Type of Intellectual Property Dictates Protection Needed

In today's​​ knowledge-based business world, intellectual property is king.

The World Intellectual Property Organization (WIPO) defines intellectual property as "creations of the mind: inventions, literary and artistic works, symbols, names, images, and designs used in commerce."

The WIPO divides intellectual property into two categories: Industrial property, which includes inventions (patents), trademarks and industrial designs, and copyright, which includes literary and artistic works such as novels, poems, films, musical works, paintings, photographs and architectural designs.

Misused intellectual property can take the form of fake medications, counterfeit handbags, and pirated DVDs. Methods for protection of such property vary, but most require proactive action.

Protect Patents with Written Agreements

In the United States, a patent is issued as a grant of a property right to the inventor by the U.S. Patent and Trademark Office (PTO). Generally, the term of a patent is 20 years from the date the patent application is filed.

The patent confers "the right to exclude others from making, using, offering for sale, or selling" the invention in the United States or importing the invention into the United States. But the patentee is responsible for enforcing the patent, without aid from the PTO. For companies, the critical question is: Who owns the patent? Antoinette M. Tease, a registered patent attorney, says employers "do not own the right to inventions developed by your employees unless you have a written assignment of patent rights to the employer or unless the employee was hired to invent that particular invention."

"So many clients are incredulous [when they discover] that they don't own the patent," says Tease, who practices intellectual property and technology law in Billings, Mont. "You have to be able to show that when you advertised for the position you made it clear [the employee was] being hired to invent," she says. "Nine times out of 10, you can't prove it."

That's why Tease says all employees-"from the receptionist to the CEO"-should sign a separate, written agreement as of the date of hire. "You don't know when someone [in your company] might invent something. You might hire a CFO who invents a business method for e-commerce," she says.

Tease says employers should not rely on a patent assignment provision in the employee handbook because some states do not treat an employee handbook as contractually binding.

Independent contractors' service agreements should have a patent assignment provision, Tease adds. "There's no 'hired to invent' doctrine for contractors."

Track Down Trademarks

Trademarks are words, names, symbols or devices that indicate the source of goods and distinguish them from the goods of others. Tease believes all companies should consider federal trademark registration, which gives constructive notice of the company's ownership of the mark in all 50 states and is incontestable five years after the registration date. The PTO provides registration information online.

"Equally important is the clearance process that occurs before" filing the application, Tease says, which generally includes an informal search, followed by a formal trademark search. She says this stage is "preventive medicine," which can minimize the risk of conflict with another trademark owner.

Tease says a trademark registration is an asset that "goes on the books." "When a potential investor conducts due diligence, it shows that you've dotted your i's and crossed your t's."

Copyright Is Clear

Copyright protects the authors of "original works of authorship" including literary, musical and certain other intellectual works, published and unpublished. It protects the form of expression rather than the subject matter. The 1976 Copyright Act generally gives the owner of copyright the exclusive right to reproduce the copyrighted work, to prepare derivative works, to distribute copies of the work, and to perform or display the copyrighted work publicly. Copyrights are registered by the Copyright Office of the Library of Congress.

Employers don't need to get written assignment of rights from employees in the case of copyright because the company already owns the copyright on all copyrightable works.

But this issue does come up with independent contractors, Tease says, which is why employers should have independent contractors sign a written copyright assignment agreement for all work they produce.

Trade Secrets

There's one more area of intellectual property an employer should take special pains to protect: trade secrets. A trade secret, says G.S. Jaiya, director of WIPO's Small and Medium-Sized Enterprises Division, is "what gives a [competitive] edge to the business. A successful business has many trade secrets."

In 2007 a U.S. District Court jury found former Coca-Cola secretary Joya Williams guilty of conspiring to steal trade secrets and sell them to rival PepsiCo. Coca-Cola learned of the attempt after Pepsi told the company it had received an offer to sell Coca-Cola's trade secrets.

A trade secret is something that would have economic value to a company's competitors if known to them and is something that a company makes reasonable efforts to keep secret. But there is no formal registration process for trade secrets, Tease notes, nor are they protected by federal law. The Uniform Trade Secrets Act has been adopted in some form, however, by 45 states.

Tease says the only protection "is through written agreements with employees and independent contractors," which should strive to protect trade secrets and other confidential information.

But she says agreements are not enough: "You have to show you took steps to limit access. If these are secret formulas, they ought to be under lock and key."

Jaiya agrees: "Have physical or electronic measures to limit access" and "put in place a training program to protect your trade secrets."

In a knowledge-based environment, value "comes from the human mind," he says. And with information so easily shared, "you need to prevent others from free riding."

"You need to control the use of information," Jaiya adds. "You share secrets with employees or partners. The moment you do that, you need a trade secrets protection program."

Stephenie Overman is editor of Staffing Management magazine.