by Ivan Lipshitz, Adv., JMB Davis Ben-David
In today`s economy, IP is the lifeblood of your startup, SME, company or corporation. As an entrepreneur there is no more important or valued asset that differentiates your business from its competitors than the intangible knowledge and know-how, known as intellectual property, that determines the raison d’être of your business` existence and underpins its place in the technology space you occupy. This “intellectual property” may manifest itself in many forms- innovative ideas, business methods, designs, tradenames, your business name and logo, customer lists or the look and feel of your business. It is this valuable exclusivity which vests in your IP that distinguishes your business and its products from that of its competitors and is a key source of value to attract funding from potential investors and makes it a more attractive acquisition proposition to potential buyers.
But do you really “own “the intellectual property that has been created and used during the course of conducting your business, and are you able to assert its IP rights? You may have come up with an innovative idea or developed a unique product but then you realize you can`t assert your IP rights to that idea or product. Perhaps an employee worked on the idea, or you outsourced the development of the product to an independent contractor, either of whom may have worked on and contributed to the development of the product and could possibly claim the idea or work product as their own. Maybe your idea or blueprints were disclosed to a third-party during negotiations, or even deliberately leaked to a rival or competitor by a bad actor. Or, perhaps, a third party, who received such information, is using it unlawfully to gain a competitive advantage over your business. This nightmare scenario is not an unusual occurrence. Unfortunately, it happens more frequently than you may think.
To avoid this disastrous situation, you must contractually protect and safeguard your IP from your employees, independent contractors who worked on it, business rivals and competitors, and even business partners with whom you may be considering entering a potentially lucrative joint venture or collaborative business relationship. Make sure to anyone who works for you either as an employee or under a consultancy contract, or other agreement or arrangement, that it is abundantly clear and in writing, that the intellectual property rights in all work product performed or rendered by them is owned by your business, and not by them or anyone else.
Because IP covers so many things, you need to understand exactly what is covered by this term and have a basic understanding of the 5 major IP categories:
Patents protect the marketplace for your inventions. To be patentable, an invention must be novel, useful, inventive, capable of industrial application and not be excluded from patentability. Examples include machines, pharmaceuticals, medical equipment, video cards, or even a better mousetrap. A common misconception is that patents grant the right to make or implement an invention, but this is not true. A patent confers an exclusive right to prevent others from exploiting what is covered by the patent in a specific jurisdiction, without permission from the patent owner. A patent does not, however, prevent you from potentially infringing someone else’s patent.
Trademarks can be a word, name, symbol, logo, design, or any combination thereof that distinguishes the goods and services of one party from those of others and indicates the source of the goods and services.
A trademark can be a brand name or a logo, or a combination between the two. A trademark can even be a 3D object or shape), the contours of a Coco Cola® bottle, the shape of a Zippo® lighter or a Toblerone® chocolate bar. Even a particular kind of smell or fragrance or scent or a sound, such as a combination of musical notes can be a trademark (at least in some jurisdictions). Anything that you use to identify your business can be a trademark. Famous trademarks include everything from McDonald`s golden arches to Nike`s “Just Do It®” slogan, to “AMAZON®”, or “MICROSOFT®”. Registration of a trademark is not mandatory. However, enforcing your rights to a trademark that is registered is much easier and cheaper than an action for passing-off under common law.
Registered and Unregistered Designs are another form of intellectual property. A design is an ornamental element of an object. Design registration laws are directed at protecting novelty and originality in industrial designs and protect the appearance of a product. This can be the whole or part of a product resulting from the lines, contours, colors, shape, texture or materials, or ornamentation of the product itself. Design laws, however, normally exclude protection for designs that are dictated only by functional considerations. Typically, the creator of the design owns the rights in it, except where the work was commissioned or created during his employment, in which case the rights belong to the employer or party that commissioned the work. Examples of objects that can be protected by design registrations are: a mobile phone hand- set, a lipstick case, the three-dimensional shape of a decorative object or an item of food, shoes, items of clothing, brushes, furniture, cutlery, plates (or the three-dimensional shape of plates or the decoration on the plates), designs on motor vehicles, toys, etc. It is even possible to protect the external shape of a building by means of a design registration. In some jurisdictions registered design rights are limited to only 10 years, while in others they can be maintained for up to 25 years. Maintenance fees are payable in some jurisdictions but not others and may be payable on an annual or periodic basis. As with many unregistered intellectual property rights, it is often more difficult to prove infringement of an unregistered design right than with a registered design.
Copyright protects the expression of ideas, not the ideas themselves. A copyright is a bundle of rights that confers upon a copyright holder the right to prevent others from copying, using, exploiting, or making derivative works of their original work without consent. It is the most expansive and powerful of all IP rights and can exist in works of art, literature, music and even computer software. Copyright subsists immediately by operation of law without the need for registration and generally lasts for 70 years after the death of the creator.
Confidential Information and Trade Secrets- Although not strictly speaking an intellectual property right, but rather an ancillary right, “Confidential Information” is used to protect commercially sensitive, valuable, and private information not otherwise protected by other intellectual property rights. Trade Secrets, on the other hand, are company business secrets. A good legal definition of trade secrets comes from the U.S. Uniform Trade Secrets Act where it means “information, including a formula, pattern, compilation, program device, method, technique or process that: (i) derives independent economic value, actual or potential from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” In terms of the U.S Uniform Trade Secrets Act, a company has the right to prevent others from “misappropriating” a trade secret. If an employee, for example, steals mailing – list data or a customer list from his employer this information could be enormously valuable to a trade competitor. Likewise with development software and tools. Some elements of a development tool, like the secret ingredients of Coca -Cola, could remain a trade secret even if the tool itself were sold.
When talking to and doing business with your investors, partners, business advisors, job candidates, employees, third party contractors and service providers be extremely careful not to disclose confidential information or trade secrets about your business, without appropriate contractual protection and safeguards. Otherwise, you will put your ideas, innovations, business model and possibly even your business itself at tremendous risk. You will clearly need to talk about these novel and innovative ideas, business models and “confidential information” with certain people during the course of negotiations and consultations but understand that failure to secure necessary protections and safeguards of your IP rights may expose your business to substantial actual loss and damage and undermine the intrinsic value of your business and its IP assets.
So, how do you safeguard and protect your IP rights? By the entering into of carefully crafted and effective key IP agreements to cover these various situations and protect your IP rights. These key IP agreements will include, but not be limited to:
- Non-Disclosure Agreement (NDA)
- Employment Agreement
- Invention Assignment Agreement
- Consulting Agreement
- IP Development Agreement (Joint Venture/Collaboration Agreement)
- License Agreement
Since IP may be developed by your employees in the course of their employment, by outside parties retained for a specific project by your business or through joint efforts with a third party, it is crucial to delineate in such key IP agreements: how the above described types of IP are identified and addressed, the various considerations that apply to them and what definitions, provisions and terms and conditions are needed to meet the goals of the contracting parties whilst at the same time ensuring that you indeed own the relevant IP. It is also necessary to detail and highlight your rights to use and exploit your IP as a business owner and entrepreneur and ensure that they are both properly secured and adequately protected.
Your IP is central and vitally important to the business undertaking of your business, so ensure it is adequately protected and safeguarded by a robust appropriately executed written agreement carefully and accurately drafted by your IP lawyer.
If you need any assistance with any of the above types of IP rights, or any of the above -mentioned agreements to protect your intellectual property rights in the various scenarios as described above, please email Ivan Lipshitz at Ivan.Lipshitz@jmbdavis.com or JMBmail@jmbdavis.com.