Keep a lock on the ideas, brands and inventions that differentiate your company and make it successful
Editor’s note: Advice presented in this article is intended for general informational purposes. To manage and secure your intellectual property or for other guidance on these topics, consult your own legal counsel.
Prudent businesses have insurance to protect against damages and losses from fire, natural disasters, theft and even cybercrimes. And prudent businesses also take steps to secure their intangible assets — the ideas, brands, inventions and other forms of intellectual property that distinguish them from their competitors and make them profitable.
A costly problem
The costs of the loss of intellectual property are high. The Commission on the Theft of American Intellectual Property estimates that counterfeit goods, pirated software and the theft of trade secrets cost the U.S. economy between $225 billion and $600 billion a year — and those figures don’t include patent infringements, which the commission says are difficult to calculate because of a lack of information.
“IP theft pervades international trade in goods and services due to lack of legal enforcement and national industrial policies that encourage IP theft by public, quasi-private and private entities. While some indicators show that the problem may have improved marginally, the theft of IP remains a grave threat to the United States,” according to “The Theft of American Intellectual Property: Reassessments of the Challenge and United States Policy,” a 2017 update of “The IP Commission Report” first issued in 2013.
The Commission on the Theft of American Intellectual Property estimates that counterfeit goods, pirated software and the theft of trade secrets cost the U.S. economy between $225 billion and $600 billion a year.
Randy Sadler, a risk management expert and principal of CIC Services LLC in Knoxville, Tennessee, notes that the loss of a company’s intellectual property is different from the loss of a building in a tornado or the theft of a delivery truck because it is so much harder to recoup.
“Stolen or damaged inventory or vehicles can be replaced through insurance, but the effects of stolen IP truly cannot be canceled out. IP infringement may rob a company of revenue and put downward pressure on its prices,” he writes in a February 2021 article for Treasury & Risk, a resource for treasury and finance executives. “In cases like this, there is no possibility of recovering stolen goods. The victim company’s only recourse is to wage a legal war to block the thief from using what they’ve stolen. This is always challenging but becomes even more difficult when the thief is foreign.”
Evaluate Your Risk With These 5 Questions
1. How could our intellectual property be compromised? Then drill down, Sadler writes in a February 2021 article for Treasury & Risk: “In each of those envisioned events, would a court agree that our legal rights were violated? Would an insurer agree that our trade secrets were stolen?”
2. How could the damage be minimized? “This might include filing an injunction to stop the encroaching company until the matter is resolved,” Sadler says. “If the theft of trade secrets could not be addressed legally, could it be addressed by other means — and what are they?”
3. If our intellectual property were compromised, would there be a real financial cost?
4. How could the cost be measured?
5. How could the loss be mitigated?
“For example,” Sadler says, “would insurance pay for the legal costs to stop a patent infringement? Would insurance pay all or a portion of lost revenue due to the theft of trade secrets?”
And that makes protecting intellectual property from the start that much more important. By not using tools available, companies risk “opening the doors to imitators,” losing rights to their innovations and infringing on the creations of others, says Tamara Nanayakkara, a legal counselor at the Geneva-based World Intellectual Property Organization. Companies also may find themselves in expensive legal disputes, not just with competitors but even with partners and vendors, Nanayakkara writes in an April 2021 WIPO article.
Global trade but not a global system
In the global marketplace, international treaties govern some intellectual property rights but when it comes to obtaining and enforcing intellectual property rights, the process is largely controlled by national and regional entities.
“Ironically, as borders melt away in the global marketplace, the IP system remains firmly national (or regional),” Nanayakkara says. “…While businesses are keen to exploit the global marketplace, they have to be mindful that their IP rights need to be actively sought and obtained in those (national and regional) marketplaces. There is no automatic global IP right.”
Regional authorities that grant rights include the European Patent Office and the African Regional Intellectual Property Organization. WIPO itself administers several systems — the Patent Cooperation Treaty, the Madrid International Trademark System and the Hague International Design System — that allow companies to obtain patents, trademarks and design rights in multiple countries.
Protect it if you’ve got it
Intellectual property is an umbrella term that covers everything from inventions to creative works to brand names. The big four are patents, trademarks/servicemarks, trade secrets and copyrights.
• Patents: Patents cover inventions, giving property rights to the inventor. In the United States, patents prohibit others from making, using or selling the invention in the country and prohibit others from importing the invention into the country. Patents are issued by the U.S. Patent and Trademark Office and generally last for 20 years from the date that the application was filed. Two types of patents are most common in the bedding industry. Utility patents cover “any new and useful process, machine, article of manufacturer or composition of matter, or any new and useful improvement thereof,” according to the USPTO. Design patents are “granted to anyone who invents a new, original and ornamental design for an article of manufacture,” the USPTO says on its website. Patents also can be issued for new varieties of plants.
Trademarks and servicemarks:
A trademark is a “word, name, symbol or device” to indicate the “source of goods and to distinguish them from the goods of others,” according to the USPTO. In the bedding industry, companies are likely to trademark things such as brand names and logos for products. “A servicemark is the same as a trademark except that it identifies and distinguishes the source of a service rather than a product,” the USPTO says. In the United States, companies that want to protect trademark and servicemarks should register them with the USPTO. “IP rights are generally granted for a limited period of time, though registered trademarks (and servicemarks) rights can theoretically exist forever as long as they are renewed,” Nanayakkara says.
Trade secrets:
Trade secrets include “information that is not generally known (and) has value to others who cannot legitimately obtain the information,” according to Lacey Miller, an attorney with Syracuse, New York-based Bond Schoeneck & King PLLC, who wrote about protecting intellectual property in an April 2021 article on JD Supra. Trade secrets can include things like formulas, processes and methods.
But unlike patents, trademarks/service marks or copyright, trade secrets aren’t registered with a governmental entity, so companies need to take other steps to protect them, Miller says.
“Confidential business information is by its very nature secret and remains protected from unauthorized access as long as systems have been put in place to maintain the secrecy,” Nanayakkara says.
These steps can include limiting access to information to certain employees, having employees sign noncompete agreements, and creating physical and digital systems to secure information, says trade expert Pamela Passman.
“International cyberattacks with the intent to steal intellectual property continue to dominate the news, leaving many firms scrambling to shore up their computer networks to thwart such hacks,” Passman writes in a February 2016 article for WIPO. “However, the greatest threat may be already within a company. In more than 85% of the trade secret lawsuits in state and federal courts of the United States, the alleged misappropriator was either an employee or a business partner.”
Copyright:
Copyright protects the creators of musical, literary, dramatic, artistic and other types of creative works, and covers both published and unpublished works. Copyright, Nanayakkara notes, “accrues at the point of creation” and doesn’t require registration, but in the United States, copyright can be registered with the U.S. Copyright Office. Copyright (for materials created after 1978) lasts for 70 years after the creator’s death.
Nanayakkara points out that intellectual property rights are “not in watertight compartments.” “If the conditions are right, a design could be protected by copyright or if it distinguishes a product from other products, it could be a trademark; confidential business information could give rise to a patent, etc.,” she says.
And there are other types of intellectual property companies need to protect, including business names (if a company chooses not to trademark theirs) and domain names for websites, according to Bill Voss, who wrote about protecting intellectual property in a November 2020 article for CPO Magazine. Businesses typically are registered in the states in which they operate, often through the secretary of state’s office, helping to protect the name. Domain names allow customers, vendors and others to find your business easily online and should be acquired as soon as a company forms, launches a new division or creates a new product that might need its own website.
“One great tip is that, as early as you have registered your business (or product) name, acquire the best domain name to represent your company as fast as possible. This act reduces the possibility of you having to pay more for the domain name,” says Voss, founder of The Voss Law Firm in The Woodlands, Texas.
More steps to take
Aside from registering and securing rights for various types of intellectual property, there are other steps companies can take to protect themselves from losses of these intangible but valuable assets.
Sadler recommends beginning with these:
- Develop an inventory of intellectual property.
- Limit access to valuable information to only those employees who must have it.
- Use data loss prevention software and other internal security measures.
- Register additional patents. “This approach makes it more difficult for competitors to engineer knockoffs and copycat products,” he says.
- Carefully vet candidates for employment.
- Purchase insurance to protect intellectual property. “In fact,” Sadler says, “this is becoming an increasingly popular solution, with IP insurance growing at a rate of 300% annually, according to an article by the International Risk Management Institute.”
RESOURCES
StopFakes.gov: This website helps U.S. businesses protect and enforce intellectual property rights, specifically against counterfeits and pirated goods. It includes a wealth of resources, such as an online training course, toolkits, guides to intellectual property rights in other countries and webinars on a variety of related topics. StopFakes.gov is run by the U.S. Department of Commerce’s International Trade Administration.
USPTO.gov: If you need to file a patent or trademark in the United States, this site of the U.S. Patent and Trademark Office is the place to go. It includes a trademark search database and online forms for filing patents and trademarks, as well as portals for checking on existing applications. It also offers educational materials, tips, resources and FAQs.
WIPO.int: This comprehensive website of the World International Property Organization provides information, resources and news about intellectual property rights around the globe. It also includes portals to international patent, trademark and design systems. WIPO has created IP Diagnostics, an online tool that allows you to do a basic assessment of your company’s intellectual property (WIPO.int/ipdiagnostic). WIPO is a self-funding agency of the United Nations. It is based in Geneva and has offices around the globe, including one in New York.
