Part 7

[21] (Part 7: Intellectual Property – Registration & Titling) De-Risk Your Biz: Minimum Small Business Legal Requirements

IP Registration

In some cases, you obtain ownership over your IP as soon as it comes out of your head and you put it into the world in some sort of fixed format. But you still need to formally register your IP with the appropriate government agency in order to reap the full benefits of IP protection under the law.

Copyrights

Copyrights must be eventually registered with the U.S. Copyright Office. I say “eventually” because ownership over a copyright is granted to the author from the moment the idea is taken from the author’s brain and recorded, written or drawn. Once the pen hits the page, common law copyright protection kicks in. But you need to register your copyrights with the Copyright Office in order to be able to proactively protect the intellectual property and claim it as your own if someone else is trying to use it. 

As a starting point, I typically recommend that business owners file copyright registrations for (a) proprietary computer source code, for software companies, and (b) designs and illustrations that are central to the company’s branding – noting that these designs are protectable separate from trademarks. If the company has certain designs they often use for marketing purposes, there is some utility in ensuring that other companies can’t use them.

Trademarks

Trademarks must be registered with the U.S. Patent & Trademark Office (USPTO). Due to technology upgrades to the USPTO’s web portal, filing a trademark application in the U.S. has become easier over the years but in my opinion is still somewhat harder than a do-it-yourself activity. People often file the applications wrong and then have to pay a lawyer to fix it, which is usually more time-consuming and expensive than having an experienced attorney do it upfront. USPTO trademark applications are also public record, so everyone can see when you screw it up, giving an opening to other applicants or registrants who may want to challenge your application. 

A key challenge in filing trademark applications is that it takes a while for the USPTO to review the application before you even have an idea of whether the application will be accepted. As of the time of this writing, the USPTO is currently processing applications 6+ months after the application date. Once that happens, you may receive challenges from the USPTO – they call these “Office Actions” – that you have to overcome before the mark can become registered. And, even after that step, there is still an opposition window during which members of the public (i.e. other applicants for similar trademarks) can challenge your application and buy time to argue that you shouldn’t be able to use the mark exclusively. This transfers your application into a litigation process which is quite lengthy and almost always requires extensive legal costs to overcome. 

In short, it can easily take 12 months from the application filing date before you have the exclusive right to use your trademark. This time lag can be especially challenging for product companies who need to meet a production timeline and don’t want to submit their product name and/or logo for manufacturing a product that may ultimately not be granted exclusive rights to use the trademark by the USPTO. 

Here’s the punchline: you have to start the trademark process really early, at least a year out, and plan ahead as to which brand names and logos you want to use. The USPTO has a type of trademark application called “intent to use” which you can file prior to actually using the mark, although you have to prove that you’ve used the mark in a commercial setting later down the line within a few years. Either way, this is one area where you have to de-risk your business as early as possible.

Patents

Patents, like trademarks, must be applied for and registered with the USPTO. This is not my area of expertise so I won’t go into detail here.

Trade Secrets

Trade secrets don’t have to be registered with any government agency. They are private secrets of the company and are protected by private contract – meaning whoever comes up with the secret should store it in a safe (i.e. encrypted, in today’s parlance) place, tell very few people about it and the only people who know about it should have already signed some sort of Non-Disclosure or Confidentiality Agreement.

IP Titling

We’ve established that you need to get your business’ IP properly registered, but how do you get the IP into the company rather than owned by you individually? Effectively, if you’ve registered your IP in your own name, you will need to re-title your IP into the name of the company.

For founders, this is done by signing a document that transfers ownership of the IP into the company, often called a Founders IP Assignment or Founders IP Inventions Agreement. Within this document, you can specify any personal IP that is not being transferred into the company in case there’s something you want to exclude. This step is often important for creative types or those who also have other businesses. 

You also need to make sure that all of your employees and contractors have similar IP transfer provisions in their contracts. Usually this is embedded within their employment or independent contractor agreements, but oftentimes can be covered in a separate document depending on the complexity of the IP and specificity required to accurately describe the IP and what is covered by the document. 

Finally, on an ongoing basis, as you grow your business you’ll need to review and scrutinize contracts with your vendors and other third parties you contract with to make sure that you are properly identifying which IP stays in the hands of the company or which IP you might be licensing in or out. This process becomes especially important for software companies who are bundling together various software IP into one solution.

In the next post, we’ll cover the often-overlooked areas of small business licensing and insurance.

De-Risk Your Biz: Minimum Small Business Legal Requirements