Intellectual Property and the Small Business Owner

The topic of intellectual property isn’t typically discussed by small business owners, even though it should absolutely be in the minds of all entrepreneurs. The main reason why intellectual property (IP) isn’t talked about much is that it is often seen as an immaterial concept, and to some extent that is correct. The recommended way to think about IP is to consider it a business asset that could conceivably be listed on a company’s financial statements once it has been given a proper evaluation. Just like with many other items that are part of the asset list of a business, IP requires a certain level of protection. This protection may not necessarily be of the kind used to protect physical assets like company vehicles and office equipment, it is more likely to be legal and procedural.

To illustrate just how crucial IP protection can be to the business process, consider the successful lawsuit by toy and doll maker Mattel -IP owner of the iconic Barbie doll- against MGA Entertainment, Inc. MGA is the maker of the rival Bratz doll. The design concept behind Bratz originated at Mattel by an employee who was doing consulting work for MGA. Although Mattel decided not to pursue the Bratz line of dolls for young girls, they rightfully sued for their IP and gained $100 million from MGA. That lawsuit is just one in a string of litigation cases involving the Bratz dolls, which have resulted in millions of dollars spent by both companies in legal fees.

Making sense of IP in small business enterprises

While IP laws differ from country to country, there are international treaties in place that seek to protect IP on a global level. In the United States, IP can be classified into four different types:

1 – Copyrights: Works of creativity such as songs, computer software applications, books, or technical drawings can be protected by copyright for a period of 70 years. While copyright law does not compel authors to necessarily register their works with the Library of Congress, it is often a good idea to do so; especially when it is believed that the work in question could bring significant profits.

2 – Trademarks: Logos are intrinsically tied to corporate brands and can serve to distinguish a company from a sea of others. Logos can be protected under IP law by filing for trademark status. The unfair appropriation of logos is rampant, and the best way to stop such practices is with trademarks.

3 – Trade Secrets: These are a bit more complicated to understand. Trade secrets can be protected if they meet certain criteria like uniqueness, competitive edge and protection by means of disclosure. If a business process in a small company is not universally known, but it is proven to be the main means by which the company is profitable, then that process can be considered a trade secret that must be protected by non-disclosure or non-compete agreements.

4 – Patents: If the success of a small business is centered on innovation and inventions, then those must patented to achieve legal protection for at least 20 years; long enough to realize exclusive significant profit and to come up with improvements or new inventions. Without a patent in place, anyone else could veritably copy -or even steal- and invention and attempt to profit from it.

With the exception of copyright, which is granted to authors of creative works virtually as soon as they are created, protecting IP is a complex affair. Drafting the agreements that disclose trade secrets and a company’s intention to protect them is not a simple endeavor, and the process of filing patents and trademarks can also be difficult and intricate. The services of an IP attorney are essential whenever questions about IP protection arise among small business owners.

Author Eldon Shaw recommends checking with an Attorney at the Doyle Raizner firm, to protect the rights of small business owners.