“[I]f knowledge is the means for creating value, then intellectual property is the means for extracting that value.” – Arena & Carreras, The Business of Intellectual Property, Oxford University Press (2008).
Protecting intellectual property is a key business and legal concern that is often overlooked, for one reason or another, by many small businesses. By understanding, identifying and taking steps to maximize the value of intellectual property assets, businesses can enhance their competitive position in the marketplace, develop new revenue streams, and enhance their value when it comes time to sell.
Types of Intellectual Property and Measures for Protection
Trademarks and trade dress are the identity of the business and its products and services. A business may have several—or, in the case of Disney, thousands—of trademarks to identify and distinguish its goods and services in the marketplace. Trademarks receive limited protection automatically upon use in commerce, but registration with the USPTO is required to obtain nationwide priority of rights.
Copyrights protect the creative expressions of ideas. Importantly, however, copyright law does not protect the underlying ideas themselves. Ideas, if protectable at all, must be protected through acquisition of patents, or, in the case of confidential information, through strict nondisclosure and/or contractual limitations. Copyright protection arises automatically upon the creation of a creative work, but registration with the U.S. Copyright Office provides greater protections and enhances damages the copyright owner can collect in the event of litigation. The threat of enhanced damages may also provide a strong incentive for an infringing party to settle and avoid the expenses of trial.
Ideas, proprietary data and confidential information may be protectable as patents or trade secrets. Where information does not qualify for patent or trade secret protection, it can still be protected through internal controls and contractual limitations on its use and disclosure.
Development and Implementation of an Intellectual Property Strategy
The first step in maximizing the value of intellectual property is to identify precisely what intellectual property the business has to protect. Once the business has an understanding of its actual and potential intellectual property assets, it can then begin to develop a strategy to control, protect and leverage those assets in ways that will maximize their value.
An intellectual property strategy should involve: capturing the intellectual property developed in the business’s operations; exploring and evaluating new ways to develop intellectual property; maintaining complete and accurate records of intellectual property assets and their relationships to one another and the business’s products and services; undertaking adequate measures to protect the business’s rights in its intellectual property; and, evaluating and advancing the business’s leveraging and monetization of its intellectual property assets. The intellectual property strategy also should align with the business’s overall growth and innovation goals and strategies, and each strategy should inform the development and pursuit of the others.
Considerations for Leveraging and Monetizing Intellectual Property Assets
Once the business has identified its sources of intellectual property and begun to control its intellectual property assets, it can then begin the process of extracting value from those assets. There are several ways to monetize intellectual property assets. The first, and most obvious, is using the assets directly in the day-to-day marketing and development of the business’s goods and services. Developing a unique and attractive brand for a proprietary creative work or software application that uses confidential processes is the very essence of the commercialization of intellectual property. Intellectual property can also be leveraged through licensing—exclusive or non-exclusive—either directly to consumers or to market allies. Perhaps a cross-license with an innovative entity in a different industry can be used to bridge the gap between two companies’ respective research and development capabilities. An efficient and effective enforcement program can also extract value from intellectual property in terms of stifling infringement and seeking compensation for unfair competition.
By understanding the value and potential associated with the development and protection of intellectual property assets, businesses can better position themselves in the marketplace and enhance their value when entertaining offers or courting potential buyers. In this age of information, more businesses than ever will benefit from developing and adhering to a well-developed intellectual property strategy.
Jeffrey Fabian is the owner of Fabian, LLC, a solo law firm located in Baltimore, Maryland that assists entrepreneurs and emerging businesses in all aspects of their transactional legal needs.