Intellectual Property Has Never Been More Valuable and Every Business Has It!

What you need to know

One area of great importance, but often overlooked by business owners, is Intellectual Property. I speak nationally to business owners, and it’s surprising how many do not even know that they have IP. They have no idea how valuable it is, or that they should protect it. They also do not realize the risks they face by ignoring, and unintentionally infringing upon, the IP of others. Every business has IP and it needs to  be protected.

Most businesses treat IP as an afterthought and lose valuable assets. Someone invents a new product, and they might think about patents. Someone develops a new logo, and they might think about trademarks. Or they launch a new product or service, and they get invited to an expensive lawsuit, because no one checked for infringement.

The stakes are high. These hidden assets can account for more than half the value of your business. And being sued for infringement can put you out of business. It’s confusing, misunderstood, and misinterpreted.

Intellectual property has never been more valuable. In 2017, Forbes stated, “Intangibles have grown from filling 20% of corporate balance sheets to 80%, due in large part to the expanding nature, and rising importance, of intangibles, as represented by intellectual capital vs. brick-and-mortar, research and development vs. capital spending, services vs. manufacturing, and the list goes on.”

Ocean Tomo, LLC, a leading IP valuation company recently reported, “Between 1995 and 2015, the share of intangible asset market value increased from 68% to 84%. In July 2020… intangible assets [are] commanding 90% of the S&P 500 market value.”

There are four types of IP:

  • Trademarks
  • Copyrights
  • Trade Secrets
  • Patents

Trademarks

Every business has a trademark, and it can be your most valuable asset. Your most important trademark is your business name. You can also have others, such as product names, logos, slogans, shapes, music, and even colors.

In a January 2022 article, the World Trademark Reporter estimated that Apple’s trademark was worth $355 billion, representing about 1/3 of the company’s market value. Other top-valued trademarks include Google, Microsoft, Facebook, Amazon, and Coca-Cola; all worth billions.

An easy way to think of trademarks is anything you use that identifies goods or services coming from a single source. Examples of trademarks are the business name, Nike; the Nike Swoosh logo; the Nike slogan, “Just do it”; the Coca Cola bottle shape; and the sound of the light saber from Star Wars.

Protecting Trademarks

In the United States, trademarks are established through use. This is called common law trademark protection. If you use a “trademark” you automatically obtain rights in the geographic area of use. Although not required, you should use a ™ symbol adjacent your common law trademark to show that you consider it to be your trademark.

Although common law rights are automatic, you should register your trademarks. Every state has a trademark registration system. (Michigan State Trademark Law) State registration is good if you only use your mark within the state, but, if you use your trademark in interstate commerce, Federal registration is best.

Federal registration is important for several reasons:

  • It provides a self-policing function by giving notice of the registration. All trademarks are listed on the USPTO website. When choosing a trademark, this is typically the first place to check for availability. If your mark is listed, most people will avoid, it and pick a different trademark.
  • Your rights extend throughout the US.
  • Your mark can become incontestable after five years, which provides valuable presumptions in litigation.
  •  You also can use the ® which shows it’s registered with the USPTO.

Businesses typically use the names of the founder(s) as the firm name, but the trend is moving away from this. When the founder(s) names are your trademark, issues are created when registering the name as a trademark with the USPTO. The USPTO is reluctant to register marks that are merely surnames. However, this reluctance can be overcome if it can be shown that the mark has secondary meaning to consumers.

An often-overlooked consideration is who owns the trademark(s). Unless they are assigned to an entity, there can be issues. Bands often run into this issue, and the same consequences can apply to businesses. The band Journey is in a dispute over its name and millions in royalties. Journey co-founders Neal Schon and Jonathan Cain claim the band members Ross Valory and Steve Smith are trying to take the Journey trademark. Who owns Journey’s name is confusing because of how it was handled through the years.

When John Fogerty left Creedence Clearwater Revival, he sued his former bandmates for using “Creedence Clearwater Revisited.” They have repeatedly battled in court over the years.

Tragedy can also strike. In 1977, Lynyrd Skynyrd lost Ronnie Van Zant and backup vocalist Cassie Gaines, and others in a plane crash. Ten years later, several of the original band members, and Ronnie’s brother, Johnnie Van Zant, began touring as Lynyrd Skynyrd. The widows of Ronnie Van Zant and Steve Gaines sued for damages and won. Interestingly, the court ruled that at least two original pre-crash members must be in the band for it to continue as Lynyrd Skynyrd.

These same issues can affect businesses. You must plan for these possibilities. Who owns the name is one of the most important decisions you will make. Also, who owns the related trademarks, logos, and symbols. Kiss registered their face makeup with the USPTO. They are all owned by Kiss Catalog, Ltd. Slash registered his stage name, as well as the top hat wearing skull and crossbones logo on his debut album, Slash R&FNR. They are all owned by Dik Hayd International, (interesting corporate name).

The best approach is to follow the typical business model. All intellectual property is assigned to the business.

Trademarks are commonly owned by a single business entity, typically a corporation. The owners then determine how they control and own those rights. Decisions are made according to the rules and regulations of the business. Disputes regarding the trademark are controlled by well-defined legal standards.

Don’t pick a trademark that will get you sued

You must be careful when choosing a trademark to avoid getting sued for infringement. The test for infringement is whether the marks are likely to confuse consumers. You don’t want to invest resources in marketing and then have to change your name and lose valuable goodwill, and even have to pay damages for infringement.

Every mark should be investigated to be sure it’s available. Experienced Trademark Counsel can conduct these investigations to give you the confidence you need to invest in your trademark.

Copyrights

Copyright protection occurs as soon as an idea is expressed in a form that can be reproduced. Copyrights are everywhere in business. Examples of copyrightable material include books, blogs, music, videos, brochures, manuals, websites, software, apps, and more.

Copyright protection attaches immediately, automatically. You do not have to register your copyright, but registration is important to maximizing value.

  • Copyright registration is a prerequisite to filing a lawsuit for copyright infringement.
  • If timely filed, statutory damages can be elected.
  • Registration before, or within five years of publication of the work establishes prima facie evidence of the facts stated in the registration certificate.
  • Statutory damages can be very important. Damages for copyright infringement are actual damages, plus the infringer’s profits that are not considered in determining actual damages or statutory damages. By electing statutory damages, you do not have to prove actual damages, which can be difficult. Statutory damages are available if you register your copyright within three months of publication, or before the infringement. Statutory damages can range from $750 to $30,000, and up to $150,000 for willful infringement, at the discretion of the court. The court can also award attorney fees to the prevailing party.

Copyright Infringement ensnares many businesses

Copyright infringement is a risk to all businesses. Images are particularly problematic because they’re ubiquitous and easy to copy-and-paste. Many people are not aware they’re infringing. In my seminars, I often hear people say they believe images are free to use so long as they do not have a copyright notice. This is wrong, but still a common misconception. In every audience, there are always a few people who have received a letter from a troll demanding damages for clipping images.

Typically, the letter describes the statutory damages available, threatens litigation, and demands payment. The typical demand is between $20,000 and $40,000 per copied image. There are strategies to defend against these charges or to reduce damages, but the better approach is to not infringe. You need to be careful clipping images, as well as any other unlicensed uses like videos, music, articles. etc.

Even if you use licensed images or free image sites, you must be careful. I suggest you keep a file of licenses. Cease and desist letters typically begin with an offer to resolve the matter quickly if you have a license. Having that license close at hand can end these matters before they start. If you use images from free sites, they usually have requirements for a licensed use. These normally require attribution of the author, and restrictions on commercial use.

Trade Secrets

In general, to qualify as a trade secret, the information must be commercially valuable, and because it’s secret, be known only to a limited group of people, and subject to reasonable steps to keep it secret.

Every business has trade secrets. Every state has trade secret laws, and there is also Federal protection available under the Defend Trade Secrets Act (DTSA). You need to appreciate your trade secrets and understand the requirements to protect them.

Patents

There are three types of patents. The most common is a utility patent which protects inventions like products or processes. The second most common is a design patent which protects the appearance of manufactured products. The least common are plant patents which protect asexually reproduced plants.

The most important thing to know about patent protection is that the invention should not be disclosed before filing an application. If it must be disclosed, it should only be disclosed pursuant to a confidentiality agreement. Additionally, the application should be filed as soon as possible, because patent protection goes to the first to file.

In the United States, you have a one-year grace period to file an application. The timer starts when the invention is made available to the public, for example, by public use, being on sale, or being described in a printed publication. Once the timer starts, you must file your US patent application within one year. There are no exceptions. Also, it is important to know that other countries may require absolute novelty, which means you do not get a one-year grace period. The safe advice is do not disclose before you file.

If you need to file in a hurry, you can file a provisional patent application in the United States to establish a filing date. Provisional applications are good for just one year. These applications have less stringent filing requirements and are usually cheaper and quicker to file. They only require a detailed description and a drawing(s) of the invention without the need for claims.

US Patents are granted by the USPTO and require an attorney or agent who is registered to practice before the USPTO to represent the inventor(s) unless they file pro se. To be registered, the attorney or agent must have a technical background (such as an engineering degree) and pass a special exam. Even though an inventor can file themselves, this is a bad idea; akin to pulling your own teeth.

Examples of IP Mismanagement

  • A business’s webmaster used images clipped from the Internet on the company’s website. They received a letter demanding $40,000.00 for the improper use. Not a good day.
  • An investor wanted to invest $5 million in a company, but first he wanted to be sure the intellectual property was well managed. The IP included unregistered trademarks and copyrights. The investor passed on the investment. The company later closed and never learned why they didn’t get the needed investment.
  • The owners of a business chose a name but didn’t do any checking. Five years later, an international company sued for trademark infringement. To avoid the lawsuit, they had to change their name, losing years of goodwill. A huge financial loss.
  • The worst call a patent lawyer gets starts with, “I have a great product, I need patent protection,” and ends with, “It has been selling well for more than a year!” This business has lost its right to file because the invention was sold more than a year before the patent application was filed. This happens a lot. Do not let it happen to you.

With proper advice, all these common problems could have been avoided. It’s imperative that you recognize these invisible assets and understand the basics of Intellectual Property law so you can protect your IP and your business. An easy way to recognize the importance of your IP is first, to be aware of it. Then make it part of your asset protection system by holding regularly scheduled reviews of your IP to ensure that you get full value from your creativity.

Intangible assets such as their brand(s), web site, operating procedures, and marketing materials, can add huge value far into the future. The best way to show future investors or a purchaser of your business the value of these assets is to have them registered.

Give me a call if you want to discuss these issues further. I have a system, the ReCiPe for Success™ that has worked well for clients over the past 30 years. I’m happy to share. Email Bill@IPGuy.com or call at 248-433-7381.

Bill Honaker, “The IP Guy” is a former USPTO Examiner, a partner with Dickinson-Wright, and author of the forthcoming bookInvisible Assets – How to Maximize the Hidden Value in Your Business. To download a sample chapter click here.

To get answers to your questions click here. To schedule a time to talk, you can get on his calendar by clicking here, you can email Bill@IPGuy.com, or call him at 248-433-7381.

You can find more articles about IP, patents, trademarks, and trade secrets at IPguy.com.

  1. “How Intangible Assets Are Affecting Company Value In The Stock Market”, Forbes, 2017
  2. https://www.oceantomo.com/intangible-asset-market-value-study/
  3. https://www.worldtrademarkreview.com/article/apple-retains-mostvaluable-brand-crown-tech-boom-continues-and-tiktok-soars/
  4. The statutory definition of a trademark can be found at 15 USC §1127
  5. In Michigan, mark registration is governed by the Trademarks and Service Marks Act, 1969 P.A. 242 as amended.
  6. Federal registration of trademarks is governed by the Trademark Act of 1946, as Amended, 15 U.S.C. §§1051 et seq. (also known as the Lanham Act)
  7. https://www.uspto.gov/
  8. https://www.michbar.org/file/barjournal/article/documents/pdf4article4173.pdf
  9. The statutory definition of a copyright can be found at 17 USC §104
  10. Fourth Estate Pub. Ben. Corp. v. Wall-Street.com, LLC – 139 S. Ct. 881 (2019)
  11. 17 USC § 410 (c)
  12. 17 USC § 504
  13. 17 USC § 412
  14. 17 USC § 505
  15. 18 USC § 1836
  16. 35 USC § 101
  17. 35 USC § 117
  18. 35 USC § 161
  19. 35 USC § 102
  20. 35 USC §102(b)(1)
  21. 35 USC §111(b)

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