Top 10 Things To Know About IP Portfolios

Wednesday, February 1, 2006 - 00:00

The term Intellectual Property (IP) covers a wide swath of rights in products of the human mind, from books like The Da Vinci Code, to inventions like iPod personal electronics, to brands like adidas athletic footwear. These familiar products have acquired significant commercial value. IP protections are used to maintain and enhance that value.

IP has become fully integrated within the fields of art, science, commerce and law, yet understanding the overlap and implications of this integration can be challenging. As a primer, here are 10 things you should know about IP portfolios:

1. There Are Different Types Of Intellectual Property Protections

Ideas are protectable under federal patent laws, if the idea is new, useful, and nonobvious. Patentable inventions include software algorithms, pharmaceuticals, electromechanical devices, semiconductor chips, manufacturing and business methods, and just about everything in between. Authorship is the domain of federal copyright laws, that protect original works fixed in any tangible medium of expression. Thus literature, music, drama, photographs, sculpture, movies, recordings, and architecture are copyrightable. Trademarks are words, designs, and other indicia that identify the source of goods or services. These marks and brands are protectable by both state and federal laws. Lastly, trade secret protection generally covers any secret, proprietary information that provides a competitive business advantage. Manufacturing processes and customer lists commonly qualify as trade secrets under state law.

2. IP Rights Can Overlap

The federal and state schemes for protecting IP, as well as the types of IP protection available for a given property, often overlap. For example, a business owner can obtain state common-law trademark rights just by using the mark in commerce. The owner can also obtain a federal registration from the U.S. Trademark Office to secure additional rights in the mark. If the mark is used to brand a new software product, copyright protection also attaches, since software is written code. Registering the copyright with the U.S. Copyright Office is optional, but gives the owner leverage against copiers and recalcitrant licensees; registration is also a prerequisite to filing a lawsuit. Software may also be patented, if the algorithm executed by the code is inventive. This gives the owner additional rights against competitors that do not copy the code, but that write new code that performs the same function.

3. Just Because You Have A Patent, Doesn't Mean You Can Practice The Invention

This peculiarity of patent rights seems strange, but patent rights are negative rights. A patent grants the owner the right to prevent others from making, using, selling, offering for sale, or importing the invention. But someone else's already-existing patent can "dominate" with broader coverage, if the new invention is an improvement on an earlier invention. The late coming owner has the option of waiting until the dominating patent expires, or getting permission ( i.e., a license) from the dominating patent owner. Other IP rights are similar, in that the owner can prevent others from using the IP without permission, but typically are not subject to the dominating rights of others. For example, a copyright owner of a song can prevent others from downloading the song over the Internet, and a trademark owner can prevent others from using the same or a confusingly similar mark to brand the same types of goods.

4. It Can Be Expensive To Procure And Maintain IP Rights

Given the complex, intermingled system of legal protections available for IP, it is prudent to consult a specialist in the field prior to product launch or committing to a new branding program. Further, because IP rights are territorial, pursuing and perfecting IP rights around the world is costly. Accordingly, it pays to develop a comprehensive worldwide strategy for protecting IP at the outset, based on your budget and your business objectives. Planning also ensures that you do not inadvertently lose valuable rights. For example, record keeping may be critical in proving first use of a trademark in commerce or conception of an invention. In another scenario, failure to file a U.S. patent application within a year of a public demonstration of the invention can forfeit the right to get a U.S. patent. Failure to file the patent application before the public demonstration can forfeit patent rights throughout most of the world.

5. It Can Also Be Expensive To Ignore Other's IP Rights

Beyond protecting your own IP, you need to respect the IP rights of others. Failure to do so can expose you to infringement damages and, if willful, increased damages and attorneys fees. Understand your competitors' IP and conform your conduct accordingly. Before launching a new product, conduct a trademark clearance search on the name of the product and a patent search on the function and ornamental design of the product. Do not rely on the notion that "What I don't know won't hurt me" or "It must be OK, because everyone else is doing it." Avoiding copying a competitor's goods is a start, but that often is not enough. For example, ignorance of a patent does not excuse infringement. You cannot identify or quantify the risks associated with what you do not know. When it comes to IP, what you do not know can severely hurt your business.

6. Protecting Your IP Is Only Half The Equation; You May Need To Enforce The Right

Not everyone respects the IP rights of others. Some, when apprised of your IP rights, will stop the infringing conduct. Others will not, either because they doubt your IP rights prohibit their conduct or because they are willing to fight. An infringer's response can depend on the remedy you seek. For example, your willingness to license the infringer on reasonable terms may entice them into negotiations. A mutually agreeable business resolution may include a partnering, joint development, or distribution relationship. Alternatively, if you demand a halt to infringing activity and compensation for prior infringement, you may be in for a fight. If you want that level of relief, you will likely need to sue them in courtÉand win.

7. Choosing An IP Practitioner

In the patent arena, you can chose either a patent attorney or a patent agent to represent you before the U.S. Patent Office. Patent agents are not lawyers; however, both are registered to practice before the Patent Office. While agents can prepare and prosecute patent applications, and even appeal to the Patent Office's Board of Appeals, they cannot provide legal advice in the area of patent infringement. Other IP lawyers specialize in trademark, copyright, and trade secret law. You can always choose to represent yourself, in pro se proceedings, before the Patent and Trademark Office, the Copyright Office, or the courts. Given the complexity of the IP laws and the importance of the rights at issue, however, going it alone is not recommended.

8. IP Rights Are Not Required For Commercial Success, But They Can Be Of Great Help

IP rights affect every successful enterprise, even if your product or service is not technologically focused. For example, IP rights are implicated in choosing names for your business and products, launching a web site, and hiring employees and contractors. Since IP assets give you an edge over competition, investors demand them. While a strong IP position cannot guarantee commercial success, it guards your success from the hands of your competitors. At the same time, unwittingly running afoul of others' IP rights can lead to lost opportunities, loss of rights, or worse - a "bet the company" lawsuit that, at a minimum, results in significant resource drain.

9. Valuation Of IP Rights Can Be Difficult And Speculative

Absent a revenue stream from a licensing program, it is tough to quantify prospective financial benefits. How do you place a value on a competitor's delayed market entry and added R&D costs in attempting to design around your patent rights? What about valuing a potential competitor's decision not to launch a competing product based upon your patent rights? IP can be a bit like a security system: you may never know the value of the protection you have procured. That said, you can extract value from IP rights by licensing them in fields of use separate from your primary market. Alternatively, if your business plan has evolved, you always have the option of selling unused rights to generate cash. And, you can always stop maintaining IP rights and let them pass into the public domain, for the benefit of all.

10. Use Common Sense

In sum, you must be savvy about establishing a flexible IP portfolio strategy. Work with trusted legal advisors and become knowledgeable about the IP landscape. Recognize emerging business opportunities and the ongoing changes in technology and IP law. Understand how IP rights can give you a significant business advantage by securing your intellectual capital and keeping your competition at bay.

Winning in business depends on a confluence of factors, and one factor you should not ignore is the role intellectual property can play. Your competitors won't.

Christopher W. Stamos, a Partner in Goodwin Procter's Intellectual Property Group, focuses his practice on intellectual property rights counseling, procurement and enforcement, with special emphasis on patent portfolio strategy and development, patent and trade secret litigation, preparation of validity and infringement opinions, licensing, preparation of novelty assessments, and preparation and prosecution of U.S. and foreign patent and trademark applications.

Please email the author at cstamos@goodwinprocter.com with questions about this article.