As an entrepreneur and business owner, you work tirelessly developing your business plan, networking, creating a stylized logo and brand and your hard work should be protected. The most valuable business assets of your firm often include its Intellectual Property[1]. Your logo, branding strategy, trade dress, brochures, pamphlets and other materials used to market your business is valuable, proprietary and needs to be protected from infringement by competitors. Formation or the start-up phase is the best opportunity to.
This month’s Legal Risk Management Tip for Jacko Law Group P.C. will help business owners understand the types of Intellectual Property, primarily Trademarks, Copyrights and Trade Secrets, that may exist in their business and the steps to take to protect it.
A. Trademarks & Servicemarks
Your company’s logo, symbol, wordmark or slogan (collectively, “mark”) can and should be protected by registering it as a Trademark (for goods and products) or Servicemark (for services). While immediately upon use of a mark, your company owns it and can claim common law Trademark rights, such rights are limited and only apply to your immediate geographic area. Registering your Trademark at either the state or federal level[2] provides greater protection for defending against infringement. If your business operated within a singular state’s lines, then you may only need to file for protection with that state’s Secretary of State.
On the other hand, if your company provides services or products in more than one state, you should consider a federal filing with the United States Patent and Trademark Office (“USPTO”)[3]. Your carefully crafted mark is what identifies your goods or services to the world and potential clients, and more importantly, distinguishes you from your competition. After properly registering your Trademark or Servicemark, your firm will be entitled to stop other businesses from using a similar mark that is likely to cause confusion. Meaning, clients are likely to confuse your goods or services with those of your competitor based on their use of an infringing mark[4]. In the unfortunate instance where a business needs to bring a legal action against an infringing party, a federal registration with the USPTO will allow your business to bring the action in federal court, and have the rebuttable presumption of trademark validity on your side (meaning the federal court will presume that your company is the lawful owner of the mark). Registering for Trademark protection with USPTO can also help protect your brand internationally. In certain circumstances, you may stop certain manufacturers from importing fraudulent or infringing products into the United States.
B. Copyrights
Copyright laws generally protect a variety of original works, which include literary, musical, and art works such as books, musical compositions, movies, paintings Small business owners often forget about protecting other important works like software code, technical documents, certain excel spreadsheets with data, white papers, corporate literature, marketing brochures, investor presentations and other documents. In addition, Copyright laws can cover blog posts or newsletters created and published by employees as written works of art. Basically, Copyright law does not protect ideas or discoveries, but rather protects the way in which they are expressed, and keeps others from copying or reproducing that expression without the author’s prior consent. While common law Copyright protection is automatic once a work is put into its fixed form, registering for federal protection with the U.S. Copyright Office[5] provides the public with constructive notice as to the author and owner of the work, but also provides the company with powerful recourse in the case of infringement. In a civil infringement case, if the court finds the defendant liable, they must pay damages to the author. Statutory damages can range from hundreds to tens of thousands of dollars, or in the case of willful infringement, up to $150,000 per work[6]. The process to file for Copyright registration is relatively straightforward and the associated filing fees are intentionally low to encourage artists and authors to file.
C. Trade Secrets
Your business has secrets -Trade Secrets! The term “Trade Secret” can be defined differently in each state, but it can generally include proprietary information such as special “secret recipes” formulas, business and financial information, computer programs and source codes, budgets, methods of calculating costs and pricing, customer and supplier lists, and other confidential key business information. One of the key tenets of determining whether something is a Trade Secret is that the information is not known to the public or persons outside the organization. To be a Trade Secret, information must be sufficiently secret to confer an actual or potential economic or business advantage or benefit upon one who possesses the information. Basically, if your competitor obtained your Trade Secret, they would benefit economically while your business would suffer. Additionally, to obtain protection of a Trade Secret, your company must take steps to ensure the secrecy of such information. Common protective measures include having employees or independent contractors sign non-disclosure agreements, restricting access to the information to only key personnel, and keeping the information physically locked in a safe or lock box. Making sure sensitive documents are marked “Confidential” or electronic media, emails or electronic files containing trade secrets should contain or be accompanied by a notice of confidentiality is key to the protection of Trade Secrets.
D. Best Practices and Tools
Once you have identified Trademarks, Copyrights and/or Trade Secrets that your business may have, below are certain practices and tools that can be used to protect that valuable information:
- Non-Disclosure Agreement (“NDA”): This contract can be used to ensure that a party receiving sensitive information agrees to limit the use and disclosure of information.
- Employment Agreement: this contract between the firm and its employee may be crafted to clearly define the firm’s Intellectual Property and how the employee is expected to keep it confidential and/or handle it.
- Data Encryption: Firms can ensure electronic data is encrypted when shared with third parties and have the NDAs require secure storage of the any information retained by the receiving party.
- Control Access to Information: Electronic and physical permissions and other safeguards are available to limit personnel that is able to access critical information.
- Conduct Regular Tests and Audits: Firms can regularly assess their infrastructure, agreements, registrations and electronic networks for any vulnerabilities and to identity how and when sensitive information is accessed.
Conclusion
You work hard to make your business as successful as possible. As your business grows, you should consider how to best protect your valuable Intellectual Property as part of the plan to achieve your company’s optimal longevity and success. The costs associated with proactively protecting your firm’s Intellectual Property generally are far lower than prosecuting infringement or theft of Trade Secrets after the fact.
JLG assists a number of firms and individuals through the nuanced considerations relating to Intellectual Property. For more information on this topic, please contact us at (619) 298-2880 or at info@jackolg.com.
JLG works extensively with investment advisers, broker-dealers, investment companies, private equity and hedge funds, banks and corporate clients on securities and corporate counsel matters. For more information, please visit https://www.jackolg.com/.
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[1] “Intellectual Property” is defined by the World Intellectual Property Organizations as creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.
[2] [Whether state or federal registration is appropriate for your Firm is outside the scope of this article, but contact our office for more information.
[4] https://www.uspto.gov/trademarks/search/likelihood-confusion