Electronic Design

Get The Lowdown On IP For Your Startup

Do you have an innovative concept for an invention that you would like to build your business around?

Do you have an innovative concept for an invention that you would like to build your business around?

If that's the case, or if you've already started this venture, you must take several key steps when handling your intellectual property (IP).

First, identify your IP or potential IP and assess its value. The law protects four basic categories of intangible assets: patents, trademarks, copyrights, and trade secrets.

Patents issued by the U.S. Patent and Trademark office (USPTo) provide rights in the U.S. for up to 20 years from the application filing date for new inventions. Utility patents protect useful processes, machines, articles of manufacture, and compositions of matter. Design patents guard the unauthorized use of new, original, and ornamental designs of items to be made.

Trademarks-and in the same category, service marks and trade dress-protect words, names, symbols, sounds, or colors that distinguish goods and services. These can be renewed indefinitely through the USPTo, as long as they're being used in business.

Copyrights protect literary works, including published documents, software, and Web site content. The Library of Congress registers copyrights, which last the life of the author plus 70 years.

Trade secrets are a business' guarded, proprietary know-how.

The value of your IP is determined by, among other factors, its worth in the marketplace, the strength of its legal protection, and its fit in your business plan. IP offers great potential for revenues.

Patents not only allow a limited monopoly, they also represent unquestionable product differentiation and, consequently, marketing power. Patents can be licensed for additional revenues as well. Trademarks distinguish companies and products, provide brand recognition, and represent value to the customer. Copyrights often become a significant portion of a company's unique knowledge base. Perhaps the most valuable, trade secrets are the most difficult to protect of the four types of intangible assets.

Assessing the value of IP is complex, but many books and articles are available to assist you. Alexander I. Poltorak has written some very good material on this topic, including Essentials of Intellectual Property (Wiley). IP consulting and accounting firms also can help with valuation.

But what about the costs? It's easy to get caught up in the excitement of a great idea, so it's important to take a sober look at what it takes to effectively protect and capitalize on your IP. Patents, for example, aren't for the weak.

A professional patent search, limited to just the USPTo database, can cost $1000. Filing an application with a patent attorney for a patent of average complexity can cost $5000 to $10,000. The Patent Examiner initially rejects about 85% of applications to some extent, so you can figure it will cost you at least an extra $1000 for each of these office Actions.

If a patent gets through the process, and if it makes it without too much trouble, it can issue in 18 to 24 months. Then, you can anticipate another $1000 or more for the issue, publication, and legal fees. If you decide to file outside of the U.S., plan on $10,000 to $15,000 for each foreign country. Specifically, it's $1200 for Canada, $10,000 to $15,000 for the European Union plus $3000 to $5000 per EU country, and even more for Japan.

Periodic maintenance fees are also required to keep the patent from expiring. For a small business, the USPTo's current fees are $455, which is due 3.5 years after issuance, $1045 after 7.5 years, and $1045 after 11.5 years. Next, add on any fees your attorney may charge. Some knowledgeable licensing professionals recommend thinking in terms of $100,000 in legal fees and out-of-pocket cost for a top-quality, boutique patent law firm to see a U.S. patent application all the way from drafting through issuance.

Now consider the costs to bring your invention to market, as well as the costs to monitor for and enforce against infringers. Because the cost of litigation is so high, enforcement deserves serious attention. How much are you willing to spend in time, emotional capital, and legal fees to protect your invention? In the U.S., a lawsuit can easily cost six figures, and if it goes to court, seven figures.

At any time, there's a risk that a patent may be demonstrated to be invalid. If you're not willing and able to enforce your patents, you may want to consider alternatives to the patent process, such as protecting the invention as a trade secret, or formally publishing it to prevent others from holding a patent against you. There are other ways to share the risk and expense of a patent, such as through licensing and contingency fee law firms. However, the costs can still be considerable. When evaluating the potential costs and benefits of your invention, also consider the life of the technology. An invention in the electronics industry can be obsolete well before the patent expires.

Generally, it's not as expensive to get legal protection for the other types of IP. Trade secrets aren't filed, so there are no fees related to registration. Legal trade secret status is maintained through reasonable security policies and practices. Basic copyright protection is in force by default when a work is published. Protection can be strengthened through registration, which is a straightforward and relatively inexpensive process. Trademarks are best handled by IP attorneys, but the search and registration process isn't as complex or expensive as it is for patents. Maintenance fees are required for registered trademarks. of course, you must consider your ability and willingness to enforce all of your IP.

Basic Suggestions
After identifying your IP, you want to protect it.

Trademark protection: To protect your trademarks and service marks, signify all marks with the appropriate SM, Y, or if registered, ®. Include a statement of ownership of your marks on the materials where they're used. Registering marks through the U.S. Patent and Trademark office strengthens your rights to use them. If you decide to register a mark, it's best to employ an attorney who specializes in trademark law.

But before you start the registration process, you may save some time and money by doing a preliminary search to determine if any existing marks are, even potentially, confusingly similar to and in the same product category as what you have in mind. Searching the Internet and your industry trade publications is a good place to start. once your mark passes your preliminary search, professional services are available to perform thorough trademark searches. You also may consider registering domain names (if you will use them) to protect the integrity of your brands.

Copyright: Copyright protection is automatic for your published works, but the protection is strengthened when you register them with the Copyright office. If someone infringes on your copyright, it's up to you to file a lawsuit in federal court and convince the judge to order the other party to stop the infringement and compensate you for your losses.

Even though you own the copyright, you can't file your lawsuit unless you've registered the copyright with the U.S. Copyright office. If you register within three months of the date your work is published, you may be entitled to recover from the infringer, in addition to actual damages, amounts for attorney fees, court costs, and "statutory damages" of up to $100,000 per infringement-without having to establish the damage actually suffered. Regardless of whether you register or not, you should mark published documents with © or "Copyright" and the year(s) the materials were published.

Patents: By nature, patents are tenuous. At any time, your expensively obtained patent can be invalidated if prior art that was missed by you and the patent examiners surfaces. Prior art is previously used, published, or patented technology that may be similar to your invention. Therefore, when you try to enforce your patent on suspected infringers, they will have strong incentive to track down whatever relevant prior art they can find, particularly if the stakes are high.

Early and thorough searches for prior art are invaluable. The more relevant prior art you can identify, cite, disclose to the examiner, and overcome up front, the better off you are down the road. And the more rigorous the examination process, the stronger the issued patent.

A good place to start searching is the USPTo's Web site, www.uspto.gov, which provides free access to U.S. patents issued since 1971. other sites such as www.delphion.com provide online databases. For more extensive searches, Patent and Trademark Depository Libraries (PTDLs) like the one at www.uspto.gov/go/ptdl are well stocked with patent materials and reference librarians who can help you with the patent search process.

Relevant patents provide helpful cross-reference information, including inventor names, for additional searches. Searches should also be conducted in any foreign countries where you intend to file. An invention covered by a foreign application can't receive a U.S. patent, so a foreign patent search also may be advisable.

A lot of prior art isn't in the patent records, so it's important to investigate markets where the invention, or a preexisting version of it, may already exist. Use the Internet and other market research methods for a thorough search.

To defend and protect your rights, write your ideas in a properly maintained notebook. This can help you prove that you're the inventor, when you thought of the idea, when you turned the idea into an actual object or process, that you didn't abandon the idea while you developed it, and that the idea was new and original. (See the Industry View in the May 5 Electronic Design UPDATE, "Did You Write It Down? How To Correctly Keep A Notebook of Your Ideas" at www.elecdesign.com, ED online 8037.)

If you think you may want to eventually license your invention, you can take some steps to protect your idea when you're pitching it to a larger organization. You may be able to inexpensively file a provisional application for patent. Though far from an issued patent, its "patent pending" status may deter others from stealing your idea.

A properly filed provisional application can enable you to claim an earlier filing date than the date your formal patent application is filed. It also can give you the time needed to work on that formal application while providing the earlier effective date of the provisional application. (This may be important, especially with respect to foreign patent filings.)

Whether or not your invention is patentable, you should have prospective licensees or anyone else you share your idea with sign a "nondisclosure" or "confidentiality" agreement before you disclose your invention. If you disclose details of an invention to the public before obtaining a patent, you must file an application (nonprovisional) within a year. otherwise, the invention won't be patentable.

Licensing professionals can facilitate the process of hooking you up with companies that might manufacture and/or sell your invention in exchange for royalties. The Licensing Executives Society is a good source for finding qualified assistance.

Trade Secrets
Most businesses have some form of trade secret information, which may be included in such things as drawings, formulas, client lists, and correspondence. Although there's no formal registration process for trade secrets, a reasonable effort to protect this information must be demonstrated to maintain trade secret status. If you reveal your secret to the public, you can no longer claim that you own exclusive rights to it. Fortunately, there are several easy steps you can take to protect your secrets.

Mark materials that contain confidential information as CoNFIDENTIAL. Shred or destroy confidential materials that you throw away. Lock up your outside trash-otherwise, it may be considered public domain and legally available to "dumpster divers" employed by your competition. Require guests to sign in and wear visitor badges. Use nondisclosure/confidentiality agreements with anyone who has access to trade secret information. Prevent free access to trade secrets and confidential information by enforcing computer passwords, covering revealing labels, restricting visitor tours, and locking drawers.

IP Attorneys
Good IP lawyers are rather expensive and quite busy. Here are a few suggestions for anaging attorney costs:

  • Determine your objectives. What do you want your law firm to do?
  • Request estimates for the work to be done.
  • Agree in writing about the specifics of what will be done.
  • Discuss who will do what. Allow the less experienced associates to do routine work and the higher-end attorneys to do the higher-level stuff. Because of their efficiency and knowledge, attorneys with more experience are often more economical, even if their rates are higher than less experienced attorneys.
  • Be organized and prepared so billable time is well used.
  • Keep your attorneys up to date on relevant information.
  • Use your attorneys wisely. Do what you can do on your own, but don't neglect their expertise. A little advice from a good lawyer can save lots of time and money.
  • As with any contracted service, hold them accountable for their time and work.
  • An alternative to paying hourly rates is to hire a law firm on a contingency fee basis. The firm would take on the defense of your patent(s) in exchange for a share of the money realized through enforcement efforts (settlement fees, royalties, litigation awards, and so forth). The bar of entry is set rather high, though.

    A client of mine with several patents in the consumer electronics field has hired a law firm on a contingency basis to negotiate with his infringers and pursue litigation, if needed. But for a firm to agree to work on this type of arrangement, the client must have considerable revenue potential and a rock-solid patent portfolio.

    The electronics industry has some 800-pound gorillas who tend to defend their territory aggressively. At the early stage of patenting a consumer electronics invention, prior art, especially anything international, should be investigated very diligently. Getting money from these gorillas generally requires a very large litigation budget or a contingent fee law firm. The law firm reviews the quality of the prosecution process, and the citing of lots of prior art that might have even the remotest bearing on issuance, is indicated as "insurance" that the examiner hasn't overlooked anything.

    Your intellectual property is the result of your creative efforts and of key value to your venture. So, include a way to cultivate, identify, protect, and capitalize on these assets in your business strategy.

    TAGS: Intel
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