An often little-understood area of the law that is quite important to your business is called intellectual property law. It has to do with intangible assets, like words, phrases, and pictures. These may, in fact, be your most important assets. Let’s use Nike as an example. How important is that swoosh logo? That is intellectual property (a trademark). What about the name “Nike”? That is also intellectual property (copyright and trademark). And its tag line, “Just Do It” – yep, that is intellectual property too.
Intellectual property is no less important to a small business. You need to know how to protect your business name, logo, inventions and so on. There are five areas of intellectual property that may help you: Trademarks, copyrights, patents, trade secrets, and goodwill. Let’s look at each:
Trademark: A trademark is a word, phrase, design or symbol that identifies your business and distinguishes it from the competition. (A “service mark” is essentially the same thing; it identifies a service you provide.) Examples of trademarks would be Dr. Pepper ® or The Portland Trailblazers ®.
Trademarking your business name or logo is quite easy. To get full trademark protection, you need to register your mark with the federal trademark office. Logon to www.USPTO.gov (the Web site of the United States Patent and Trademark Office) and follow the directions.
Copyright: Copyright protects the original, physical expression of a creative idea. This sentence is a copyrighted sentence. To be copyrightable, the ideas must be unique, must be tangible (written or taped, for instance) and must be a “work of authorship.” Musical scores, magazine articles, choreographed dances, photographs, movies and sculptures would be examples of copyrightable expressions.
Copyrights last the life of the author plus 75 years, and the creator owns the copyright, although if the creator created the thing working for someone else, the employer would own the copyright. You own the copyright to any works your employees create in the fulfillment of their duties. This is called work-for-hire.
One of the best aspects of copyright law is that there is nothing to register. As soon as you create the thing, it is copyrighted as a matter of law. This sentence is being copyrighted as I write it. Certainly you can register it with the U.S. Copyright Office, but it is not necessary. What you should do instead when you want to put the world on notice that you have copyrighted material is to have “© All Rights Reserved” prominently affixed to the work.
Patents: If you invent or discover a new and useful “process, machine, manufacture or composition thereof” you can apply for a federal patent to protect your invention from being used by others without your permission. Utility patents protect machines and industrial processes and last for 20 years. Design patents protect designs of manufactured items and last for 14 years. Plant designs protect new plant varieties and last for 17 years.
Patents are not inexpensive to obtain, and the assistance of a lawyer is almost always required. However, if you have invented something unique, you definitely will want to spend the money and patent it.
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Trade Secrets: Most states have adopted the Uniform Trade Secrets Act. This law defines trade secret as information that has independent economic value by virtue of remaining secret. A customer or vendor list might be a trade secret. KFC’s “17 herbs and spices” would surely be a trade secret.
To be legally protected, you have to make efforts to keep your secrets secret. This is not to say that you can never tell anyone the secret, but rather, that you attempt to retain the secret and act appropriately.
Goodwill: After some time in operation, your small business developed a positive reputation in the community and a valuable list of customers. This is called your goodwill. Goodwill is a business asset that usually relates to your exit strategy, when you are looking to sell your business.
Andrew Osterland has edited various financial websites at QuinStreet for a span of four years. Because of his talent and hard work, he was raised to the role of senior editorial manager of the company’s insurance sites and was a contributing writer at CNBC.com. He is also an entrepreneur and has been the editor manager of Insure.com. Full profile here.