IP Basics
Here’s why startups should care about IP -- it’s helpful to understand the types of intellectual property (IP) in the US legal system, how they protect certain creations, and how that translates to business value. For tech companies in particular, bringing an invention mindset to company culture can greatly increase a company’s ability to hire top talent, and increase the value and attractiveness of the company for growth, financing and exits. Today, I’ll give a general overview of the types of IP in the US legal system. In future blog posts, I’ll also discuss each category in more detail and when it may be a good time to speak to an attorney to make certain filings or registrations, which can provide vast economic advantages on the market and in court.
Intellectual property, or IP, is a category of property that encompasses intangible creations of human intellect. There are four types of IP in the US legal system: copyright, trademarks and trade dress, trade secrets, and patents. Each category protects different types of creations, with different exclusive rights for the owner.
Copyright protects original works of authorship that are fixed in a tangible medium. Works that can be copyrighted are: literary works such as a novel, audiovisual works such as movies, graphics, sculpture, software, and architecture, among others. Copyright protection is automatic – it starts when the work is created and fixed on the tangible medium (something that is created but stored in a transitory state is not copyrightable). Copyright owners have exclusive rights when it comes to their works, which include reproducing, preparing derivative works, distribution, public performance and public display, and can license these exclusive rights through licensing agreements, or transfer ownership of these rights. However, copyright does not protect against independent development; it only protects literal copying.
Additionally, registration with the Copyright Office is required before a copyright owner can sue for infringement or get statutory damages (which I’ll define and get into later on). Best practices for copyright owners who choose not to register a particular work is to use the © symbol next to the work, and “Copyright [year], [your name], All rights reserved.”
This category of IP protects branding by identifying the source of products or services, and helping consumers distinguish one source from another. Trademarks protect specific words, symbols or phrases associated with a brand, such as names, logos, and slogans. Examples include the Nike logo, Target red bullseye, and the Nike slogan “Just Do It.” As with copyrights, trademark owners get automatic rights, but only when used in commerce, such as using the logo or slogan when selling a good or service. However, like with copyrights, you’ll get better protection when registering the trademark, which an owner can do at the state and/or federal level, and even overseas for international businesses.
Trade dress protects brands through product packaging, or “look and feel” of a brand, as a way to identify the source of a product or service and distinguish from competitors. To be protectible as trade dress, the design or packaging must be non-functional and distinctive. Examples include the Coca-Cola glass bottle; the design, signage and layout of a retail store such as Starbucks; and the unique shape and design of a Porsche 911.
Trade secrets protect confidential business secrets, and cover any non-public information used by a business, where that information has independent economic value because it is a secret and not publicly known. To be a trade secret, the information must also have value to others who don’t legitimately have access to the information (such as competitors), and there must be reasonable efforts to maintain secrecy. Maintaining secrecy can include labeling certain documents as “Confidential”, storing them securely and controlling access, and using NDAs when sharing the information with anyone outside the business. Trade secret protection can be indefinite as long as the information is kept secret and are protected under state and federal law. Examples of trade secrets include the Coca-Cola recipe, the WD-40 formula, and even customer lists for businesses.
Patents protect inventions, and are documents issued by the US Patent and Trademark Office that describes an invention, and provides a “negative” right to the patent owner, meaning it provides the owner the right to stop other people from making, offering to sell, selling or importing the patented invention. Because patents are publicly disclosed, they are mutually exclusive from trade secrets, which derive value from being kept secret. As I’ll describe later, it’s up to executives with advice from patent counsel to decide whether to keep certain information or inventions confidential as a trade secret or to patent them, but they can’t do both for the same thing. Patent protection can be quite broad in scope, encompassing more than just the specific embodiment or version of the invention listed in the patent itself, making it very valuable for tech and pharmaceutical companies.
