The recent $7.3 million jury award to the estate of the late soul star Marvin Gaye, from singers Pharrell Williams and Robin Thicke, reminded the public of the power of copyrights and the importance of protecting intellectual property.
Few small businesses own a hit song, but many possess intellectual property. Everything from a company’s name, logo and website to a restaurant’s recipes and a manufacturer’s process may be important assets that can be protected with copyrights, trademarks or even patents, said Frank Kozak, patent counsel for technology giant Nokia and the former vice president and intellectual property counsel for NAVTEQ. The flip side of this issue is that a small business can end up defending itself against a charge of infringement unless it takes some precautionary actions.
Kozak said the first intellectual property issue a small business may face involves trademarks.
“Can I use my own
name? The answer generally is yes,” he explained. “If your name is Bob
Smith and you wanted to open a muffler shop, you could name your business Bob
Smith Mufflers. However, you can’t call your muffler shop Xerox Mufflers,
even though Xerox is not in the muffler business. Certain corporate names
are protected, and the more unique the name, the stronger the protection. Many
small businesses face a dilemma over what to call themselves. But I would
caution against using a name like Xerox or Pepsi because these are such unique
names that have such broad rights.”
He said that businesses that do create new and unique names should check first to see if that name is taken or protected. “That’s an easy and relatively inexpensive thing to do for an intellectual property attorney and may cost a few hundred dollars. But do it before you spend the money to make up signs and other advertising and promotional materials. Business owners can try to conduct a trademark search themselves, but trademarks are protected under both state and federal laws and it can get complicated. It is much better to get the advice of a professional.”
Kozak also warned small business owners who are developing software to include copyright notices in their work. He said software developers should be careful not to take the work of others and incorporate it into their own, even accidentally.
Bill Maddocks, founder and former president of Chicago-based MAC Medical Supply, a medical equipment firm he later sold to his wife, had mixed experiences in navigating the world of intellectual property. Maddocks said he obtained a copyright for a new reporting format for a cardiac monitor, a copyright that protected his product and gave his company with a unique competitive advantage. He advised soliciting legal advice from reputable intellectual property attorneys or peers who have insights into the process. Maddocks, who has worked in the medical supply industry for more than 30 years, said with an earlier company he had renewed patents at a cost of more than $12,000, only to find that new technologies had made those products obsolete.
“Getting a patent can be a very difficult and expensive process,” he said. “Those patents must be maintained and you need to insure that you’re spending your money wisely.”
Craig Summerfield, a patent attorney with the Chicago law firm of Lempia Summerfield Katz, said small businesses need to protect their intellectual property and innovations. “A patent is a document that says you can keep other people from doing or using something you created. Small businesses need to know that. It can be an incredibly expensive financial burden to prevent somebody from using that idea. Most people are honest and if they know there is a patent will try to avoid infringing,” Summerfield said. He added that most companies or individuals seeking patents are start ups that tend to have a larger investment and recognize that their intellectual property is vital to their future. Often these are software companies that invest greatly in patent protections to help their business develop and grow.
Summerfield said obtaining a patent is not a sure thing, but is easier when the patent claims are really narrow. “But those types of patents typically have less value,” he said. “A patent still needs to pass a number of tests. It needs to be new and not obvious, but that’s sometimes a subjective determination. There can be a lot of back and forth with the patent office and often after all that you don’t end up with patent. Small business owners need to understand that.”
He said getting a patent application on file can cost between $6,000 and $10,000. Responses to patent office rejection may involve changes to the claims that can cost several thousand dollars more. “Those that are more technical in nature are likely to cost closer to the $12,000 range,” he said, while pointing out that the level of complication doesn’t usually affect the number of responses because the patent office works with engineers and scientists familiar with the subject.
Summerfield said he sometimes hires searchers to find whether it’s worth it to spend the money involved in a patent case. “Larger corporations rely on engineers and scientists and don’t worry as much about searchers,” he said. “But for smaller companies, it may be worth hiring a searcher.”
Amy Ziegler, an intellectual property attorney with the Chicago law firm of Greer, Burns & Crain, said small businesses that have been around a while and start ups tend to have limited financial resources and while trying to attract investors sometimes disclose information that comes back to haunt them. Ziegler said there is a one-year grace period in the United States from when someone discloses information about a product, service or process they are trying to protect. “Way too often start ups unintentionally destroy their rights by failing to sign confidentiality agreements,” Ziegler said.
She’s also seen companies that have failed to learn whether slogans or trademarks they intend to use have been trademarked by existing companies. “They end up wasting resources,” she said. “But they usually won’t receive an infringement letter from third party until their business is doing well. A little bit of preventive trademark searching could save that grief. They can search on the trademark office website or on Google.”
She said certain naming conflicts are inevitable. If two restaurants across the country use the same name, perhaps a family name, that shouldn’t be a problem because they don’t compete and would not be mistaken for one another. “But you don’t want to copy the look, menu and feel of the other restaurant, say, for example, the staff’s uniforms,” she said.
Logos: Also Intellectual Property
Ziegler said many companies would be surprised to learn that they don’t even own their own website or logo because the designers who created them maintain the rights. “That happens all the time. You hire somebody and don’t even think about it, which is why owners should demand in the original contact that all intellectual property rights go to them. It saves a lot of headaches later. When you do it after the fact, those designers want more money.”
Patrick Smith, an intellectual property attorney with the Chicago office of Greer, Burns & Crain, also speaks to small business groups. “The first challenge is getting them to recognize that they probably already have intellectual property, but don’t’ realize it,” Smith explained. “When you create your logo, trademark, website and customer list, that’s proprietary information that you use in your business to distinguish yourself from your competitors. You probably also have some trade secrets. You can obtain protection for this, in some cases, without going to see an intellectual property attorney or making a trip to the patent or copyright office.”
He said one easy first step is requiring employees to sign employment agreements that require them to protect trade secrets, such as like customer lists and prohibiting them from taking confidential materials outside of the office. “We hear stories all the time about business owners whose employees left and started competing companies using their former employers customer lists,” Smith said. “It’s easier to make their cases in court if they’ve taken those small steps first.’’
Perform an Audit
He advised business owners to perform a self-audit to examine what they have developed and created and who actually owns it. Smith said one trade secret that surprises many is recipes. “Your recipes can be very valuable assets. Large corporations fight very hard to protect those recipes,” he said. “To protect what you have, you have to be able to prove that you recognized early the importance of these assets by steps like password protected computers and keeping recipes locked in offices.”
He pointed out that customer and vendor lists that include business contacts, price and client orders are intellectual property.
Sriracha: A Cautionary Tale
Smith cited the example of David Tran, a Vietnamese émigré and founder of Huy Fong foods in California. Tran created the popular Asian-style chile sauce, Sriracha, but failed to secure a trademark. Now food companies around the world are creating their own “sriracha” products, costing Tran millions of dollars in potential royalties or licensing fees and freely using the name of his premier product without his permission.
Nokia’s Kozak pointed out that protecting intellectual property shouldn’t stop with confidentiality agreements and copyrights, trademarks and patents. With growing evidence of corporate espionage and foreign countries seeking proprietary information, he urged small businesses to improve their physical plant and data security to safeguard valuable information.