of patent and trademark records and designing around patents whose owners use law suits as a means of competition.

In order to do all of these things --- and do them strategically --- attorneys must understand the value of intellectual property to the direction and goals of their clients¡¦ businesses.

Types of Intellectual Property. There are four basic types of intellectual property:

Patents. A patent gives its owner the right to prevent others from making, using, or selling their invention. Getting a patent takes a long time and is expensive. Many businesses only get patents for their most important inventions.

Copyrights. Copyrights protect things such as text, graphics, images, photographs and sound recordings from unauthorized copying, modification and distribution. Copyrights only protect the way an idea is expressed, not an idea itself. Copyrights are easier and cheaper to obtain than patents.

Trade Secrets. A trade secret is any secret that gives its owner an advantage over competitors who do not know the secret. A trade secret is protected if its owner takes reasonable steps to protect the secret. Trade secret protection is perpetual, but can be permanently lost if the secret becomes known outside the business.

Trademarks. A trademark is any word, name or symbol that is used by a business to identify its goods and services. The more distinctive a trademark is, the better it performs its function. Obtaining a registered trademark is more time consuming and expensive than obtaining a registered copyright, but much less expensive than obtaining a patent.

Size and Strategy. Intellectual property protection may be difficult, time consuming and expensive to obtain. Many small businesses often cannot afford comprehensive protection, which makes careful planning at a business¡¦ earliest stages that much more important.

Many new businesses are based on the sale of a single product or service. Under these circumstances, it is important to allocate adequate resources to obtain protection for the "crown jewels." Even if the cost of a patent application is daunting for a small business, an issued patent may be critical to the business¡¦ future growth and prosperity.

On the other hand, most businesses are not centered around breakthrough products or services, but instead rely on incremental changes or advances to existing products and services. For "faster/better/cheaper" businesses, the most important consideration may be the implementation of business "best practices" that will allow the business to develop an intellectual property portfolio over time while minimizing the risk of getting sued by competitors for infringement.

Many businesses cannot spare the personnel or funds to implement all the practices that might be desirable. The focus for these businesses should be to maximize the future benefit that can be derived from a key practices. Practical, informed modifications to best practices are sometimes necessary to serve the goals of both getting a business off to a strong start while not burdening it with unmanageable costs.

In growing businesses, important intellectual property issues are frequently overlooked or ignored. For such businesses, the time preceding a sale of the business or an initial public offering is often a good opportunity to review the business¡¦ intellectual property portfolio. Businesses at this stage frequently undertake an intellectual property audit to uncover and correct gaps in the protection of their intellectual property. For instance, a business might inventory its trade secrets in order to understand the value of those trade secrets and also to ensure their effective protection. Businesses also frequently review their employment agreements and independent contractor assignments to ensure that the business has clear title to the intellectual property it relies on.

Quickly growing businesses are particularly susceptible to infringement and misappropriation of intellectual property, and need to have a plan for intellectual property law suits which takes into account factors such as whether their competitors are regular litigators and how averse to litigation as a form of competition the business¡¦ management is.

Large, mature businesses have different intellectual property concerns than smaller, growing businesses. For example, a multinational business may have complex issues as to whether an offshore entity should be formed to hold the business¡¦ intellectual property and receive global revenues. Large businesses sometimes also fall victim to over-protection of intellectual property and may spend money on maintaining patent and trademark registrations that are no longer useful or have little value. For these and other large businesses it is important to regularly revisit intellectual property protection strategy and focus not just on whether a specific invention can be protected but also whether it should be protected in furthering the overall strategic goals of the business.

Budgeting. In budgeting for intellectual property management, attorneys need to consider which intellectual property measures will most effectively ensure that their clients¡¦ overall goals will be met. For example, if a business produces products that are effectively protected as trade secrets it may not make sense to patent the products and reveal the business¡¦ secrets to competitors.

An intellectual property budget must also be realistic and should move the business toward better and better practices. One way for a business to view the process is through a cost-benefit analysis: when considering a budget for patent protection, businesses will confront costs of at least $10,000, and often more, and a process that often takes three years from start to finish. It may only make sense to patent inventions that generate revenues that justify these expenses and that will be valuable to the business for years to come. Accordingly, businesses need review processes for all of their inventions, new and old, in order to evaluate whether patent protection is cost-effective.

An intellectual property budget should also take into account surprises, like getting sued when it¡¦s discovered your sales manager misappropriated confidential information from his past employer. Some businesses build flexibility into their budgets in anticipation of these bumps in the road, others take them as they come. More important than any particular plan for handling surprises is making senior management aware that these things can happen so that they can minimize disruption when they do happen and are more amenable to budgeting for prevention.

Diversifying. In the long run, diversification is essential to the value of all businesses¡¦ intellectual property portfolio. Businesses that take great precautions to maintain the confidentiality of their trade secrets are at risk because of the fragile nature of trade secret protection: a secret isn¡¦t a secret once it becomes known. It makes sense for businesses to consider overlapping forms of intellectual property protection. For example, it may be possible to protect a confidential operating manual both as a copyright and a trade secret as well as by patenting the process described in the manual.

By considering these strategic issues attorneys can help their clients make better use of their intellectual property resources.

1. The decision to protect an invention should take into consideration what type of protection is most effective, how the invention fits into a business¡¦ overall strategic plans, the market life of the invention and whether other inventions under development are better candidates for protection.

□ A True □ B False

2. A patent gives its owner the right to make, use, or sell their invention.

□ A True □ B False

3. Getting a patent can take a long time and can be relatively expensive.

□ A True □ B False

4. Many businesses only get patents for their most important inventions.

□ A True □ B False

5. Copyrights only protect text.

□ A True □ B False

6. Copyrights protect both the way an idea is expressed and the idea itself.

□ A True □ B False

7. Copyrights are easier and cheaper to obtain than patents.

□ A True □ B False

8. Trade secrets include any secrets a business owns, even if they give the owner no advantage over competitors who do not know the secret.

□ A True □ B False

9. Trade secret protection is perpetual, but can be permanently lost if the secret becomes known outside the business.

□ A True □ B False

10. A symbol that is used by a business to identify its goods and services may be a trademark.

□ A True □ B False

11. Obtaining a registered trademark is more time consuming and expensive than obtaining a registered copyright, but much less expensive than obtaining a patent.

□ A True □ B False

12. Patent protection may be critical to growth and prosperity of a business built around "crown jewels."

□ A True □ B False

13. For some business the best intellectual property protection strategy may be afforded by the implementation of business "best practices" that allow the business to develop an intellectual property portfolio over time while minimizing the risk of getting sued by competitors for infringement.

□ A True □ B False

14. A review of the employee handbook may be part of the intellectual property due diligence to determine if a business has clear title to an intellectual property asset.

□ A True □ B False

15. Businesses need to have a plan for intellectual property law suits, including whether their competitors are regular litigators.

□ A True □ B False

16. Large, mature businesses have intellectual property concerns that are substantially the same as the problems of smaller, growing businesses.

□ A True □ B False

17. For large businesses it is important to focus not just on whether a specific invention can be protected but also whether it should be protected.

□ A True □ B False

18. Even if a business¡¦s products are effectively protected as trade secrets it may make sense to patent the products.

□ A True □ B False

19. It may not be cost effective to patent an invention even if it is a core intellectual property asset.

□ A True □ B False

20. Businesses can reduce their risk by using overlapping forms of intellectual property protection.

□ A True □ B False

1. T

2. F

3. T

4. T

5. F

6. F

7. T

8. F

9. T

10. T

11. T

12. T

13. T

14. T

15. T

16. F

17. T

18. T

19. T

20. T