Protecting Your Intellectual Property

Be a stickler about contracts: Employees and contractors must agree that anything they create or enhance on your behalf is owned by your company

by Christine Comaford

My biggest business challenge is finding a fair and equitable resolution to a business dispute with a former 'informal partner.' I say informal because she did not invest capital nor did we have a written agreement. It's complicated because she believes she is entitled to patent rights as well. My business is skyrocketing and here I am mired in a legal battle. What should I do? —Desperately Seeking a Solution

Ouch. There's nothing worse than having to slow down your growth due to a legal hassle. Just when you've picked up speed, there you are slamming on the brakes. This is a prime example of why I am such a stickler about contracts. At this point Desperately needs to answer a key question first: Did the former partner help create the product? Could she be construed as a co-inventor? If there's no way she had any part in creating the invention (BusinessWeek.com, 9/12/07), make an offer. It should be a fair settlement offer, like 20% of the revenue generated since inception, since Desperately put up all the costs and 2007 was the first year of sales. If this offer is declined, the former partner can propose a counter-offer. If it is ludicrous, Desperately can raise her original offer a tiny bit and say it expires in two business days. If this doesn't work, it's time for mediation.

Far too often I see examples of deals that haven't been adequately covered with contracts and intellectual property that hasn't been adequately protected. Cover your assets—or risk losing them.

Every employee or contractor must sign a proprietary information and inventions agreement. This ensures that all intellectual property they create or enhance on your behalf is owned by your corporation. Have any third parties who'll be let into your company's inner sanctum sign this agreement, too. I prefer a proprietary information and inventions agreement over a nondisclosure agreement (BusinessWeek.com, 4/2/07) any day. The former is more comprehensive. The latter is often too lightweight and subject to interpretation and scope.

Remember, your brand equals the accumulation of the experience, beliefs, and ideas your customers have about you. They have an expectation of who you are, what you deliver. Their expectation and experience must be consistent. Your logo, trademark, and other intellectual property is how your brand is conveyed to the public. Without intellectual property protection, your brand is at risk. You must actively protect your brand or you will lose it. For instance, if you find out about brand infringement, you must step in and take legal action. If you don't, or won't, why bother protecting your IP?

In talking with my favorite intellectual property attorney, Eric Farber of Pinnacle Law Group, he stressed that entrepreneurs must know the four key types of intellectual property and they must protect them from the get-go.

Trademark. This protects a corporate identity, which is most often expressed in a logo or word mark. Start out by filing an Intent to Use application first to reserve your mark. Then start using it pronto, as the key to trademarks is to use them in commerce, especially interstate. As you use your trademark, its value will increase, making it worthwhile to now register it. Don't spend the money until you determine that people will buy what you have and resonate with your brand. Once you register your trademark, add a "TM" next to it. When the trademark is granted, you'll change the TM to an R. The registration process can range in cost from about $3,000 to $5,000, including lawyer's fees.