Intellectual Property (IP) deals with the protection of non-material things, such as inventions, ideas, concepts, and artistic creations. These are often referred to as “intangible assets” because the protected asset is not the tangible, underlying item, such as the canvas or the paint on a work of art. Rather, the protected asset is the idea that is either expressed on or that comes together on the underlying item. To reward the creator of these intangible assets and to protect these intangible assets, IP laws have been created.
Intellectual property is generally classified into four different categories: Patents, Trademarks, Copyrights and Trade Secrets. In some cases, an inventor’s creation will fall into more than one category of IP. This is because each of the four categories is meant to protect a different aspect of the intangible asset, and on occasion, the intangible asset can be protected in more than one way. In general, the following summary can assist a company in identifying its IP:
- Patents and Trade Secrets protect useful ideas and methods.
- Copyrights protect the expression of an idea.
- Trademarks protect an association between a product or service and its source.
Patents and Trade Secrets both grant the owner the right to stop others from practicing, making, or selling a useful invention. However, Patents and Trade Secrets go about providing this right in a different way.
Patents are most commonly thought of as protecting a product or device, but can also protect a computer program, a biological or chemical composition, or even a method of performing a task. According to the Constitution, patents serve “To promote the progress of science and useful arts, by securing for limited times to … inventors the exclusive right to their respective … discoveries.” U.S.
Constitution, Article I, §8. Our government has recognized that by rewarding inventors and creators, and the continual expansion of human knowledge, society as a whole benefits.
But how does the process work? If I say, “I invented the cure to cancer,” is that enough to apply for a patent? What is enough?
The short answer is much more is needed to prove you are an inventor. Long ago, the patent office used to require that inventors file a working version of their inventions. This would allow the patent office employee, commonly referred to as an “examiner,” to review the invention and better understand what the invention included. However, as one can imagine, these inventions quickly began to clutter the patent office storerooms. In some cases, sending a working version of the invention simply didn’t seem practical, i.e. when the invention related to an improved farm implement.
The patent rules now allow inventors to file only a “constructive” version of their invention, which is a complete description of the invention laid out in the form of a patent application, using annotated drawings when possible. In the application, the inventor must be careful to fully disclose the idea in detail, and in the format required. In particular, the inventor must describe the BEST way the inventor knows to perform the invention, or the inventor may lose the right to protect the invention. The application must also be filed within certain time constraints. For example, the application must be filed within one year of offering the invention for sale to someone, or the patent rights are lost FOREVER. Because the laws associated with obtaining patents are very strict, an inventor should consult a skilled patent practitioner early on in the process.
Once an application is on file, the patent office takes quite a bit of time (currently averaging more than 18 months) to determine whether the invention is new, useful, and not an obvious variation of something that has already been invented. If all of these requirements are met, the patent office will grant the inventor a patent, thereby awarding the inventor the right to exclude others from practicing, making, or selling the invention for a period of 20 years from the date of the application’s filing. If the invention was, for example, an improved machine that fills soda bottles faster than any previous machine, a patent would allow the inventor (or company to which the invention was assigned) to prevent its competitors from building or using that same machine for a period of 20 years.
After that 20-year period of exclusivity, the technology is said to “enter the public domain,” where it may be freely practiced by anyone. This is when competitors may choose to pick up the patent, read the details that are included in the patent, and go into business for themselves. Congress has decided that the 20 year patent “monopoly” given to an inventor is sufficient to encourage innovation and reward inventors, yet also allow competitors to eventually enter the field and bring marketplace competition.
A Trade Secret, in contrast to a patent, requires no governmental filings of any kind. Instead, a company or inventor can secure a trade secret by simply keeping the concept / process / invention a secret. In fact, a trade secret lasts for as long as the invention is a secret – possibly forever. One of the most widely recognized trade secrets is the recipe for Coca-Cola®.
However, trade secrets have their own negative aspects, as well as a number of guidelines that must be followed in order to maintain the trade secret. In general, the trade secret guidelines set forth how a trade secret can remain secret — the key to protecting it. Because as the laws state, once the invention is revealed through legal means, the trade secret is permanently lost.
The loss of a trade secret may occur when adequate measures are not taken to safeguard the secret, i.e. when a company talks about the idea with others without a non-disclosure agreement, or when there is a lack of proper security measures taken at a business. However, there are other major considerations for a company to consider. For example, a trade secret will also be lost forever if it is invented independently by a third party, or if the invention is reverse-engineered (i.e. – someone examines the product and figures out how to build it themselves). The concern over reverse engineering is often the biggest factor determining whether an invention should be protected by patent law or trade secret law. Using the example of the recipe for Coca-Cola®, if someone could reverse engineer how the famous soda is made, the trade secret would be lost.
A Copyright protects the expression of an idea. This is generally an original literary, musical or artistic work, and can be found in just about any type of medium. For example, a soda can, a compact disc, or even a website can be considered a medium. Accordingly, the print on a Coca-Cola® can, the music on a CD, and the artistic layout of a website can be protected by Copyright law. Ideas not expressed in a medium are not protected under Copyright law.
In contrast to patent law, copyright law states that copyright protection is automatic upon completion of a work. Therefore, no formal registration is required. Registration with the US Copyright Office is only necessary if the copyright owner wishes to sue an infringer in court or to preserve the right to certain statutory damages.
In recent years, Congress has greatly extended the length of Copyright protection. The present law states that in the case of an individual author, a Copyright endures for the life of the author plus 70 years. For corporations, the Copyright lasts 95 years from publication of the work, or 120 years from creation of the work, whichever is shorter.
Finally, the fourth type of IP, a Trademark, is used to protect the association between goods or services and their source. Trademarks are frequently found in the form of words, logos, and slogans (i.e. Coca-Cola®, the Coca-Cola® wave, and “Enjoy Coca-Cola®”). However, Trademarks may exist in other forms. For example, numbers may be trademarked (“273” for a perfume), a color may be trademarked (“John Deere green”), and even the shape of a bottle (the Coca-Cola® shape) may be trademarked.
Companies use Trademarks to identify their goods or services so that customers can recognize the Trademarks and associate products with that company. This association often benefits both the Trademark owner and the public. The Trademark owner benefits by having customer loyalty and goodwill. The public benefits by being assured that they know the origin of the goods, and that the goods or services they are purchasing are of a certain quality associated with the Trademark. (For example, a purchaser of a $70,000 Mercedes Benz® would likely not make the same purchasing decision if he/she was uncertain whether Mercedes Benz® was the true manufacturer.)
It is important to understand early in a company’s formation that not all names, slogans, and identifying characteristics can be trademarked. Moreover, even among marks that can be protected, some marks are considered “stronger” than others. The U.S. Trademark Office will often reject marks that are considered “merely descriptive” or “generic” – i.e. marks that merely describe the underlying product or use generic, industry-wide terminology. For example, a company that wishes to protect “Chicago Pizza Company” will undoubtedly find resistance at the Trademark Office, and therefore an inability to stop a competitor from using the same words to describe its products.
On the other end of the scale, a company that coins a new word, such as “Prozac®” will likely receive prompt registration of its mark, as well as broad trademark protection in courts of law. Marks that are “suggestive” (i.e. “Greyhound®” for a bus transportation company) fall somewhere in the middle. Assuming a Trademark is properly registered and consistently used, it can last forever, and often can be one of the most valuable assets owned by a company.
Because IP decisions nearly always have long-lasting repercussions, we encourage entrepreneurs and companies to set aside time early in their formation to understand the four types of IP and how each type may impact the corporate strategy. In many cases, entrepreneurs are surprised at how important IP can be to a corporation’s growth and valuation, and how easily it can distinguish a company from competitors. We look forward to helping your company identify its IP assets.