Wednesday, April 17, 2013

Start Ups Need Lawyers: Part III Marketing and IP

As April is Autism Awareness month, I've slacked on posting new content and instead directed readers to this old post - How My Autistic Son Made Me a Better Lawyer.  It's a good post, if you haven't read it yet, go read it.  Then visit to see how you can help.  In the meantime, I'll admit that I've recently been solicited by a few loyal readers to get on with the next post in our Start Up series. So I'll stop being lazy and get to it.

After employment questions, the next questions my start up peeps ask about the most are marketing and intellectual property (IP) related.  For something that can make or break your company, understanding how IP works and what you need to do to protect it is critical.  But IP lawyers are notoriously expensive and most corporate lawyer types don't have a good understanding of how marketing and branding tie into IP other than in the textbook ways.  And most startups don't bring on in house lawyers until a year or two after they really should have.

To start with, it helps to know what type of IP you have.  Most recognized is going to be trademarks.  Registered or not, the company name, logo, tag lines, product names, etc. are all part of your branding and may consist of valuable IP.  IP that needs to be properly selected and maintained in order to keep control over that value.  The most common mistake for start ups (or marketing types anywhere) is in the selection.  They tend to use images or names that are too descriptive and generic.  They want the consumer to know what they are getting, so they'll call car washing services, "ultimate car wash" and then wonder why they can't trademark it or stop competitors from using the name.  For a trademark to be enforceable, and thus valuable, it has to tell the consumer where the goods or services are from, not what the goods or services are.  It has to differentiate your car wash from your competitors, so that when they hear or see the mark they know immediately that it's your car wash. The more arbitrary the mark, the better - and the harder it is for a new company to gain that recognition in the consumer.  It's a fine line to walk, but remember at one time Apple had to introduce people to the concept that computers could be named after fruit and Google had to introduce not only a relatively new concept of searching the web but then tie it to a made up word.  Now they're both holders of some of the most valuable trademarks on the plant.   For this reason I always recommend that any branding strategy sessions include your in house lawyer.  If you don't have one, then you should at least have someone in the room who is thinking big picture on the trademarks and not just on the current campaign.  Once you've got a good trademark, make sure you speak with a trademark lawyer for an hour to get a good understanding of how you have to use your trademark in order to keep your rights to it.  The game isn't all over just because you've got a registration, that's where it actually starts.

The second most recognized IP right is patents.  Everybody thinks they know what a patent is in these days of patent trolls making headlines daily.  However, few entrepreneurs in early stages of business development think about patenting their technology.  Some are confused as to what is or is not patentable, some disagree with the whole patent concept and some are just too busy trying to get off the ground to think about getting formal legal protection for their innovations.  I honestly think ignoring your patent options early on is one of the biggest mistakes new start ups can make.  Getting a patent is expensive.  No doubt. And even most in house lawyers are not remotely qualified to have more than a cursory discussion about patents.  So you will need specialists.  But if you have something truly innovative, something that is revolutionizing the industry - then you need to protect it before an industry insider who has the money and systems in place to quickly and cheaply duplicate what you're doing will push you out before you get started.  Not to mention, that unlike trademarks that have to be used properly in order to get and maintain your IP rights, your ability to patent an idea will go away if you wait too long.  So early on, talk to a patent lawyer.  And not just any patent lawyer.  Patent lawyers are like any other kind of engineer.  Software engineers won't be the best people to talk about mechanical inventions.  Electrical engineers won't be the best people to talk about pharmaceutical discoveries.  Find a patent lawyer or firm that has an expertise in the business area first, then evaluate their patent law background.  You'll save a ton of money by not having to explain the basics of the industry before even getting to how your technology is innovative.  As a pro-tip, I also try to look for a patent lawyer that has spent some time in house as well.  It generally means more respect for my budget and more "business talk" to my inventors/management to understand the value of the invention - if there is any.

Then there are the often ignored IP rights, that actually have a tremendous amount of value but are often underappreciated - trade secrets and copyrights.  Unless you're in a content generating business, copyrights get no respect.  But your copyright in your website or source code can often be the most easily enforced right to protect.  You don't have to register them with the copyright office, but if you do you get better damages once you do enforce them.  And you can register them easily, cheaply and without a lawyer using a service such this one from LegalZoom.

Trade secrets can be the most valuable IP right you have - unlike patents, there is no expiration date.  The only catch is that you have to keep them secret!  In order to get injunctions and other types of legal protection afforded to trade secrets you have to proactively take steps to protect your trade secret.  NDAs alone are generally not enough.  Most often you will need physical, technological and legal tools keeping your secrets secret.  A rarely used best practice is to take inventory of your trade secrets annually and evaluate whether the steps you are taking to maintain secrecy are adequate.  Good news is that there's no extra cost in doing this, no lawyers needed.  Bad news is that it never gets done unless driven by counsel or litigation - even in the biggest companies - because it's time consuming and doesn't have an immediate benefit.  But like other annual exams, this one can save you big in the long run.

This concludes my start ups need lawyers series.  If you have a start up legal question I didn't address, drop me a line.  I'll do my best to answer (understanding that neither asking nor answering any questions as a result of this post create an attorney client relationship...) or direct you to someone who can.  If you have multiple questions that haven't been answered, you might consider whether bringing in an in house lawyer earlier rather than later might be the best thing for you.