Third-party intellectual property rights occur when one party has infringed upon another party's intellectual property rights and, as a result, must take defensive action. Infringement comes with different consequences depending on the type of intellectual property. Business owners should educate themselves on third-party intellectual property rights to avoid potential lawsuits.

First-Party vs. Third-Party Intellectual Property

First-party intellectual property (IP) is considered a company's intangible assets, such as its knowledge, goodwill, patents-trademarks-copyrights-and-trade-secrets">patents, and trade secrets. An individual or company owns its intellectual property unless the IP is transferred under contract. Someone else who doesn't own the IP may use it only if they're given written permission.

Third-party intellectual property is when you have personally infringed on someone else's intellectual property and must now defend yourself against allegations or lawsuits.

In other words, third-party IP is defensive while first-party IP is offensive.

Third-Party Intellectual Property Claims

Business owners should be aware of a couple of things to avoid risking third-party IP lawsuits:

  • Exposure exists
    • Don't merely shrug off patent information because you think your company doesn't have any exposure.
    • Social media has become a major source of unexpected business exposure.
  • Pursuing or defending intellectual property infringements comes with an excessive cost, so it's always best to protect it from the onset. 
    • The internet, in particular, has created large numbers of patent and copyright issues, including third-party consent, framing, linking, and implied licensing.

Protecting Your Company

The first step in protecting your company from patent exposure and third-party copyright is to realize the exposure exists. Trademark rights vary by location. The most famous trademarks are considered “well-known marks” in various countries thanks to brand recognition built up over the years.

To minimize your own intellectual property risks, start developing adequate internal procedures and processes. This includes establishing strong risk-management practices.

Every company should have an intellectual property compliance program in place. All employees must be trained in this program, which should be updated and reviewed regularly. A strong program will:

  • Evaluate ongoing exposure
  • Check for signs that companies are either proceeding “out of copyright” or are requesting permission to use intellectual property
  • Draw from many resources, including the company's financial, legal, and marketing departments

When you've identified your company's intellectual property risk, consider protecting it with a proper insurance policy. Available insurance policies include:

  • Standalone IP policies
  • Patent defense policies
  • Infringement abatement coverage
  • Patent infringement cost reimbursements

Terms and conditions of these insurance policies vary, but insurers adapt to meet changing demands.

Involving Every Department in the Process

There are many reasons to have every department in your company get on board with intellectual property protections. For starters, you need your legal team to vet third-party information so you're not unknowingly infringing on someone else's property. Your legal department or outside legal representative can verify whether the information is patented or still under copyright.

Your marketing team should then create a marketing strategy based on this third-party knowledge found by previous researchers. Finally, the financial department should consider the costs associated with the entire plan of action.

Unless these teams communicate with one another, one department may infringe upon intellectual property rights. For example, the marketing department may utilize patented information that the legal team already discovered. Failing to communicate could result in pulling an entire marketing strategy for failure to not do due diligence, which is an expensive mistake.

How to Avoid Third-Party Lawsuits

There are several steps you should take to avoid IP infringement. For instance, consider the iconic Nike Swoosh symbol. If you own a shoe retailer and want to use the Nike Swoosh in promotional materials, you must receive permission from Nike. Otherwise, you'll be hit with an immediate infringement claim.

Certain types of intellectual property are available to the public, such as open-source software codes. These codes are copyrights, but they exist in the public domain, which means that anyone can use them.

When in doubt, request permission from the IP owner to avoid legal action.

Since social media is now considered exposure, it's important for your company to have policies that discourage or limit social media use from company-owned computers. Simply restricting employees from accessing Facebook and other social media sites from work computers is a smart way to limit exposure. Simply have them access these sites via their mobile phones instead.

If you need help with third-party intellectual property rights, post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.