By UpCounsel Attorney Nate Kelly
Most business owners are aware that brand names, logos and other identifiers customers associate with your product or service can be protected through state and U.S. trademark registration.
But intellectual property is often a company’s most valuable asset, and founders and CEOs should plan ahead and consider all of their IP protection options. The best method will vary depending on the idea and the company’s structure and value proposition.
Here are the primary means of protecting your idea – from watching what you say to friends to filing with the U.S. Patent and Trademark Office (USPTO).
1.) Keep Your Mouth Shut
If you have a unique and potentially lucrative idea, formula or invention, your initial instinct may be to shout it from the rooftops. However, if your idea is not legally protected, anyone can claim it as their own. And if a well-prepared and legally represented competitor learns of your invention, the company or individual may be able to obtain control over it before you.
The best IP protection for your company will vary depending on your idea.
Patents and trademarks are issued by the USPTO on a first come, first served basis, so if someone else files for IP protection before you, they can obtain legal ownership of your idea. For this reason, you should use significant discretion when deciding who will receive valuable information.
2.) Use Non-disclosure Agreements (NDAs)
At times, it will be necessary to share your idea with others, including potential investors, partners, developers and other parties that will be instrumental in monetizing your product or service. In such situations, you should have those parties sign an NDA.
NDAs are contracts signed between parties that establish an actionable duty to not disclose confidential information given by one party to another. If a party violates an NDA, you can sue for any losses you incurred as a result.
A good NDA should establish the scope and nature of the confidential information, the obligations of the party that is receiving the information, and the time period for which the NDA will be valid.
Patents and trademarks are issued by the USPTO on a first come, first served basis.
3.) Consider Trade Secrets
Trade secret status may provide better protection than copyrights, trademarks or patents, and this line of IP protection should be considered from the very start. Establishing a trade secret does not take long, and there are many benefits, including the following:
- Non-disclosure – By definition a trade secret is something secret – that is, not disclosed to the public. Other IP protections require you to disclose details of your idea or invention to the world. This means anyone may improve upon it, allowing them to secure exclusive use. For example, when Eli Whitney patented the cotton gin in 1794, he had to release his specific designs for the invention. On the other hand, Coca-Cola famously chose to protect its recipe as a trade secret, and the formula for the distinctive cola is still only known to a few employees. Other famous trade secrets include the search algorithm for Google, the formula to make WD-40 and the recipe for Mrs. Field’s cookies.
- Protection for abstract ideas – Trade secrets may protect ideas that are not eligible for patents or other protections. They are often used to protect algorithms, source code and other abstract ideas, because they meet the requirements for trade secret protection.Under the Uniform Trade Secrets Act, which California has adopted as law, there are two main requirements for a trade secret:
- Keeping it from the general public has economic value for you.
- Reasonable efforts are made to maintain its secrecy.
- Indefinite protection – Patents, copyrights and trademarks all have expiration dates, even if they are relatively far away. Trade secret protection, however, can remain intact as long as the idea or formula remains a secret. For this reason, it is essential for anyone who must know details of the trade secret to sign a non-disclosure agreement.
The above are only some of the benefits of protecting your business with a trade secret.
Coca-Cola famously chose to protect its recipe as a trade secret.
A trade secret can also give your business notoriety and mystery, which may attract customers. Customers may enjoy the idea that they are eating something that comes from a closely guarded secret recipe or that competitors cannot duplicate the product.
The primary downside to protecting your company with a trade secret is that the protection ends as soon as the secret is publicly disclosed, and anyone can then apply for a patent for the invention if it qualifies. While NDAs provide legal recourse should disclosure occur, they cannot undo the harm caused by someone breaching the agreement. Therefore, you should ensure you can trust anyone who receives confidential information about your idea and evaluate the risks before you use trade secrets as a primary form of protection.
4.) Consider a Copyright
Another form of IP protection is a copyright. Copyrights can be registered with the U.S. Copyright Office, though they do not have to be officially registered to be valid and provide protection.
Importantly, copyrights have been extended to protect computer code, so this type of protection is often extremely important for software developers. While a copyright does not apply to abstract ideas, algorithms or concepts for programs, it will protect any code actually expressed in the computer program.
Patents, copyrights and trademarks have expiration dates, while trade secrets remain intact as long as the idea remains a secret.
The process of obtaining a copyright can be significantly easier than obtaining a patent, so this is a common form of protection pursued by developers.
5.) Consider Patent Protection
In some cases, the best way to protect your intellectual property is to seek a patent. Though the patent process can be complex, once you obtain one, you will have sole legal ownership of your invention for 14 or 20 years, depending on the type of patent. No other party will be able to legally use your idea without your permission.
You can develop, market and sell your invention yourself, or you can license your patent so that another party can develop, market and sell your idea. This means that you have the option to collect royalties on your patent without any additional expenditure other than having the patentable idea first. However, patents do expire, and you will no longer be able to legally collect royalties after the expiration date, so such income can be limited.
Your idea may be patentable if it meets the following requirements:
- It’s “novel,” or something that isn’t known or used by others in the U.S. and hasn’t been introduced and described in printed publications or elsewhere.
- Your idea is “unobvious” to someone with ordinary skills in the relevant arts of your idea.
- It’s “useful,” meaning that it works, “is not frivolous or immoral” and has utility.
While obtaining a patent is a complicated and lengthy process – with specialty legal counsel highly recommended – since 1995, the USPTO has offered inventors the option to file a provisional application for patents. A provisional patent application associates the term “Patent Pending” with the description of the invention and reserves a filing date, establishing future patent rights. Filing a provisional patent lets entrepreneurs defer the cost associated with obtaining a patent until after they’ve shopped their idea around to determine whether it has commercial viability.
In closing, there are many different options for protecting your company’s confidential information, formulas and/ or inventions. The method of protection you select is important, and you should always find a highly skilled IP lawyer to evaluate your situation and provide advice regarding the best way to comprehensively protect your valuable intellectual property.