Intangible assets, including intellectual property (IP) and goodwill, may be your company’s most valuable assets. A recent study indicates that 90% of the value of the S&P 500 companies is a result of their intangible assets. But intangibles provide far more to your company than increased stock valuation. They are also a potential source of additional revenue for your company through a sale, licensing or an enforcement.
Are you doing enough to protect and monetize the time and resources your company has invested in developing your IP?
What are intangible assets?
Intangible assets comprise all assets that lack physical form, such as IP, your goodwill with your customer base, and your brand recognition. Your company should take steps to protect these assets from misappropriation or misuse. In this article, we will focus on how you can protect your intellectual property rights.
Protecting and monetizing your intangible assets
The first step to protect your intangibles is to identify what you have. Without a proper inventory of intangible assets, you cannot determine the most effective means of protecting or monetizing your intangibles. Working with trained IP and brand protection attorneys can help ensure you aren’t missing opportunities, whether through commercialization, enforcement, licensing or sale.
While most companies know of the value of patents, many do not understand how patents actually work. A patent does not give the patent owner the right to practice an invention; instead, a patent is a right to exclude others from making, selling or importing the invention. While this is a subtle distinction, it is an important one because it means that you can take companies to court to obtain damages for their use of your invention.
The two types of patents are: 1) utility patents for technological invention, and 2) design patents for the ornamental appearance of products. Consider your mobile phone. Utility patents cover aspects such as the chips, the screen, the cameras and other functional features, while design patents cover the phone’s shape and layout.
An invention is potentially patentable if it meets three criteria: usefulness, novelty, and non-obviousness. The classic example of a non-useful invention is the perpetual motion machine because no one has shown an actual use. Novelty requires that some aspect of the invention be new. Understand, however, that the entirety of the invention does not have to be new; indeed, many patents are known as improvement patents because they build on or feature new uses for existing technology. Non-obvious means that a person skilled in the invention’s technology would not be able to come up with the invention based on existing knowledge in the field.
In addition to the substantive patentability requirements, a patent must meet specific procedural requirements during application drafting. These include obligations to adequately describe the invention and the best way of making or using it.
Patent owners need not practice the invention but can still enforce it against others. And even if your company doesn’t practice your invention, you may want to sell or license your patent to obtain value for your efforts.
Patents are time-sensitive; the first person to file an application has a substantial edge on the competition. The patent application process can be quite complex for the inexperienced, and drafting strong, enforceable patents requires skill and understanding of the intricacies of patent law. If you think you might have a patentable invention, you should contact an IP expert as soon as possible.
Once issued, a patent expires 20 years after the date of filing (NOT the date of issue).
Trademarks and service marks
Trademarks and service marks protect your brand and images or slogans identified with your products or services from being used or registered by others without your permission. You are likely familiar with a recent local trademark issue, namely the Ohio State University’s attempt to patent “THE” for its products.
Like patents, trademarks must meet specific eligibility requirements. Specifically, trademarks must be distinctive – they cannot be generic descriptions of a product or service or its geographic origin. Unlike patents, however, which do not need to be practiced, you must demonstrate either an actual use or an intent to use your trademark.
Also, unlike patents, which are only protectable at the federal level, you can have state or federal trademarks. State trademarks have very limited value, only apply in the state where they are issued and do not allow you to mark your product or service as trademarked, but they can be useful to prevent unfair competition from competitors or establish the time and scope of actual use for later federal trademark applications. Registering a federal trademark allows you to mark your goods or services (®) and seek damages for infringement, rather than just precluding others from using the mark.
Note that others may have pre-existing rights in a registered trademark. One of the most well-known cases involves a restaurant in Illinois with a state trademark for “Burger King.” After extensive litigation with the nationwide chain, the courts found that the federal mark took precedence over the state mark, except for the actual area where the Illinois restaurant operated. So, Burger King does not have any franchises with 20 miles of Mattoon, Illinois.
Trademarks have an unlimited lifetime as long as you meet ongoing requirements for demonstrating actual use.
Copyrights apply to works of authorship rather than inventions or marks. Works of authorship are not limited to books or other writings but also include artistic works such as paintings and sculptures; recorded work such as music, TV shows and movies; and, importantly, computer code and websites.
Copyrights exist from the time an eligible creation is “fixed,” i.e., recorded in a tangible medium, such as paper, electronic file, or sound or video recording. Copyrights need not be registered, but like trademarks, registration allows owners to seek statutory monetary damages (i.e., damages that do not require proof of harm or unjust enrichment of the infringer) for infringement. Registration is a prerequisite for filing an infringement lawsuit.
A copyright’s lifetime depends on who created the work and for what reason. For individual works, a copyright lasts 70 years after the creator’s death (e.g., in 2021, Fitzgerald’s The Great Gatsby loses protection). For works made “for hire,” protection lasts the shorter of 120 years from creation or 95 years from first publication.
Trade secrets are a more difficult asset to identify and protect, as there are not formal, registration protections available, but they remain one of the most valuable assets for many companies. The formula for Coca-Cola is perhaps the most well-recognized trade secret in the world. According to legend, only three people know the formula.
Deciding on whether to keep the information a trade secret rather than seeking patent protection, for example, depends on your goals. Patent protection requires public disclosure and patents expire, so the length of protection is limited. Trade secrets are potentially protected forever, as long as a company takes the proper steps to protect them. Most significantly, the company must take reasonable steps to prevent disclosure of the trade secret. Once the secret is out, it is no longer protected (with minor exceptions).
Trade secrets are also useful to protect confidential information that does not meet all the requirements for a patent.
Defending against potential infringement
Obviously, your company is not the only one with intangible assets. So, just as you must protect your own intangible assets, you need to ensure that your company is not infringing on the rights of others. Due diligence efforts are the subject of another conversation you should have with your IP counsel.
This article is meant to be utilized as a general guideline. Nothing in this blog is intended to create an attorney-client relationship or to provide legal advice on which you should rely without talking to your own retained attorney first. If you have questions about your particular legal situation, you should contact a legal professional.
Please contact Gertsburg Licata, home of CoverMySix®, for more information about our anti-litigation audit services, including an assessment of patent portfolio and protected marks and works. At Gertsburg Licata, we help you through the legal challenges facing your business, so that you can focus on making it grow. We invite you to call 216-573-6000 or fill out our contact form, for a complimentary consultation with one of our attorneys.