Intellectual Property Basics for Startups

Over the past few years the Southern California startup community has grown by leaps and bounds. In fact, Fast Company has reported that Los Angeles alone is the home to more than 2,200 startups as of 2013. 1 While exciting, the early stages of developing a new business can be a complete whirlwind and intellectual property is easily overlooked either because it is too expensive or time consuming. However, overlooking this critical asset can be detrimental to your startup. There are three types of intellectual property that a startup needs to understand and protect, quickly.

1. Patents
What are patents and why would you need them?

While there are three different types of patents (plant, design, utility), for non-agricultural businesses, only two are particularly relevant to most startups: (1) the design patent, and (2) the utility patent.

Utility patents are available for processes, machines, articles of manufacture, or compositions of matter that are deemed new, useful and non-obvious. For example, Facebook was granted a utility patent on its News Feed Feature, US Patent No. 8,171,128, titled “Communicating a newsfeed of media content based on a member’s interactions in a social network environment.”

A design patent, on the other hand, may be sought to protect ornamental (non-functional) designs. For example, Apple® has a design patent on the design of its iPhone interface (D604,305).

Patents are important because they protect your business and your invention(s). Although they can be expensive and time-consuming, patents are worth the investment since they often can provide the best scope of protection for ideas. Further, for startups, a robust patent portfolio is attractive to investors. Patents also may allow a startup to generate revenue through licensing. Finally, the “patent pending” or “patented” disclaimers often deter would-be competitors from developing identical products.

How long do patents last?

Utility patents currently last 20 years from the effective filing date. Design patents currently last 14 years from the issue date.

*Warning: It is critical to know that there are certain bars to receiving a patent, namely the one year on sale bar. An inventor has one (1) year to file for a United States patent from the time an invention is patented or published anywhere in the world or sold or known of in the United States. If a patent application is not filed within this one-year grace period, you lose the right to apply for a patent forever. Further, this one-year grace period is not the standard in most foreign countries, therefore, if international patent protection is sought, it is important to file a U.S. patent application prior to making, using or selling a new invention.

2. Trademarks
What are trademarks?

Trademarks are words, symbols, logos, slogans or product packaging and design that identify the source of goods or services. In other words, a trademark is a brand name. Famous trademarks include Coca-Cola®, Nike® and Apple®. The purpose of trademarks is to build brand awareness and goodwill with consumers. Startups should protect their brand early by clearing and registering key trademarks (i.e., company name or company service/product line).

How do you get a trademark?

Trademark rights are acquired through use. Federal registration of your trademarks with the United States Patent & Trademark Office for your trademarks is highly recommended.

Although federal registration of a mark is not mandatory, it has several advantages, including notice to the public of the registrant’s claim of ownership of the mark, legal presumption of ownership nationwide, and exclusive right to use the mark on or in connection with the goods/services listed in the registration. 2 Without federal registration, the symbols “TM” or “SM” may be used to accompany trademarks or service marks to designate products or services. Only registered marks may be accompanied by the “®” symbol. Federal registration is quicker than a patent – generally 8 months to a year – and can cost a few thousand dollars.

As the startup grows, it will become increasingly important to police your trademark rights so you do not lose business to consumer confusion and knock-offs.

*Warning: Prior to filing for registration of any trademark, it is highly suggested that you engage an experienced trademark attorney to search for existing uses of your proposed trademark to limit the possibly that (i) your trademark gets denied by the Trademark Office or, (ii) you get sued for trademark infringement.

3. Copyrights
What do copyrights protect?

Copyrights protect the expression of ideas not ideas themselves. For example, a copyright can protect a particular photograph of a car, but others may still create their own photographs of the same type of car. Books, music, art, websites, advertising materials, photographs, architecture and computer software are protected by copyright.

How do you get a copyright?

As soon as a work is written or recorded in a tangible form, it is considered to be copyrighted. In the United States, the law provides six exclusive rights to copyright owners, including the rights to reproduce the work, prepare derivative works and distribute copies.

Why should I register my copyright with the Copyright Office?

Although not required, it is suggested that you register your copyrights with the U.S. Copyright Office (www.copyright.gov), which can be done online for just $60.00. Registration is inexpensive, easy and provides procedural benefits. Most importantly, federal registration of a copyright is required in order to file a lawsuit in federal court for copyright infringement. Federal registration is also necessary to receive certain remedies, such as statutory damages and attorney fees. Finally, federal registration provides a presumption of originality and ownership, and it allows U.S. Customs to stop the importation of infringing or counterfeit works.

Whether a copyright is registered or not, businesses should include the “©” symbol or the word “Copyright” with all materials it distributes. They should also include the year of first publication, the name of the owner, and the language “All rights reserved.”

*Warning: Startups should be careful to avoid using third-party photos, music, or writings on their website, marketing materials or products. Such use could lead to a potentially costly infringement dispute with the copyright holder.

Conclusion

Startups should be aware of the types of intellectual property that can impact their business and consider pursuing patent, trademark and copyright protection as appropriate. The significance and value of intellectual property mandates that companies strategically approach intellectual property protection. Startups that do strategically protect their IP create significant value.

Notes:

  1.  http://www.fastcompany.com/3020056/analysis-finds-las-tech-scene-outgrowing-hollywood, Accessed 12/16/20-13
  2.  http://www.uspto.gov/trademarks/basics/index.jsp, accessed 12/16/2013