It is a common myth that intellectual property matters are reserved only for larger companies and do not affect small or medium-sized businesses.  However, like other myths and fairy tales, this is fiction.  Just like its larger corporate counterparts, a small or medium-sized business’s intellectual property can account for some of its most valuable assets and may be critical to its growth and success.  Therefore, small and medium-sized business owners and entrepreneurs must be aware of the rights vested in their intellectual property and how to protect these valuable assets.  This article provides a basic overview of intellectual property small and medium-sized businesses may own, the rights associated with that intellectual property, and ways to protect those intellectual property assets.

Common Forms of Intellectual Property

A small or medium-sized business may possess four basic forms of intellectual property—trademarks, copyrights, patents, and trade secrets.  A trademark (or service mark) can be any word, phrase, symbol, or design that distinguishes the source of a particular good or service.  Trademarks can help a business establish brand recognition and loyalty and can provide a business valuable commercial goodwill.  Trademarks are highly valuable assets that allow a business to set its products or services apart from its competitors.  Where a business has established significant goodwill in the market through a particular trademark, the business may transfer the value of that goodwill by either selling or licensing the trademark to another entity.

In contrast, copyrights protect and establish rights in various forms of expression by an author that are fixed in a tangible form.  See 17 U.S.C. § 102(a).  Protectible expressions include literary works; musical works (such as musical scores and lyrics); dramatic works (such as screenplays or scripts); pantomimes and choreography; pictorial, graphic, or sculptural works; motion pictures and audiovisual works; sound recordings; and architectural works.  See id.  Computer software programs are also treated as copyrightable properties.  The owner of a copyright in an expressive work possesses the exclusive rights to perform, or license others to perform, the following with a copyrighted work: (1) reproduce the copyrighted work as copies or phonorecords; (2) prepare works derived from the copyrighted work; (3) publicly distribute or sell copies or phonorecords of the copyrighted work; (4) publicly perform the copyrighted work; (5) publicly display the copyrighted work; or (6) publicly perform a copyrighted sound recording through digital audio transmission.  17 U.S.C. § 106.

Patents protect and provide rights to inventors for practical innovations.  There are three kinds of patents available: utility patents, design patents, and plant patents.  Utility patents are the most common type of patent and are available to an entity that invents or improves upon a new and useful process, machine, manufactured product, or composition of matter.  Design patents may be issued to an entity that invents an original and ornamental design for a particular manufactured product. A plant patent is available to any entity that invents or discovers and asexually reproduces any distinct and new plant variety.  Securing a patent for a particular process, design, or invention will grant the patent owner the exclusive right to use, sell, or manufacture goods using the patented innovation, and such rights may be licensed or transferred for value.

Trade secrets are at the core of many small or medium-sized businesses.  A trade secret can consist of any information or process that is shielded from the public and provides a competitive or commercial edge to its owner.  Popular examples of trade secrets include secret recipes or formulas, like the secret spice blend for KFC’s fried chicken or the secret 23 flavors in Dr. Pepper.  However, a business’s trade secrets can be much broader and may include information such as client lists, strategic business plans, sales or distribution processes, or other information that gives a business an advantage over its competition.

Protecting Your Intellectual Property Assets

It is not only in a small or medium-sized business’s best interest to protect its rights in its intellectual property; an owner of intellectual property must protect and enforce its rights to legally maintain its rights in its intellectual property assets.  If an owner of intellectual property fails to enforce its intellectual property, it may forfeit its legal claim to rights in its intellectual property.  Therefore, it is critical for an intellectual property owner, including small or medium-sized businesses, to take proactive measures to protect its intellectual property rights.

First and foremost, intellectual property owners must be aware of potential infringements and enforce their rights against infringers.  Enforcement measures may range from sending cease-and-desist letters to initiating administrative actions or lawsuits against any infringer.

State or federal registration also provide valuable protection for trademarks, copyrights, and patents.  In the case of patents, a prospective patent owner must apply for a federal patent registration through the United States Patent and Trademark Office.  Without this application and registration process, a business’s innovative processes or inventions are treated as trade secrets, meaning a competitor could potentially use or even patent your idea if it is exposed and the competitor applies for a patent first.  Further, while the author of a copyrightable expressive work automatically owns a copyright in the expressive work (with certain exceptions for works authored by employees or independent contractors of a company), copyright registration provides the owner greater ownership recognition and stronger protections, including the availability of statutory monetary damages if the registered copyright is infringed.  Similarly, a business may possess certain state common law rights in an unregistered trademark used in a particular geographical market, but obtaining a federally registered trademark provides national recognition and awareness of that trademark across multiple states, which precludes national competitors from using the same or similar trademarks for their goods or services.

In contrast, a business cannot obtain protections for trade secrets through registration. Instead, a business must enact reasonable policies and procedures to protect the secrecy of its identified trade secrets from public view, such as limiting access to trade secrets to only those individuals who need to know them, carefully disposing of any unneeded documents including trade secret information, and providing training on how to handle trade secret information.  When a business’s employees or independent contractors must have access to a particular trade secret, it is common to protect that trade secret by requiring the employees or independent contractors to sign non-disclosure agreements, in which the employees or independent contractors agree not to share confidential or proprietary trade secret information with any person or entity.

Intellectual property can be a critical tool to allow a small or medium-sized business to succeed and grow.  However, the prudent business will first take care to understand its intellectual property rights and how to protect them.  It is essential to consult with an attorney with experience with intellectual property rights for a business to maximize the value of its intellectual property.

© Riley Bennett Egloff LLP

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Posted on January 19, 2022, by Jaclyn M. Flint