By Reed Richardson
It is the classic American business archetype-the lonely entrepreneur tinkering in a lab or garage hits upon a revolutionary idea, one that eventually changes the world and brings untold riches to its inventor. But for every household name like Alexander Graham Bell or Bill Gates, there are many more obscure, cautionary tales of men like Edwin Howard Armstrong or Robert Kearns, brilliant innovators whose dreams never materialized because outsiders brazenly appropriated their clever ideas.
"Unfortunately, that has long been the experience of a lot of ‘little guys' in business," acknowledges Professor Tom Field, an intellectual property expert at the Franklin Pierce Law School. For example, Armstrong-the Columbia professor who pioneered FM radio in the 1910s and '20s-and Kearns-the engineer who first patented the intermittent windshield wiper in 1967-both watched in vain as their valuable inventions were stolen out from underneath them by large corporations. (After costly, decades-long lawsuits, both men were eventually vindicated.) But whether today's intellectual property threat comes from old-fashioned corporate theft or its more modern version-overseas knockoffs-the lesson to small business owners, Field says, is that "just because you're the first one to come up with an idea and have the rights to it, doesn't mean it's easy to enforce those rights."
Indeed, in today's increasingly global marketplace, intellectual property (IP) theft has grown into a massive problem, one that costs American companies up to 750,000 jobs and anywhere from $200-250 billion annually, according to the U.S. Patent and Trademark Office. "IP theft particularly hurts small and medium-sized enterprises," noted outgoing USPTO director Jon Dudas in a recent speech before a global forum on IP issues in Beijing, China. This vulnerability arises from the fact that budding entrepreneurs often lack sufficient industry savvy and legal advice to properly safeguard their ideas against either foreign or domestic infringement.
At the macro level, the federal government has recently taken steps to bolster intellectual property protection, expanding its outreach to foreign IP offices in the European Union and China as well as hiring more examiners to handle the record-high caseload of U.S. patent applications. But on the individual company level, there are many steps that a small business can take to prevent their ideas from slipping away from them.
Among the different intellectual property safeguards, patents offer the most protection precisely because getting one is not easy-nor should it be. Patents prevent anyone else from making, using, or profiting from an item or invention for a relatively long period of time. (In the U.S., new patents typically last 20 years from the filing date.) Because of these often lucrative privileges, patents are only to be granted for truly unique items. To be eligible for a patent, the USPTO requires that an item meet four criteria: it must have utility; it must be genuinely novel; it cannot have been obvious at the time of the invention; and it must be thoroughly documented so that someone else could replicate it. Patents are not limited to physical objects, however. A process or method of doing something can sometimes now be patented although a simple idea or phrase or song cannot be patented (see copyrights and trademarks below).
This high threshold of proof means that not quite half of all current U.S. patent applications are rejected and those that are ultimately successful often take years to be approved. And because of the extensive drawings and documentation required, the process is a relatively expensive investment for most entrepreneurs. "At a minimum, the cost to get a patent is about $4,000-$5,000," Field estimates. There are many online sites that promise cheaper and quicker patents, but Field warns that they often cut corners and he doesn't recommend them. Experienced patent attorneys, on the other hand, must pass special examinations before seeking patents from the PTO. "You risk forfeiting potential rights and benefits if you don't use patent attorneys that know what they're doing," he explains.
"But the most important thing for every small business owner to know is that, in the U.S., you have one year from the first sale of an item to apply for a patent," explains Field. After that initial 12-month period, an unprotected idea or invention becomes fair game; anyone can then sell it or even patent it. Therefore, waiting until your idea or invention becomes a hot seller and then attempting to patent it is not a wise move. Instead, it's a good idea to apply for a patent early on in the developmental stage. If the invention doesn't pan out, you can always abandon the application midstream and consider any money spent a short-term insurance policy on protecting what might have been a big payoff. And for those items that do turn out to be worthwhile patent applications, Field says the ensuing period between application and approval is an especially important time to remain vigilant about IP infringement. "‘Patent pending' offers you no rights whatsoever," he warns.
For works created by authors, songwriters, artists, and even computer programmers, copyright protection is the appropriate IP safeguard. Unlike the very complicated and deliberate process of obtaining a patent, copyright is much more informal. Once the work is published in some kind of medium (written or published on paper or online) copyright protection-noted by the mark ©-is automatically granted for the life of the author plus 70 years. If the work is that of a full-time employee, however, the employer typically owns the copyright for 95 years from the date of publication. Formally registering the copyright with the federal government is fairly simple and affordable (a single form and a small application fee of $35 if online or $45 if by mail), but is not necessary. Nonetheless, many legal experts still recommend it, as there are some important advantages to formal copyright registration.
"Statutory damages up to $150,000 and attorney fees can be obtained only if copyrighted works are registered promptly" with the federal government, explains Field. "For published works, ‘promptly' means within three months of publication." To illustrate the importance of this step, Field cites a copyright lawsuit from a few years ago involving a small North Carolina architectural firm. In 2000, the firm published and sold for $20,000 a set of custom home blueprints to a client. Another individual then obtained those blueprints and violated copyright by using those same plans to build a second house. Upon discovering the copyright infringement years later-after construction on the second house was almost complete-the architectural firm federally registered the copyright of the blueprints and then immediately sued seeking damages. However, after a lengthy court battle, the architectural firm only ended up winning a judgment of $20,000 -- the original fee for purchasing the blueprints. "In my opinion, the court basically affirmed that because the architectural firm didn't formally register the copyright in a timely manner, they gave up their right to sue for damages and attorney's fees," Field says. "And that's too bad, because they spent a lot more than $20,000 on the case."
Trademarks, service marks
Trademarks and service marks are most commonly recognized as a business's brand name or slogan, but they can also be extended to include logos and symbols, such as McDonald's golden arches or Nike's Swoosh. Trademarks may even include colors (cell phone company T-Mobile has actually trademarked a shade of magenta), scents, or distinctive shapes (Apple's iPod, Coca-Cola's hour-glass-shaped bottle) and sounds (think broadcaster NBC's three-note chimes or Intel's distinctive "na-NA-na-NA" sequence attached to its microchips). Their importance arises from their ability to let your customers distinguish your business from another.
"Most people are pretty ignorant when it comes to trademarks, though," Field says. "I had a woman with a business named Antiques ‘R' Us call me up once complaining that she got a nasty letter from the lawyers of Toys ‘R' Us. She said she couldn't understand why they were picking on her and said that she had found lots of other Something ‘R' Us companies during a Google search. I told her she could rest assured that those businesses were all getting nasty letters as well and that her only recourse was to change her company's name."
This example illustrates a larger point. Choosing a trademark is all about capturing the essence of a business's focus without being too specific or too derivative. For that reason, trademarks that rely upon generic terms, family surnames, geographic locations, or-as seen above-another company's trademark, are generally poor choices precisely because they are bound to overlap with another company's brand, weakening their intended effect. Sure, they may work at the local or state level for a while, but since the Internet can expand a business's reach (and exposure) around the world, it is often only a matter of time before they will start sounding too vague, too provincial, or run afoul of an already established trademark.
As such, it's a good idea to do what Field calls a "knockout search" when naming a new business or product. Simply type your prospective trademark into Google and see what comes up. Lots of results probably suggest you should head back to the drawing board. Once you hit upon a good candidate, registering your new trademark at the state level is usually a quick and painless process; in many states, a simple form and less than $100 takes care of it. This makes state-level trademarks look like a bargain when compared to the $1000 or more needed to obtain a federally registered trademark, which is denoted by the mark ®. But the extra time and money is often worth it, for two reasons. First, for a company that conducts any business outside its home state, whether physically or online, a state-level trademark offers no real protection. Second, in any legal dispute over trademark rights, the federal trademark always wins. And for this reason, it's always worth screening the USPTO's federal database-now online-before finalizing any new trademark just in case.
Online Intellectual Property Resources:
Tutorial on IP basics: http://piercelaw.edu/thomasfield/ipbasics/
U.S. Patent and Trademark Office's small business site: http://uspto.gov/smallbusiness/
For a tutorial on copyright basics: http://copyright.gov/circs/circ01.pdf
For a tutorial on trademark basics: http://uspto.gov/web/offices/tac/doc/basic/
To search all federally registered trademarks: http://uspto.gov/main/trademarks.htm
To search all active and pending U.S. patents: http://patft.uspto.gov/
For a list of all USPTO fees: http://uspto.gov/about/offices/cfo/finance/fees.jsp
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