The loss of proprietary information has both short and long term effects. Sometimes, the “loss” of intellectual property derives from a failure to exploit or protect it. If you are the person responsible for the bottom line numbers of your company, it is up to you to make sure that you maximize and leverage all of your company’s assets. A company should identify and aggressively protect its intellectual property. Doing so, will allow the company to use all of its assets and give your company an edge over your competition.
Intellectual Property Audit
The first step to take in protecting your company’s intellectual property assets is to comb your company for intellectual property assets. While it is easy to identify the patents or patent applications, the trademarks, or the copyrights (presumably, all are registered with the appropriate authority), it is more difficult to find the trade secrets or other items of intellectual property that provide value to your company.
Typically, an intellectual property audit (“IP Audit”) allows the company to assess and value its intangible assets (i.e. its intellectual property). It also includes evaluating the steps taken to protect the intellectual property. This is particularly important with trade secrets. The audit may also assist a company in improving upon its protection and maximizing of its intellectual property. The IP Audit can also give the company ideas on where there are issues involving third party rights and how to minimize any exposure or risk involving those third party rights.[1] Finally, the IP Audit may allow the company to evaluate whether they would like to seek trade secret protection rather than patent protection.
The patent versus trade secret challenge involves making a determination of the type of technology involved and the length of time that the technology will be the company’s core business. Another inquiry in this regard would be whether the company wants the assured protection of a patent with its time limitation, or to seek protection of its intangible asset for a longer period of time. Of course, the trade secret protection is not assured as is the patent protection, so the company should way the pros and cons of seeking to protect its invention in this manner, including understanding that it may lose trade secret protection of the information. The costs associated with each type of protection should also be a part of this equation.
Depending on the size of the company, the audit may be performed by in house or with the help of outside counsel. Eitehr way, the company’s in house legal counsel should be involved. It is also helpful, before conducting the audit to prepare an audit plan defining the scope of the audit, the audit’s timing, who is responsible for each task, and the information to be provided in the report.
An IP Audit of this magnitude should be much more than simply listing the company’s patents, trademarks, and/or copyrights and ensuring that all the paperwork for registering or maintaining these intangible assets with the appropriate governmental office. Moreover, a company should conduct an IP Audit regularly.
With regard to trademarks, your company should ensure that the company’s logos or trade dress (shapes or designs of products that identify your company as the source of that product) send positive messages to potential consumers. Additionally, the IP Audit should evaluate the “recognizability” of any names, logos, tag lines, or trade dress. It would also behoove the company to evaluate any competitor names, logos, tag lines, or trade dress in order to make sure that your company’s trademark assets stand apart from theirs.
Do not ignore copyright protection for non-trademark related artistic elements of your company’s product, or software, or business plans, or other similar materials used by your company. Copyright protection may be the most overlooked intangible asset for companies not in the entertainment industry.
Protection and Action
Now, that you and your counsel have performed the IP Audit and completed the IP Audit Report, it is time to protect those intangible assets that the audit uncovered as not protected. To the extent that the IP Audit uncovered errors in any patent, trademark, or copyright applications, then the company should correct those errors. In many instances, this will mean filing patent, trademark, or copyright applications. Or, it may involve a cost-benefit analysis as to whether it would be more cost effective for the company to seek trade secret protection rather than apply for a patent or seek common law or state registration for a trademark rather than file an application with the United States Patent and Trademark Office.
If the IP Audit revealed system-wide deficiencies in identifying and protecting the company’s intangible assets, then the company should begin improving or implementing procedures to do so. Likewise, if the IP Audit revealed ownership defects in the company’s intellectual property (e.g. consultants did not assign the rights to the intellectual property developed for your company), then the company should cure any such defects. In order to avoid this problem in the future, the company may also implement an ownership transfer plan.
Of course, in the event that the IP Audit revealed potential infringement risks—that is potential infringement of a third party’s rights--the company should remedy this situation as soon as possible. Similarly, if the IP Audit provides a basis to assert rights against a third party, then the company should consult with counsel regarding asserting those rights.
Conclusion
As an intangible asset, it is easy to overlook or not appreciate the value of a company’s intellectual property. However, intellectual property can be as valuable or more valuable than a company’s tangible assets. As such, a company would do well to conduct an IP Audit frequently, implement policies and procedures for identifying and perfecting intellectual property rights, and aggressively protect those rights against third parties.
[1] While the scope of an intellectual audit can range depending on the situation, this article will focus on a broad audit rather than one in response to a threat of litigation.
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