3 Steps to Protecting Intellectual Property
Many start-up owners are concerned with the intellectual property (IP) of their company, and they should be. IP is a valuable asset that needs to be protected, insured, and, sometimes, even risked.
Seasoned entrepreneurs understand the need to take risks with their IP, typically by sharing early-stage product ideas, concepts, or business models with potential investors. In an ideal world, you’d protect your IP with a trademark, copyright, or patent. But small businesses in the early stage don't always have that luxury.
Plenty of places will explain how to file for a patent or a trademark registration, and it's true that a federal registration can help enforce your company’s rights. But there are other things you can do to protect your IP. Here are a few.
Employ Internal Controls
Controlling who has access to IP and other sensitive information is key. And for confidential information that's harder to register such as business plans, trade secrets, and customer lists, controlling who has access to them can keep things on lockdown.
Employees or contractors working with your IP should have an "assignment of inventions" clause or a "work for hire" agreement, in addition to some confidentiality clause. Likewise, make sure your IP is legally owned by your company. There can be statutory or case law exceptions to this kind of assignment, so keep your employment lawyer on speed dial for questions. For highly-sensitive information, I recommend keeping a log so you know who's viewing your info.
Sharing Doesn't Always Mean Caring
There will come a time when you have to share information with someone who is not a consultant or employee. That's where a nondisclosure agreement (NDA) comes in.
You might implement "confidential policies" such as putting all verbal communications in writing or making written information “confidential.” But above all, be sure to limit the other party's access, especially people on a “need to know” basis, such as accountants, lawyers, or a board of directors.
The same goes for your side. Log out each piece of confidential information--with a description, date, and time--and when the agreement is terminated, ensure the IP is returned or destroyed.
Sometimes an NDA won't happen. Venture capitalists almost never sign them, as they manage hundreds of thousands of IP. In the end, you'll just have to balance the advantages of collaboration--investment, sharing R&D resources, outsourcing, or a potential deal--against the risks of having the other side disclose your information.
Have a Solid Defense
If you have a brand name and learn another company is using it, don't let it drag on for too long.
Many companies trot out the old “cease and desist," which are easy enough to find online. But fair warning: Empty threats won't help you. I generally tell businesses that instead of threatening to sue, they should simply state that they're ready to “take all appropriate legal action.”
Likewise, if you send a cease and desist and just let it slide, in a way you're saying your IP is not valuable. You don’t always have to sue, but should be able to explain why you decided one infringer versus another.
CHAS RAMPENTHAL | Columnist | General Counsel, LegalZoom
Chas Rampenthal is general counsel and vice president of product development at LegalZoom. He's also a former talk radio host (KTLK AM 1150 at Clear Channel) and an entrepreneur himself, as the founder of LegalEndeavor.