4 Basic U.S. Intellectual Property Concepts Every Startup Founder Should Know, According to Immix Law’s Leigh Gill
For startups of all sizes, being familiar with intellectual property laws can have many benefits, especially when it comes to protecting your business. But learning about the details surrounding IP law can seem daunting. Labs mentor Leigh Gill, an attorney from Immix Law, held a session to go over four basic intellectual property concepts that startup founders should understand from the very beginning of their business.
Concept #1: Who owns your IP?
Generally speaking, the person who created the product owns the rights to it. But be careful in cases where you’ve contracted “work-for-hire” employees, such as contractors, freelancers, or outside agencies. In these situations, you should be sure to come to an agreement on who owns the work that they create before they start. If you make the mistake of waiting until after the work has been completed to then ask the employee to sign an IP contract, “that can put your business in the difficult position of having to ask them, after they’ve been paid and when you have little leverage, to sign an assignment or release before you can use the IP,” Gill says.
According to U.S. law, copyrights last the life of the author, plus 70 years, so it’s important to do your due diligence with any “work-for-hire” contracts to avoid creating any awkward or problematic scenarios. “Seventy years is a long time and even if you’ve got a great relationship with your contract partner or former employee, things can change,” Gills says. “Be sure to always use a written contract, and make sure that it includes an assignment or ‘work made for hire’ clause.”
Concept #2: Trade secrets and confidentiality
In business, a trade secret is anything that’s not widely known, like the recipe for Coca-Cola, that’s valuable because of its secrecy. Businesses try their best to keep these secrets from being exposed to the public but, according to U.S. law, it’s their responsibility to do so, or else they lose the rights to that information.“An idea, concept, list, document, recipe, strategy—anything can be a trade secret, but only if it is ‘the subject of efforts that are reasonable under the circumstances to maintain its secrecy,’” Gill says. “Efforts could include consistent labeling of confidential information as well as defining the information that should remain confidential in contracts.”
One tool frequently used by startups to protect trade secrets are non-disclosure agreements or NDAs. These agreements make it illegal to disclose information that is outlined in the agreement such as product details, organizational strategies, and revenue forecasts. ”Businesses should use NDAs liberally with employees, contractors, business partners—whoever is going to get privileged access to something the business considers secret,” Gill says.
There are also U.S. federal protections that allow trade secret owners to file a lawsuit against anyone who uses their confidential information illegally. “The Defend Trade Secrets Act of 2016 gives trade secret holders the option to pursue trade secret misappropriation in federal courts and potentially execute a civil seizure of trade secret material,” Gill says. “Additionally, companies who sue former employees for trade secret misappropriation under the Act may be able to collect damages and attorneys’ fees.”
Concept #3: Selecting and registering your trademark
Trademark law allows businesses to protect any words, names, or symbols used to identify a particular brand so that other companies can’t create knockoffs. “Trademark law is designed to avoid consumer confusion and to provide protection to companies that invest in generating brand equity among consumers,” Gill says.
To help with the trademarking process, try to think of company names that are distinct and unique but avoid word-for-word descriptions of your product. Otherwise, you may have a difficult time protecting it. “What makes a good trademark? A trademark is usually considered distinctive if it’s created just for the product. It should also be arbitrary, like using the word Apple for a computer product, and only suggestive of product features,” Gill says. “So while naming your clothing company ‘Comfortable Threads’ might seem like a good idea, it will be difficult to protect that as a brand.”
After you’ve selected your trademark, you should file to register it to better protect your startup as you grow. “A trademark doesn’t need to be registered to be protected, but registration is helpful because it gives evidence of the trademark holders’ rights and may prevent others from filing for conflicting rights,” Gill says. “Registration also allows businesses to take advantage of certain legal rights. For example, registering a trademark allows the owner to claim damages and attorneys’ fees in an infringement lawsuit. It also allows owners to extend protection to their ‘intent to use,’ to cover the timeframe before they actually launch to market.”
Concept #4: Patenting your product
Patenting a product that you’ve invented is worth the effort if you have the time and money to do so. “Patents protect inventions but require registration, which can be costly and take years to issue. Most businesses have something that distinguishes them from competitors, and in some cases, that’s an invention,” Gill says. In order to qualify for a patent, the information must be a trade secret. “But some inventions can’t be kept secret. Not only do you want to consider patenting those inventions, you’ll want to consider when to patent those inventions,” Gill says.
After the America Invents Act of 2011 bill passed, the first person to file for an invention became the legal owner of it, even if they weren’t the original inventor. “If you get to the patent office second with your invention, you’re out of luck. You might even be prevented from using your invention if the first person to file invented the product on their own,” Gill says.
What actually qualifies as a patentable invention? “Anything that has never been invented before might be patentable, but only if its ‘non-obvious’ and has not been previously disclosed. For example, let’s take the spork: spoons and forks were already invented, but what about the combination of a spoon and fork?” Gill says. “Perhaps it would be obvious to combine the two, but how to combine them is a decision that the inventor has to grapple with.”
Read more articles from our Insider startup legal toolkit.
This post is based on content from a WeWork Labs programming session.
Interested in connecting directly with this mentor? Ask your Labs Manager for help.