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Intellectual Property and Your Business: Understanding the Basics - March 2016

March 29, 2016

by Duncan G. Byers

Intellectual property (IP) is any product of the human mind or intellect, including inventions, ideas, artistic expressions, unique names, business methods, chemical formulas or industrial processes. Almost every business, no matter the size, owns some form of IP, like a trademark or other brand-related property. Failing to understand, protect and police your IP can have far reaching consequences for your business, particularly from a financial standpoint.

For example, loss of control over a trademark could cost your business tens of thousands of dollars in rebranding, including the expense of new and/or revised marketing plans. Convincing consumers that your quality goods or services are associated with a particular trademark or trademarks can be costly at the outset, but rebranding after years in the marketplace can be far more costly and time consuming and often will result in some period of decreased business.                                            

There are five areas related to IP. Most people are familiar with the first three – patents, trademarks and copyrights. The last two, however – trade secrets and unfair competition – are less known and understood. Unfair competition is generally related to protections designed to ensure fair competition and depends upon the first four.

The three basic areas that are important to business owners regarding IP are development, protection and enforcement. These areas go hand-in-hand; without an issued patent, you can’t prevent another business from making, using or selling your invention. The same is true for copyrights; without a copyright registered within the guidelines of the U.S. Copyright Act, you can’t bring a suit against an infringer. Trademarks stand out because there is no requirement that a trademark be registered prior to enforcing trademark rights. However, there are marking and notice requirements for trademarks. Just using a trademark isn’t enough; you need to let others know that you claim trademark rights in order to not just warn off other potential users but also to stop infringers. While there is no registration or filing requirement to bring a case for theft of a trade secret, there are requirements for how a trade secret is handled by the owner in order for it to qualify for trade secret protection.  

Business owners must consider what, if any, IP they own or are developing, and then protection strategies must be developed or reviewed, including an analysis of the marketplace for potential overlap with IP owned by another entity. Businesses must determine if their trademark is similar enough to another to cause confusion and whether or not a product or service would infringe on someone else’s protected property. During the development stage of any product, it should be examined for potential protectable IP. There are statutory deadlines and ways in which rights can be lost if you delay too long in filing for patent protection, so businesses should consider each new development, even if it just part of the whole product, for potential protection.

Failing to have an IP strategy can be costly, and trying to save money on the front end can end up costing hundreds of thousands or millions of dollars later. For a patent infringement case with less than a $1,000,000.00 at risk, the costs of litigation average $600,000.00. For $1,000,000.00 - $25,000,000.00 at risk, the average cost is $2.5 million dollars. Even trademark infringement lawsuits, while cheaper than patent infringement cases, cost an average of $375,000.00 and can quickly rise over $500,000.00 for larger risk cases. Given the exposure to such potential risk, businesses need to consider what they are doing to protect themselves and IP, and what can be done to improve what they are already doing.

In follow up articles, I will discuss the five IP areas and what, in particular, businesses should consider for each.

Duncan Byers is a Pender & Coward shareholder who focuses his practice on intellectual property and business matters. He can be reached at (757) 502-7396 or dbyers@pendercoward.com.