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A Better Partnership


Feb 2006
February 22, 2006

What Businesses Should Know About -- Intellectual Property

Virtually every business has intellectual property and, on the other hand, can also easily and unwittingly infringe the intellectual property of others. Knowing a little about intellectual property, and taking the proper steps in the early stages of a business, can save a tremendous amount of time, money and aggravation later. This IP guide is designed to provide some essential knowledge which should help you avoid intellectual property quagmires.

Trademarks: What's in a Name?

Very often, quite a bit. Like proud parents choosing a name for their new baby, most entrepreneurs think long and hard about what name to give their new business, new product or service. However, what many small businesses fail to do is have the name they want thoroughly checked to ensure it does not infringe any rights owned by another, such as trade name (the name under which a company conducts business or is commonly known) or trademark (words, letters, logos or other symbols that allow customers to identify the source of a product or service) rights.

This can lead to disaster! Think of how devastating it would be to your business to spend several years investing all your time and effort in building your recognition and reputation under a name, only to be later forced to change that name, thus losing virtually all of the goodwill you had gained. This is what can, and often does, happen when a business adopts a name without thoroughly checking it first. So, what do you do to prevent this from happening to you?

  1. Have a Search Done. The best protection is to have a full trademark search conducted for you by a knowledgeable attorney before you adopt a name for your business, product or service. (This can even be helpful for names you have already adopted, so that you know what potential pitfalls may be awaiting you.) Such a search will include not only registered trademarks but also unregistered or "common law" trademarks. "Common law" trademark rights are created by using a name to sell the products or services. These rights exist without any registration. Since the name of a business is almost always used to identify the business's products or services, almost all business names also function as trademarks. That means virtually every business has at least one trademark.

    Many businesses (and attorneys) mistakenly believe that if they are allowed to incorporate under or reserve a corporate name, the name is free and clear to use. Quite the contrary! The Michigan Secretary of State (1) will allow a business to be formed under any name as long as it is not the exact, identical name of an existing corporation, LLC or other entity registered in Michigan and (2) does not consider at all whether the name violates any federal or common law trademark rights. So, while the Michigan Secretary of State might allow you to incorporate under the name "Microsoft of Michigan, Inc.," federal trademark law, and Bill Gates, will not.

    To be a conflict, the name does not have to be an exact match with the trademark nor do the businesses, products or services have to be identical. A name and its corresponding business have to be only close enough that customers are likely to be confused that one business is the other or believe that one business or its products or services are sponsored, authorized, licensed or otherwise connected to the other. In other words, using the name MICROSOFTENER for retail computer stores would be a trademark infringement problem even though Microsoft does not operate its own retail outlets.

    So, search first, and you won't have to ask questions later.

  2. Ensure Your Right to Expand by Registering. While simply using your name may give you common law rights, these rights are limited to the geographic area in which the products and services are sold and distributed. If your business is currently local or regional, you could be precluded from later using your name in other areas of the country if other businesses use the name there first. However, you can protect your ability to expand throughout the country by getting a federal trademark registration for your name. A federal registration gives the name owner rights throughout the entire United States as of the date the application is filed.

    Another advantage of registration is that your name is more likely to be discovered by others conducting name searches and, as a result, will discourage others from using that name. A further benefit is that a federal trademark application can be filed on an "intent-to-use" basis before any use of the name has ever begun. Thus, you can take steps to ensure rights to a name before you actually begin conducting any business under the name. Finally, federal registration gives additional benefits regarding proof of ownership and monetary recovery if the mark ever needs to be enforced against infringement by others.

Copyrights: What You Don't Own Can Hurt You

A copyright is basically the right to control what is done with an original work of authorship. A "work of authorship" can take many forms including: obvious ones, like books, songs and movies, and not-so-obvious ones, such as photographs, software, catalogs, brochures, ad copy, artwork, architectural plans and more. Similar to trademarks, registration is not necessary for a copyright to exist. A copyright exists in a work from the moment the work is created.

The issue critical to most businesses is who "owns" the copyright and the right to control what uses, copies and derivatives are made of the work. The "creator" of the work owns the copyright. Normally, this is the individual or group of individuals who actually creates the work. However, there is an exception when a work is created by an employee (as opposed to an independent contractor) within the scope of his or her employment. Then the employer, not the employee, owns the copyright in the work. This is known as a "work for hire." A key factor to remember is that creating the work must fall within the employee's normal job responsibilities. So, if the company janitor is a computer wiz and develops a software program that the company can use, this would most likely not be covered by a "work for hire" exception, and the employee would still own the copyright in the software.

The only way ownership of a copyright can change is if the creator assigns the copyright in writing to someone else. This becomes very important when you hire an independent contractor to create a work covered by copyright, such as photographs, software, graphic art, ad copy, etc. The independent contractor will own the copyright in the work unless there is a written assignment from the independent contractor and you may be limited to use the work only in the specific way contemplated when you hired the contractor. As an example, if you hired a photographer to take a photograph for one particular piece of advertising, you may not be able to use that photograph on a different piece of advertising without further consent from the photographer. Therefore, before hiring an independent contractor to create a work covered by copyright, you should consider carefully all future uses you may want to make of the work and negotiate with the contractor for either an assignment of the entire copyright or at least a license to allow those future uses, either of which should be put in writing and signed by the independent contractor.

While registration of copyrights is not necessary, it does give some significant advantages. Having a registration gives the copyright owner far greater ability to recover monetary awards for an infringement and therefore greatly increases the copyright owner's bargaining leverage in attempting to resolve infringement situations. The registration process is relatively easy and inexpensive, so it is well worth considering each time a new work is created.

Patents: Protecting the Better Mousetrap

If you truly build a better mousetrap, you can protect that invention by obtaining a patent from the U.S. Patent Office. Unlike trademarks and copyrights, patent rights do not exist unless and until a patent is issued. That means that you cannot make someone stop copying your invention until the registration issues, even if you have an application pending.

There are two types of patents. Utility patents cover what we normally think of as inventions: devices, processes, machines, composition of matter, business methods and the like. Design patents cover the ornamentation or appearance of an item.

To be patentable, an idea must be something new and inventive. It cannot have been done before by others.

Patents last for only a limited time: 20 years from the filing date for utility patents and 14 years from the issue date for design patents. Once a utility patent expires, there is no way to extend it for that particular invention, and you can no longer stop someone from copying the elements covered by that patent. If you have revised that invention, you may be able to obtain a new patent on the revisions but that still will not allow you to stop someone from using the elements covered by the original patent once that patent expires. There are, however, some other possible legal remedies regarding design patents, such as trade dress, that may cover the subject of that patent after it has expired.

It is important to consider patenting your invention early. If you do not file a patent application before you disclose your invention to the public by either selling or showing it, you may lose some rights. In the U.S., you have one year from the date of first disclosure to file your patent application. However, in many foreign countries, you must have filed a patent application in at least one country before the invention is disclosed or all rights to patent the invention in that country are lost.

Therefore, it is highly recommended that you file your patent application before you publicly disclose your invention. If you have any intellectual property questions or concerns, please contact Scott Keller directly at 616.752.2479.



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