People tend to think of intellectual property in formal terms, such as trademarks, copyrights and patents, but IP also includes a broad range of work processes and intangibles (such as customer relationships and employee morale).
To obtain financial rewards from your intellectual property, you need to take steps to protect your rights.
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Test your business practices. It's much better to close the proverbial barn door before the IP escapes. How would you answer these questions? True? False? Depends?
- The company automatically owns the work produced by employees and consultants as long as it pays for services provided.
- Copyright registration is not necessary to enforce my rights.
- I don't need business liability insurance because my business is incorporated.
- Domain names are more important than trademarks.
- Nondisclosure agreements, or NDAs, are a waste of time.
- Verbal, handshake agreements are enforceable.
- I can stop my employees from working for a competitor.
- The noncompete agreement that I signed years ago is unenforceable.
- It's OK to use someone else's work as long as I credit the author.
- Someone who participated in a brainstorming discussion cannot claim an ownership interest in my business.
Here are my (short) answers to the quiz:
- False. Employees and consultants who work on the company's products and services should sign assignment of rights and confidentiality agreements to ensure that your company has clear ownership of the IP.
- False. To enforce your rights, the copyright needs to be registered. Copyright registration is inexpensive and greatly enhances your ability to recover statutory damages and attorneys' fees. If you wait until after an infringement occurs, your recovery is limited to actual damages, which are difficult to prove.
- Partially true. Incorporating does limit your personal liability for claims against the business. It's still a good idea to have insurance in case you need to defend against any claims.
- Depends. A strong domain name, easily remembered and distinctive, is extremely important. However, it is wise to research registered marks to avoid a conflict with an existing mark. Registering your domain name as a trademark enhances your ability to enforce your rights against a copycat.
- False. Nondisclosure agreements are an important part of protecting your rights and should be signed before confidential information is disclosed.
- Depends. Many businesses operate successfully on handshake agreements. However, if there's a disagreement, it's difficult to enforce an arrangement that's not in writing.
- Depends. Stopping former employees from working for competitors requires that you are protecting a "legitimate business interest," such as your confidential business information. It's prudent to have confidentiality and noncompete agreements in place if you are serious about restricting employee activities.
- Depends. Many noncompete agreements are unenforceable because they are overly broad or there has been a material change in circumstances since the document was signed.
- Depends. The "fair use" doctrine allows reproduction of copyright-protected materials under certain circumstances. But before you add music to your website or copy someone else's photograph or writing, it's wise to check whether your use fits within the criteria for fair use.
- Depends. If your business is successful, many people may claim they contributed to the critical ideas. To avoid misunderstandings down the road, it's wise to have agreements in place with collaborators about confidentiality and ownership.
How did you score?
The answer "depends" is frustrating, I know. The law is complicated. Still, it's possible to protect your IP with a disciplined approach. Don't count on a handshake agreement or make assumptions about legal enforceability. If IP is core to your business, it's worth the investment in experienced legal advice to protect your interests.
Business attorney Jean D. Sifleet heads the Business Practice Group. Sifleet, who provides practical, outcome-focused advice to business owners, is the author of several books, including: Beyond 401(k)s for Small Business Owners and Advantage 'IP': Profit from Your Great Ideas.