Edward Lowe Foundation

Second-Stage Entrepreneurs

Entrepreneur's Resource Center

How to Protect Your Business Through Patents, Copyrights and Trademarks

An Edward Lowe In-Depth Business Builder

No business is too small to avoid or ignore protecting itself from another business using its name, product, service, or invention, consequently, reaping the same benefits. There are ways to protect your business from "copy cats."

WHAT TO EXPECT

No business is too small to avoid or ignore protecting itself from another business using its name, product, service or invention, consequently, reaping the same benefits. There are ways to protect your business from "copy cats" and this Business Builder will describe and explain each one:

patents
copyrights
trademarks

Professional assistance with any of the three processes is strongly recommended as the procedures for each are quite detailed and can, therefore, prove costly to your business if not followed completely and accurately.

PATENTS [top]

A patent is a grant provided to the inventor by the government, giving the inventor the right to exclude others from making, using or selling the invention claimed in the patent. A U.S. Patent is valid in the United States, its territories and possessions.

Patents promote the progress of science and the useful arts by encouraging the disclosures of inventions that would otherwise be kept secret. Patents can help protect the investments of developers who have invented new technology. By securing a patent, the developer can rest easy that another competitor cannot reap the benefits of his costly research and development. Patents, on the other hand, stimulate competition by encouraging competitors to maintain a continuing program of inventive activity in an attempt to gain the business advantage.

There are different types of patents. They are:

Utility Patent — The most common patent, this patent is obtained for a new process, machine, article of manufacture, composition of matter, or any new and useful improvement of the above.
Special Patent — This patent is obtained for plants and ornamental designs.
Design Patent — This patent allows the inventor to protect the appearance and design of an item instead of its functional capabilities.

A. When Should You Apply For a Patent?

When you have invented an idea for a product or process that you feel will be profitable to your business, write it down. Consider specifically what it is about your idea that makes it original or superior to similar devices already on the market. Record your information as completely and in as much detail as possible to provide evidence of its originality should your claim be challenged at a later time.

Next, you'll need to determine if your invention is patentable. To be granted a patent, your invention must

Pass the test of "novelty"
Fall within the "proper subject matter"
Pass the test of "non-obviousness"

Novelty

This is considered to be the most crucial of the three requirements. To help determine the novelty of your invention, first, analyze the invention according to specified standards, then, note whether or not anyone else has patented it first. The only sure way of accomplishing this is to make a search of the files in the Patent and Trademark Office.

Proper Subject Matter

In order to satisfy this, you must determine whether your invention falls within the following classifications.

Patentable inventions:

A new process — A form of treatment of certain materials to produce a specific result. It is an act or acts performed to produce a different form or state of the existing subject matter.
A machine — a mechanical device or combination mechanical devices to perform some function and produce a certain result.
An article of manufacture — any tangible item not already included in the process, manufacture or machine descriptions above. A separate patent can be registered for an article of manufacture, the machine for producing it, and on the process for making it.
Composition of matter — this phrase covers all products whether the result of a chemical mixture or mechanical mixture or other compounds.
Improvements of the above — a patentable improvement may be in addition to, simplification of, or alteration of any of the above.
Plant Patents — some living plants, depending upon their origin, are patentable.
Living organisms — the Supreme Court elected to patent a living organism which was developed to absorb oil slicks. Until this case, plant patents were the only form of patent protection available for living organisms.
Design patents — this patent protects only the appearance of an item rather than its function. A design patent is easier and less expensive to obtain than other patents. This type of patent can be valuable because it prevents a competitor from producing a similar invention.

Unpatentable inventions:

Laws of nature — discovery of a science principle or a law of nature cannot be patented.
Abstract ideas or theories — ideas for advertising, or mathematical computations are not considered patentable.
A business system — a system of doing business is not considered patentable; it may prove very advantageous and profitable to your business, but it does not fit into the "process" category.
Constant motion machines — any invention claiming constant motion cannot be patented.

B. Patent Search

You should also ask yourself the following questions to help you decide whether a patent already exists:

Is this invention known to others in the country?
Was this or a similar invention described in a printed publication in this or a foreign country?
Was this or a similar invention described in a printed publication more than a year before the application was filed?
Was this or a similar invention once sold or used by the public in this country more than a year before the application was filed?

If you answer "yes" to any of these questions, you may not be eligible for a patent. Also, if you described your invention in a printed publication or used it publicly or attempted to sell it within one year, you must apply for a patent before that year has passed; otherwise, you lose your right to that patent.

Once you have determined whether you are eligible for a patent, a search of existing patents should be conducted as a final check before applying for your patent. Although not legally required, a search can be helpful to you in deciding whether or not to spend the money necessary to file a patent application. You may want to conduct the search yourself, but understand it is a very tedious and less than exciting process. The U.S. Patent and Trademark Office provides Web access to some of its databases, and many U.S. libraries have librarians trained to help you use their patent and trademark reference collections. If you have the search done by an attorney, it can be costly, but the attorney will have records that protect your interests for the future.

Only the files of patents that have been granted are open to the public. Pending applications are kept in strictest confidence and no access is given to them except on written authority by the applicants. Existing patents can be reviewed in the Search Room of the Patent and Trademark Office, Washington, D.C., where records of over 4,000,000 patents issued since 1836 are maintained. You can also review over 9,000,000 copies of foreign patents in the Patent Library.

By conducting a search of existing patents, you'll not only help to determine whether your invention is patentable, but you could also find helpful information about patents superior to your own yet not available on the market. This may open doors for a potential business association, which could prove profitable to your business.

C. The Patent Application

You, your attorney, or a patent agent can file a patent application. A patent attorney is a lawyer who has passed an examination given by the patent office and has met certain minimum requirements of technical education. A patent agent is not a lawyer but has met the technical education requirements and has passed the same examination as the attorney. The patent application is comprised of drawings (if applicable), a written description of the invention, and one or more claims ("claims" define the scope of protection). Depending upon the complexity of the invention, patent application fees vary widely, as do the attorney fees.

D. Filing The Patent Application

Don't be discouraged to find you will most likely have to wait a year before the Patent Office acts on your application. When it is received by the Patent Office, it is given a preliminary examination to determine whether or not all requirements are met. If the application is in order, the office will notify you and assign you a serial number and a filing. If the Office finds the application incomplete, they will notify you and hold up your application until you supply the required information.

Once your application is filed, an examiner with expertise in the field of your invention will be responsible for performing an in-depth review of your application, including another search for any existing patents. Should this search result in patents with very similar inventions to your own, the examiner may require certain revisions to your application claims. Sometimes several revisions and arguments by your attorney (or agent) are necessary in order to resolve these objections or requirements by the examiner. Each objection is considered an action by the Patent and Trademark Office. If you or your attorney do not respond to an action within a specified time, the application is considered abandoned. An abandoned application is dropped from further consideration.

On average, this entire process takes 19 months.

E. A Refused Patent

If the examiner refuses to grant you a patent based on claims requested, the application may be appealed to the Board of Appeals of the Patent Office. The fee is $50 (plus another $50 fee if a brief in support of an appeal is required. This brief must be filed within 60 days after the date of the appeal.)

F. Foreign Patent

If you are planning to use or distribute your invention in other countries, you will need to obtain a foreign patent. In this case, it is recommended that you do not sell, publicly use, or print anything about your invention until after you have filed for your foreign patent.

G. Special Applications

Small business owners, who cannot begin to manufacture their invention without a patent, thus holding up possible income, can request that their patent application be given special consideration. This special consideration, if approved, will push the application ahead of others for examination. If you ask for special treatment for your application, you must state under oath:

that you have sufficient capital available and facilities to manufacture the invention in quantity.
that you will not manufacture unless it is certain that the patent will be granted.
that you will obligate yourself or your business to produce the invention in quantity as soon as patent protection has been granted. A corporation must have this commitment agreed to in writing by its board of directors.
that if the application is allowed, you will furnish a statement under oath within three months showing (a) how much money has been spent, (b) the number of devices your business has manufactured, and (c) the number of employees your business paid during this period.

H. Patent Infringement

As a patent owner, you are entitled to damages in the form of reasonable royalties for infringement occurring within six years before filing suit. There are several factors to consider in defining infringement. The Federal Court, which has exclusive jurisdiction in patent suits, will review the patent claims as an aid in determining the validity of the proposed infringement. If this infringement includes any aspect of the claim, it infringes the claim.

TRADE SECRETS [top]

A trade secret can consist of any formula, pattern, device, or compilation of information used in a business. This information can give your business an advantage over your competitors who do now know or use it. Trade secrets generally relate to the production of goods, such as a machine or formula. However, they may also relate to the sale of goods or to other operations in the business, such as a method of bookkeeping or other office management activities, codes for determining discounts or rebates, even a list of specialized customers. A trade secret can constitute any information that is not generally known in a trade.

Trade Secret vs. Patent

Enhancement to an existing patent (i.e., new designs and/or development) is a common practice. This enhancement can be a trade secret, which is not required under patent law to be disclosed after the patent is filed — that's why it's a secret. This is an obvious advantage to the business who owns the patent, which is public information. However, with appropriate contractual conditions, others may be willing to pay royalties for the privilege of using the trade secret.

A trade secret will not automatically become public domain at the end of 17 years as is the case with a patent. Nevertheless, the competitive advantage provided by a trade secret can quickly be destroyed if it becomes available to the public or if another researcher independently develops the same information. If you initially maintain your invention as a trade secret, then decide to apply for a patent, you must file an application within one year of using the trade secret for commercial advantage.

Careful measures should be taken to protect your trade secret. Establish a program to ensure that all reasonable steps are taken to maintain secrecy. Employees, manufacturer's representatives, consultants, suppliers, customers, and licensees should be bound to the strictest of confidence. Visitor access to sensitive areas should be restricted.

COPYRIGHTS [top]

A copyright provides protection for original or artistic works that exist in some type of fixed form. This can include works of literature, drama, music, art, motion picture, computer programs, and laser disks. A copyright provides the its bearer with the following:

the right to copy or reproduce the work;
the right to publish it;
the right to perform it publicly;
the right to record it;
the right to display it; and
the right to make versions of it.

Once established, a work is automatically protected by copyright in the United States and in countries with U.S. copyright relations. However, formal registration provides additional benefits under the current law.

The U.S. copyright system establishes "ownership" of certain exclusive rights such as distribution, reproduction, and performance rights, thereby, increasing the author's ability to generate income. Since ownership begins with the author's creation, legal copyright protection is important.

The 1976 Copyright Act set the duration of copyright at the author's life plus 50 years. The 1998 Copyright Term Extension Act reset the duration to the author's life plus seventy years for general copyrights and to ninety-five years for works made for hire.

A. Basic Steps To a Copyright

Once you have created your work for copyright, place the appropriate symbol — © — on the work followed by your name and the year.
Assign a title to your work. Although this title is not protected by copyright, it will help identify your work for later use.
Perform a copyright search by reviewing the records of the U.S. Copyright Office. This search will help to identify similar titles already use. A title search will also help you and your attorney decide what risk, if any, is involved in using a chosen title.
Publish the work with the copyright symbol on it. This involves distributing copies of the work to others in various locations.
Register your copyright by completing and filing an application. Send your completed application form, along with a $10 filing fee and two copies of your work, to:
Register of Copyrights
Copyright Office
Library of Congress
Washington, DC 20559
To request an application, call (202) 707-9100.

B. Creating From a Copyright

In the world of show business, it is very common for a movie to be produced based on a published novel. In order to produce the movie, a copyright search would be required to determine if another party owned movie rights to the book. This is done with a copyright ownership search. Once the movie is completed, the owner of the movie rights can then sell rights for distribution, advertising, musical scores, foreign language rights, etc.

C. Public Domain

A work that is no longer protected by copyright is considered to be in the "public domain" and can be used by anyone without permission. However, a copyright that has expired in the U.S. may still be in force in other countries. Also, new works created from existing copyrights may be entitled to protection. Consequently, an extensive search of copyright ownership and legal advice from your attorney is highly recommended.

TRADEMARKS [top]

Trademarks, or brand names, distinguish one business product or service from another. It can be a word, a symbol, a logo, or a combination of letters or numbers. A trademark can even be a color. Trademarks have no legal protection; instead, they are a part of a much broader common law of unfair competition. Unfair competition results when a competitor acts in a manner which causes consumer confusion between the two businesses.

Deciding to trademark your product or service is the best way to protect your investment against the possibility of another business reaping the benefits (sales) of your product or service. Once developed, a trademark can become one of your most valuable assets.

Whatever its form, a trademark can be legally used by only one firm or group of legally related firms. Trademarks all have a common element — to enable consumers to find or to avoid a product or service sold under those symbols. Trademarks gain value to a business as the business becomes more established (consider the "golden arches").

Trademarks cannot be used to prevent another business from copying the products or services of another. Trademarks also cannot prevent that same business from selling their products or services under a generic name with a common description.

A. Relationship To Patents

A trademark is not patentable. Patents are granted for inventions and advances in the arts, not for symbols, words, or devices that identify and distinguish goods or services. A patent subject matter must be new and original. While a patent gives its owner the right to exclude others from making, using, or selling a particular invention, a trademark gives its owner the right to exclude others from using the same or similar marks. Also, the life of a patent is limited. The life of a trademark may be indefinite if appropriate use is continued.

B. Relationship To Copyrights

Authors use copyrights to prevent someone from using his or her work. A trademark owner can prevent someone from using the same or a similar mark on goods or services. A trademark cannot be copyrighted, but the label on which the trademark appears can generally be copyrighted as long as it presents original printed matter.

C. Creating a Trademark

No legal formalities exist with a trademark. As soon as consumers identify or relate to a name associated with a product or service, the name is legally protected as a trademark. There are guidelines to consider when creating a trademark, such as avoiding misleading or descriptive terms. Creating a trademark should be given the same energy and respect as with any other major business decision. Trademarks are often developed in brainstorming sessions or by hiring a firm specializing in creating names.

There are strong trademarks and weak ones. Avoid using the first name that pops into your head, at least without taking a hard look at its strengths and possible weaknesses in the marketplace. Take a few minutes to write down your ideas of possible trademarks. Do they have anything in common?

D. Good Trademarks

As mentioned earlier, a unique product or service deserves a unique trademark. Initially, it may be more difficult to promote; however, unique trademarks provide the strongest protection for goodwill. Consider "Pepsi" — there's only one!

Sometimes, terms which have nothing to do with or no connection to the product or service can be interesting, i.e., names for automobiles.

Suggestive trademarks can be helpful in promoting a product or service. Consider "Beef" Fitness Center. When considering a trademark, be sure to check all translations before promoting it. General Motors is said to have suffered in sales since "NOVA" translates into "won't go" in Spanish.

E. Bad Trademarks

The weakest trademarks are those used similarly among other businesses, such as "national," "general," or "American."

Descriptive terms make weak trademarks. Generic terms, such as "car" or "TV repair" are so common when applied to products or services that it would not be good business sense to consider them. Although it is not permitted, imagine if one firm could acquire exclusive rights to use these terms solely for their business.

Creatively misspelled trademarks are no more attractive to the consumer when advertised or promoted on the radio.

Misdescriptive terms are also discouraged. Consider, "Quick" Car Sales. This may lead the consumer to believe there is less paperwork, no red tape. It might also give the consumer the false impression that "quick" interprets as "get them in, get them out," which would reflect negatively on the dealership.

F. Avoid Other Firm's Marks

Trademarks similar to those used by businesses in the same marketplace are considered bad choices. Businesses that are well established in a market can be protected by trademark law from sharing their goodwill with another, less established business using a similar trademark. This law, discussed further in this section, can sometimes allow a business to recover profits from those trying to get a "free ride."

G. Research Your Trademark

Once you have compiles an exhaustive list of trademark options, the next step is to narrow the list. Screen your list for any trademarks that already exist through U.S., federal, state, or international trademark registrations or applications. You can obtain this screening service through a trademark research company or you can perform the search yourself using trademark directions or on-line trademark research systems. Remember, you should consider this only preliminary research to screen out the obviously unavailable trademarks.

Now that you have consolidated your list, perform an in-depth research on each remaining trademark. Typically, this research is performed by a company specializing in trademark research. The resulting report is used by legal counsel to determine if your trademark can be registered. The firm you select will conduct a search for any identical or similar trademarks, as well as international company names, designs, logos, etc. Your attorney will use this report and any other related material to fill out an application for filing your trademark registration.

H. Filing Your Trademark

Once your trademark application is completed and your attorney has filed it with the U.S. Patent & Trademark Office (USPTO), an examiner will perform a final check against any other existing trademarks. If no matches or similar matches are found, the trademark will be published in the USPTO's Official Gazette. The Official Gazette provides anyone who believes they would be damaged by registration of your trademark an opportunity to challenge your proposed registration. Should this happen, the opposition proceedings are instituted and a decision is made by the Trademark Trial and Appeals Board. Hopefully, your trademark will avoid any opposition and proceeds on to registration.

I. Trademark Registers

Trademark registers cover certain areas. The majority of states have registers which cover that state. Federal registers cover the entire country. Those who work for state registers may not have the resources to determine if your trademark is registered in other states or federally. Also, state registration may not guarantee the state against later users in unoccupied markets. Again, consult your attorney for more information regarding registration territory.

J. The Life Of a Trademark

Unlike patents or copyrights, trademarks can last indefinitely. The federal registration term is 10 years, with subsequent renewals every 10 years. Failure to file for renewal will result in the expiration of the trademark. It is recommended that you implement a maintenance program for your trademark(s) to ensure that no trademark applications are canceled for failure to file the necessary documents within the specified time period.

K. Trademark Costs

The average cost to search a trademark is under $500. The estimated cost to register a trademark in a given state may be as low as $175 for each class of goods and services or as high as $1,000 for federal registration. These costs may seem expensive, but it is the only way to ensure that as your business prospers and expands (into other states), your trademark can expand with it.

COMPARISON CHART [top]

	Utility Patent	Design Patent	Trademark	Copyright
Protectable subject matter	Useful processes, machines, articles of manufacture and compositions of matter.	Ornamental designs for articles of manufacture.	Words, names, symbols, or other devices that serve to distinguish one's goods or services.	Writings, music, works of art that have been reduced to a medium of expression.
Sources of protection	Issuance of patent by the Patent and Trademark Office.	Issuance of patent by the Patent and Trademark Office.	Common law protection, so long as proper use continues. State registrations available. Issuance of Federal Registration by the Patent and Trademark Office.	Federal law protects once it has been reduced to a medium of expression. Enforceable only on issuance of Registration Certificate by Copyright Office.
Terms of protection	17 years from issuance of patent.	3-½, 7, or 14 years depending on term elected prior to issuance of patent.	State terms vary. Typically, 10 years and renewable 20 years from issuance of Federal Registration; renewable for additional 20-year terms.	Life of author plus 50 years for works created after 1/1/78.
Tests for infringement	Making, using, or selling invention claimed in patent.	Making, using, or selling design shown in patent drawings.	Likelihood of confusion, mistake, or deception.	Copying of protected subject matter.

GLOSSARY [top]

Abandon — To give up completely.

Composition — The makeup of a person or thing.

Device — A mechanical invention.

Domain — Territory under one government or ruler.

Generic — A product without a brand name or trademark.

Infringement — To trespass or intrude on the rights of others. In this case, intruding or reaping the benefits of another businesses' copyright, trademark or patent.

Invention — Something originated, newly produced.

Jurisdiction — Legal authority or authority in general.

Novelty — Something new, fresh or unusual.

Territory — Any large piece of land or assigned area.

RESOURCES [top]

Books

Patent and Trademark Tactics and Practice, 3rd ed. by David A. Burge. (John Wiley & Sons, 1999).

Other Sources

Patents. Inc.com.

Patents. Entrepreneur.com.

Patents and Trade Secrets. Nolo.

U.S. Patent and Trademark Office. U.S. Department of Commerce.