United States: Protect Your Assets – Now, Not Later

• If you’re looking for venture capital, remember that venture capitalists and other investors will often refuse to invest in a company whose assets are not protected by IP. In the due diligence phase, investors check carefully to ensure that all IP central to the company’s success is protected.

• Obtaining IP protection (even in the form of patent pending application) greatly increases the likelihood that your business can block competitors from infringing on the IP that’s essential and central to your business’ core activities.

From the get-go, there are several key steps for protecting IP. Executing these steps correctly means working with a professional who specializes in IP law, and the sooner the better.

It is surprising how often a company enters into a "handshake deal" with their key outside service providers, which unfortunately leaves the company with nothing more than a nonexclusive license to use the deliverable. To protect yourself make sure that when you hire a service provider to create copyrightable work you ask the provider to sign a "work for hire" agreement. That way, your company "owns" the deliverable. Additionally, confidentiality agreements and/or non-compete agreements should be a matter of protocol from your key employees and outside service providers and vendors.

Trademarks or brands are essential property rights in commerce. What would Coca Cola be without their trademark? In today’s environment, you need to search and register not only trademarks but also the URL for the corresponding Internet address and availability of the corporate name in key states. Businesses could spend a lot of time and money researching a trademark and getting it registered, only to find that somebody else already owns the URL that you really want or has rights to the business name.

Another important decision you face is the protection of your business’ proprietary information. Should you treat it as a trade secret, which must be held confidential? Or, maybe you should get a patent in all the major countries where the product may make an impact. For example, if Coca Cola had received a patent on their syrup formula (versus treating it as a trade secret) the patent would have expired about 100 years ago. It’s reported that the Coca Cola syrup formula is still locked in a vault in Atlanta. It’s a secret taste that has never been "reverse engineered" or duplicated. Coca Cola made a smart decision when it chose the trade secret route rather than the patent route to protect its proprietary information.

If, unlike the Coca Cola formula, your business’ proprietary information is easily "reverse engineered" or, for other reasons, it’s not feasible to keep your proprietary information secret, then patent protection may be your best route.

Don’t delay in getting to a patent attorney or you may lose some or all of your protection. Although U.S. law allows the filing of a patent application up to one year after public disclosure of an idea or the sale of the article, if a patent is applied for in many foreign countries during the time the invention is disclosed publicly or articles incorporating the invention are sold in commerce, then the patent will not be valid.

You should explore which countries to file applications in with your patent lawyer. After all, patent applications can be expensive. The cost of a U.S. patent application normally ranges from a little less than $10,000 to over $30,000. If you file in numerous countries, the total cost of the patent program may run into the hundreds of thousands of dollars.

Because patent and other IP litigation is some of the most expensive litigation there is, you should consider purchasing infringement insurance. For pennies on the dollar it provides the funds to prosecute a patent infringement claim (not the expenses of defending the claim).

Lathrop & Gage works extensively in representing start-up and emerging technology companies as well as mature industry leaders. Our attorneys find that if a business has done its best to obtain IP, then not only will venture capitalists and other investors be more interested, but chances are the business will be better able to protect itself against infringement by others.