Remember Billy Bass? The mounted, plastic fish sang and wiggled its way to building a small fortune for its creators when it flew off the shelves in drug stores and Wal-Marts a few holiday seasons ago.
It may have seemed like a no-brainer to patent the popular novelty item, but with an average three-year wait period between applying for and receiving a patent, cornering a market for a fad that would be all but gone by the time the patent was approved wouldn’t have made business sense.
“Sometimes, you’re better off not going with the patent,” says David Lafkas, an attorney with Lafkas Patent LLC who used the singing fish as an example. Those kinds of counter-intuitive decisions that help clients decide where to spend scarce time and money are a key part of intellectual property work.
When entrepreneurs have great ideas, they’re often tempted to shout it from the rooftops, but doing so before securing ownership of those ideas can be devastating to their future success.
“If you publicly disclose, you essentially forfeit your patent rights,” says Drew Blatt, a patent attorney at Wood, Herron & Evans, a firm specializing in intellectual property law.
Inventors have one year from the time they publicly disclose their idea to apply for a patent for the U.S. market. For most foreign markets, there is no grace period between disclosure and applying for a patent.
Still, most inventions don’t develop in a vacuum, and entrepreneurs often need to hire outsiders or consult with experts. How to keep the public disclosure clock from ticking?
“They must have at least a sentence in a contract that confirms confidentiality,” says Stephen Gillen, a Greenebaum, Doll & McDonald patent attorney. The confidentiality clause is important because it protects entrepreneurs from claims against business partners and others who may contribute ideas to their enterprise. Business owners also need to execute confidentiality contracts to prevent employees from walking across the street and sharing trade secrets or vendor associates from doing the same.
“If your business involves a proprietary practice but takes visitors and competitors through the workshop, you’re vulnerable,” Gillen says. Everyone privy to a product in design needs to sign a confidentiality agreement, he warns.
Foreign markets are rife with knock-offs of American products, which creates the need for additional intellectual property protection overseas. While piracy has become more prevalent, so has detection, thanks to the internet. Detection and enforcement are easier to do in a more interconnected world economy.
Rayan Coutinho, a trademark and copyright attorney at Wood & Lamping, explains that three levels of trademark protection are available. Simply affixing a “TM” superscript by a logo or design without registering the trademark protects a common-law trademark. Surprisingly, Google falls into this category, having never registered its name, Coutinho says.
The second option, registering a trademark with a state’s secretary of state, is inexpensive but only offers protection in that state.
The final and most comprehensive option is registering the trademark with the U.S. Patent and Trademark Office, which offers national protection and, after five years, is incontestable to anyone who claims he or she came up with the trademarked item first.
“If you claim something as a trademark — a mark, logo or phrase — always put “TM” on it to indicate it’s a common-law trademark. If it’s registered, use “R” with a circle around it,” Coutinho says.
Entrepreneurs should keep in mind that threats to trademarked items abound. Coutinho says trademark owners can lose their exclusive rights to a name if they allow it to be used generically. The holders of the aspirin and thermos patents are classic examples.
Choosing the right trademark is also important. “Fanciful” trademarks are created from new words, such as Xerox or Viagra. Coutinho recommends this type of trademark to avoid infringement battles.
“Suggestive” trademarks give an indication of what the product or service is. Brown Bag is the name for a container that is used for cooking in a microwave, for example.
“Descriptive” trademarks plainly describe the product or service, such as Ryan’s Computer Service. These types of trademarks are generally not protected unless they acquire a secondary meaning, such as the McDonald’s Quarter Pounder, which may not be used by other hamburger purveyors.
When competitors do infringe on a trademark, the owner should not make the mistake of selective enforcement. If he or she does, the infringer who was targeted can use that fact as a legitimate defense.
But don’t fret about going against the big guys, Coutinho urges. Ninety-nine percent of infringement cases are settled before they reach the expensive step of a trial, he says, usually with a “cease and desist” letter.
The most common mistake entrepreneurs make is failing to apply to register eligible works, or failing to do it quickly enough, says Amy Wright, a Taft Stettinius & Hollister partner in the intellectual property group. “In litigation, (registering works) typically makes the difference between being financially upside-down as a plaintiff and coming out ahead; in some cases, very far ahead.”
A classic example of that mistake is when an entrepreneur hires an outsider to build a web site for his or her venture. “If (the two) have a bad contract, the entrepreneur doesn’t have ownership, the vendor does,” Gillen notes. “The entrepreneur has to pay a lot more to get it back.”
When it comes to copyright law, Gillen adds, default rules favor the creator, rather than the commissioners.
Ditto photography. Without a contract, ownership for continuous use of photos diverts to the photographer, even when the entrepreneur paid for the photographer’s work.
“To have a good contract on the front end, they have to go pay a lawyer,” Gillen says. It’s often a good investment, especially if no one would have objected to signing a contract in the first place.
Do Your Homework
Legal work is rarely cheap, so entrepreneurs, especially those new to the business, have to weigh the costs and benefits carefully.
Lafkas says he actually prefers when potential clients do some homework on their own before they hire him. Those who don’t do research beforehand risk paying him to discover that their ideas have already been patented, trademarked or copyrighted.
Initial patent searches are fairly easy to do at www.freepatentsonline.com, which links into the U.S. Patent and Trade Office web site and its huge database.
Another thing to keep in mind is that some ideas may be marketable but not patentable, Lafkas notes, citing a possible competitor to the iPod music player as an example.
“Part of my job is to say this is way too close. Don’t spend it on the patent, spend it on marketing,” he says.