Intellectual Property Business: Everything You Need to Know
Intellectual property is a means by which you own your business identity, technology, works of authorship, logo, slogans, or trade dress.15 min read
What is Intellectual Property Business?
Intellectual property is a means by which you own your business identity, technology, works of authorship, logo, slogans, trade dress, and any other practical expression of the ideas that drive your business forward.
Intellectual property is vital to all levels of your business. From your initial business plan to trademarks, patents, and copyright, having the right representation and knowledge to protect those things that make your business unique is essential to your success.
What Is the Intellectual Property-Business Connection?
Everything important about your business aside from the actual people that run it, is somehow tied up in intellectual property. You could say that your business is the sum total of all of the intellectual property that form and relate to your concepts, practices, goods, and services.
One important aspect of intellectual property is that it must have commercial value and be protectable by patent, copyright, trade- or service mark, or trade secret laws. Specific kinds of IP can include brand names, works of literature, paintings, discoveries, formulae, physical inventions, written information, registered design work and music.
Why Is Intellectual Property Important to my Business?
Intellectual property is the key to drive growth and competition in the market place. It's essential to your company—in many ways, its heart and soul. Your ideas and the way you express and use them are as (or more) important to your company than its physical assets.
In addition to protecting these assets, they help you to:
Build a brand identity
Analyze information from the IP of other companies to gain a competitive edge
Increase your revenue stream from limiting or licensing competition to use your IP
Increase the commercial value of your company
Increase market access
Gain financing and venture capital
Increase the value of your brand
Create strong business partnerships
Protect your freedom to operate, and reduce infringement risks
Preserve geographic market segmentation by restricting exports and imports
How Do I Protect My Intellectual Property?
Protecting your intellectual property is essential to maintaining your competitive edge in the marketplace, and is accomplished in one of four ways:
Abstract ideas are not subject to the above protections. In no case is an abstract concept or idea granted specific intellectual property protection. There must be some expression of the idea, which is what is protected.
Copyright protects works of authorship. That includes literary, musical, dramatic, graphical, sculpted, photographic, recorded, filmed, architectural, and website works, as well as the interface, form and function of software, and the specific code used to make the software work.
Copyright provides the owner with exclusive rights to use, display, copy, exhibit, modify, and otherwise present and distribute the work. Such protection is automatic the moment a work is created, but can also be registered with the federal government for additional protections in court.
Trademarks are those things that make up your brand. Certain phrases, logos, unique words, and graphic design elements can be trademarked. Trademarks defend against confusion or dilution of the brand in the marketplace. Like copyright, trademark is automatic upon the first time you use such a mark in business, and mark it with a ™ symbol.
However, for stronger protection in courts, it is highly recommended that trademarks be registered with the USPTO (U.S. Patent and Trademark Office). Registering such a mark carries a presumption of validity in court and allows you to use the ® symbol after the mark. In addition, after five years of constant use you can file for your mark to become incontestable, which adds strong additional protections.
Trademarks have to be distinctive in order to gain protection. You can't for example, just call a deli, "Sandwiches," and trademark that word. Even a derivative of the word, like "Sammiches," would be hard to trademark, as it's still simply descriptive of the product. The more distinctive the word is, the easier it is to trademark, but you still need to create a market identity, so finding a distinctive term that still evokes your product is a delicate balancing act. The mark's association with your business denotes its strength, which is vital if you need to defend your ownership of it.
The Difference Between a Trademark and a Copyright
The difference between a trademark and a copyright is what they protect. Trademarks are registered with the USPTO and last for ten years. They protect any name, symbol, or logo that is used for branding the goods of a business. Copyrights, on the other hand, are used to protect creative works. This can include films, books, songs, and many other works of art. A copyright is registered with the Library of Congress. It lasts for the lifespan of its original owner plus seventy years.
Patents protect your actual inventions—methods, processes and physical creations which are "novel" (unique), "non-obvious," and which solve a problem in a useful way. Patents last for 20 years, during which time you have exclusive rights to use, manufacture, ship, import, sell or make available for sale your invention.
There are three types of patents:
Utility patents, the most common, form, protect physical inventions, chemicals and processes. These are the type of patent that's usually referred to when someone talks about patents.
Design patents protect the unique form, appearance or design of an item.
Plant patents protect the development of a new variety of plant via asexual reproduction in a controlled setting.
The elements of a patent require that your work be "novel," or truly unique and previously unknown in the territory or country where the patent is held. It must be non-obvious, meaning that anyone with ordinary skill in the associated art wouldn't have come up with the same idea through a basic leap of logic. Finally, it must be useful, that is, offer significant use that is beneficial in solving a problem.
Patents protect physical inventions and specific mixtures of ingredients or chemical compounds, as well as those acts, methods and processes related to industrial or technical use. If it's a unique physical product or the process for producing a physical product, a patent can be sought to protect it. Obtaining a patent requires that you publicly reveal the object in full detail.
It can take up to three years (sometimes longer) to complete the process of a patent, so it's important to start the moment you have something that is patentable. It's also important to note that you have one year to file for a patent following the revelation that your invention exists, be it from a public demonstration or published description.
Trademarks, Business Name Registration, and Domain Names
Trademarks, domain names and business name registrations are three related but very different things. Trademarks protect your brand in court from use by another. Business names can be registered with your state to allow you to function as a corporation, LLC or other entity for tax purposes. Domain names are web address URLs. Each of these is mutually exclusive in terms of the legal protections it offers, and each must be pursued separately.
Trade secrets, finally, are those things which give your business a competitive edge, and which if they were known would harm your ability to compete in the marketplace. Legal protections for trade secrets are limited and are usually defined only through licensing and non-disclosure agreements which outline the penalties for violating the secret.
The down side of this protection is that once a secret is revealed, it can no longer be treated as a trade secret. Trade secrets also do not protect you from someone reverse-engineering or parallel development of the same process or formula.
On the up side, so long as you maintain your secret, you can gain exclusive income far longer than the 20 years offered from a patent. Some of the best examples of this are the secret formulae for drinks like Coke, Pepsi and Dr. Pepper.
IP Protection Strategies
Protecting your intellectual property does not stop at filing the right paperwork, but requires active work to defend. Make sure that your clients are aware of your ownership and make active use of non-disclosure agreements.
Keep an eye on independent contract workers. These can be some of the largest dangers for IP theft. They also may attempt to claim ownership of any IP they developed while working with the company, after their contract is up. Use contracts that clearly define the ownership of any IP developed in the course of the partnership.
Don't be afraid to make use of cease and desist letters or to contact potential infringers and advise them to stop their infringing activities. You may need to file a lawsuit if they fail to obey, but active legal protections are vital to maintaining your IP.
Do your homework. Always make sure that your IP isn't owned by someone else already when you pursue a new market. Also ensure that the new market's laws will protect your IP rights adequately. Transferring IP to the new market will carry associated costs, which you'll need to consider.
Above all else, remember that your IP is an asset to your business. Protecting it is a necessity, not a luxury. It is an essential part of your costs and budget, every bit as important as your employees.
Fallacies about Intellectual Property Business
There are a number of fallacies regarding intellectual property that can prove devastating to businesses, including:
It's not worth the time and effort to register IP: If you fail to register your trademarks, copyrights and patents, before you know it someone will produce knock-off products and it will fall upon you to prove that you had the property first. Even worse, if your competitor files a patent on your invention before you do, they legally own it!
Once I have a trademark, my property is safe: This may or may not be true. Even with a valid trademark, people can still challenge your ownership. The trademark ownership also doesn't stop other people from buying a domain using that trademark.
A patent automatically allows me to produce something: This is a basic misunderstanding in patent law. Patents don't give you the right to produce; they give you the right to stop others from producing. In addition, patents can and often are challenged in court.
A trademark or patent in the U.S. protects me everywhere: Again, this carries varying degrees of truth. In general, IP rights have to be gained country by country. There are certain trade agreements that offer limited protection across borders but these are by no means universal.
The myth of the Patent Troll: Coined in reference to a lawsuit between holding company NTP and Research in Motion, who market the Blackberry, over a wireless e-mail delivery patent, this myth dismisses those who collect patents as a business model as parasitic trolls out to hoard property and never let anyone have it except at a premium.
The truth is, many inventors are "idea people" who partner with others to produce their concepts. Thomas Edison was one such inventor. These people aren't generally out to stop others from using products, but to allow as many people access as possible through licensing agreements.
An Overview of the Business Plan
Your business plan is far more than a report you write to get funding. It's a detailed strategic document you will use to guide your business, engage in commercial practices, bring products and services to market and grow in the future. The elements of a good business plan are:
Company description, mission statement, objectives, status, and parties of interest (managers and shareholders)
Description of goods and services
Goals for future development
Discussion of target audience, market and clients
Discussion of competitors
Company marketing strategy, distribution channels and sales
Discussion of how the business will be organized, from supply and manufacturing chains to outsourcing and purchasing issues, to employees and technology partners
Financial planning outline, including pro-forma balance sheets, profit and loss projections, estimation of required funding and outline of available funding sources.
Business plans serve a dual purpose. Internally, they are valuable for guiding your decisions and defining your vision and objectives for commercial and technical development. They provide useful indicators and targets to manage corporate performance.
Externally, your business plan will explain your company to investors and partners to act as an important aid in fundraising and business collaborations. They will both raise interest in your activities as well as serve to demonstrate your plans for the future which are based on a solid understanding of your own assets and strengths. They serve to plant your business solidly inside a larger technology and commercial community.
The Intellectual Property-Business Plan Connection
Intellectual property is deeply entrenched in your business plan, which describes your assets, resources, and strategy for success. It is vital to include a strong IP management and protection policy to make sure that all of your practices are defended against misuse and corporate espionage.
Your IP will have a major influence on the business model you choose to operate. Your business plan will refer to this IP and the intellectual property rights you hold to describe what makes you unique from competitors.
It also outlines the resources you can access to establish positive relationships with partners, investors and clients. IP and IPR become a key factor of your how solid and valuable your business is in the marketplace, and will have an influence on the strategic position you hold.
IP Information and the Business Description
How you will handle intellectual property rights is a key part of your business plan. If you describe it and place the proper value upon it, it can add a great deal of value in turn to your company.
On the other hand, if it is not clear or detailed enough, it can actually harm the value of your company in the eyes of potential stakeholders. This is because your company and the goods and services it provides have inherent value, but only if they are properly protected.
It's important that you avoid uncertainty or a lack of clarity. Failure to do so can lead to exploitation of your IP by competitors seeking to undermine your business. Further, defining these issues in your plan helps to make sure they are not only clearly defined for you and your business, but that they are in line with your mission and goals.
Dealing With Technical Details and Specs
When drafting your business plan, you need to decide the level of technical detail and specifications you want to include. This depends on how detailed you need to be in order to make the technology you're using understandable to readers, as well as defining the value it adds to your target audience.
Ideally, you'll want to keep the focus on the "value added" level as your business plan is an outline of your strategy for success in the market. Focus on descriptions of what the product does, how it works and what value it adds. Avoid overly technical jargon in your descriptions. Instead, focus on readability and clarity.
Your business plan is generally considered privileged information and will remain generally confidential. As such you'll want to be careful who has access to the details within. This also means, however, that you can (and should) describe your products and associated trademarks as well as the brands you'll use to market them. Most successful businesses find it helpful to use a trademark for the overall brand, and then offer various modules and solutions under it.
Protecting IP Ownership Within the Business
Your business plan should be absolutely clear on how you will handle the ownership and commercialization of innovations and technology developed by various groups of employees, with involvement from researchers, designers and suppliers from outside the company.
The easiest way to handle this is that ownership is transferred to the business. In order to gain private investors, you may in fact have to adopt this option. If you choose to pursue shared ownership of the IP with the creators, you will need to have a default exclusive and long-term licensing agreement.
Investors and Intellectual Property
Investors focus heavily on IPR when they perform due diligence before offering any funding. They will check on the status of IPR the company owns, and consider all of this when they value the business. They will also review the extent to which the company's rights can be registered to restrict competition from copycats. The more exclusive your property can be held, the more valuable it will be come.
If you cannot register a certain IP, you will need to explain how the advantage offered by that IP will be maintained into the future. You could, for example, limit access to the IP to very specific people inside the company as a trade secret with binding non-disclosure agreements. For products like software packages with a limited lifecycle, a commitment to continual innovation and improvement can maintain a competitive edge.
Another important factor in maintaining your IP edge is to register web domain names (.com, .net, .biz, .eu and all variants) for all of your properties, even if you don't plan to use them. This will stop other people from gaining the domain and using it to create confusion in the marketplace.
Third Party Contracts
Any contracts you intend to keep with third party researchers, investigators, suppliers or other service providers need to be identified in the body of your business plan, with a clear policy for the development and maintenance of relationships with these partners, who become a form of stakeholder in your business.
Your partners need to have access to the necessary elements to fulfill their responsibilities to you, but not restricted in a way that they cannot themselves remain competitive. As such, define what access they will have to your IP for product development, but avoid overly restrictive or locked alliances.
Explaining your approach to partnerships in your business plan will allow you to create a roadmap for the future. It will define the parameters of your future collaborations and clarify any gray areas that might exist. Some options include:
No access to IP or proprietary information is required or involved in the agreement.
Specified patents are licensed to a partner, who may integrate the property into their own products within the country.
Collaboration and R&D agreements exist for all innovations which clearly define ownership of any new IP. If the IP is owned by the partner, the company has the right to negotiate for a first option on worldwide, exclusive sub-license on any resulting assets.
Sales Strategy: Global vs Local Markets
It is a common mistake for entrepreneurs to focus heavily on the global market potential of their product in their business plan, while ignoring the portion of the market that is immediately available and achievable. While having a big picture is admirable, it's vital to use your business plan to focus on the details of the small-scale operations and strategy of your company as well.
In order to meet the needs of an increasingly diverse marketplace, you will have to establish a range of partnerships, each of which has to be carefully reviewed and drafted to protect your interests. Failing to take care in these agreements can end up with you accidentally granting unlimited IP access to a partner who could later become a serious competitor.
Thus, when you define your sales strategy for the future, be as detailed and clear as possible in how you will handle:
Contractual targets and milestones
Never grant commercial exclusivity unless there is a specific need for it justified by your global strategy—a worldwide device manufacturer, for example, who can effectively fulfill your product manufacturing and distribution channels.
You will need to be sure the price of such exclusivity is reflected in the revenues you gather from the commercial agreement. All of this needs to be accounted for in your business plan.
Every partnership, for example, includes multiple arms. These could include (but are not limited to):
Product manufacturing and distribution
Licensing agreements and fees
Fee-based services and transfers related to skills and competencies
Outsourcing of know-how and services
At the other end of the spectrum, be sure that any co-existing direct or indirect sales channels are organized in such a way that they don't jeopardize one another. Having a clear strategy and vision when it comes to commercializing your IP creates a very clear explanation of the roles each market segment and territory will play. These could include (but are not limited to):
Skills and services for equipment installation and operation
Access to specific designed commercial and/or industrial markets
Access to an established infrastructure for sales, distribution, marketing, fulfillment, maintenance support and customer service
Past licensing agreements of goods and services from other companies
IP in Your Financial Plan
The financial plan area of your business plan describes both your beginning financial status and your plan for maintaining and growing the business into the future from a financial standpoint. The more accurate and detailed your valuation of your company is, the more credible you will look to potential investors.
In order to properly know what goes into the logic supporting the numbers, and to be able to answer questions put to you, you will need to understand the value of your IP assets and IP-related revenues. Not only do your IP assets help in terms of getting investor buy-in, they can serve if properly valued as security against loans.
Use respected, well-known and clear accounting methods when you value your business assets and intellectual property. Keep your figures realistic and rooted in proven methodology and an understanding of the benefits and drawbacks of the method you choose.
When you negotiate with partners, investors or lenders you will likely have to further negotiate the values in question, as they are, in the end, only estimates. You will, however, have to incorporate a fixed value for your IP in your projected balance sheet.
Maintaining Realistic Expectations
It's important to keep the expectations for standard licensing agreements realistic and minimal. Clearly state them in formal collaboration agreements. Such standard rates can be found by doing your homework online, checking business databases and performing internet searches.
If you expect that IP-based revenues will represent a large percentage of projected revenues, you may want to consider describing the global policy in your business plan. Consider include clauses in licensing agreements that, among other considerations, include:
Pricing options and discounts
IPR, Market Potential and Analysis
Successful entrepreneurship requires keeping your eyes open for potential opportunities at all times. Your business plan should precisely describe not only chosen market segments to target, but how you will approach those markets in light of competitors and alternative technologies.
Searching patent and trademark registers can be vital to provide you important information about your competition. This will in turn, allow you to better map out your business' future and strategy. Not only does this information give you the freedom to market and use your technology, it gives you essential information about how to go about your marketing.
Market monitoring and analysis provides a clear understanding of your competition, which in turn lets you develop a strategy to place yourself in the market. This adds value to your business plan. Know the strength, strategies, weaknesses and market presence of all of your relevant competition, and summarize this information in a table within your plan.
Business and Trade Organizations
Various business organizations, trade groups and chambers of commerce can help you to better use and leverage your IP. They can advise and aid you in increasing your market competitiveness, provide leadership and guidance in economic issues, help you to attract new partners and customers, particularly if you are operating in a sector of innovation, and can offer new sources for income generation.
Another important source of help for any intellectual property issue is an outstanding IP attorney. The attorneys at UpCounsel carry many decades of combined experience in trademark, copyright, patent and all issues related to protecting intellectual property. Representing Harvard, Yale and other top law schools in the nation, they are among the top attorneys available in their specialized areas. Post your legal need in the UpCounsel marketplace to find the legal help you need to establish and protect the IP that's so vital to your business.