Intellectual Property in the United States: Myths and Realities (English version) Part 2/2

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startup, startupdate, pitch, legal, vcThis article is the second part of Intellectual Property (IP) in the United States: Myths and Realities. In the first part Ian Bennett introduced us to the basics of the regulations of Intellectual Property in the United States and busted the first six myths. In this second part Ian will reinstate the remaining three myths of IP and provides some bonus insights as well…and the secret of eternal life, of course. – Peter Kadas

Myth Number Seven:  United States and European Intellectual Property cannot be enforced in China

Reality:  China has a robust system of intellectual property and a system to address infringement of foreign rights.  The real challenge for anyone attempting to establish or enforce IP in China is the crucial need for localized connections who can navigate the legal and business systems on your behalf, and then having the money to engage in such proceedings.

Myth Number Eight:  Having an NDA will provide adequate protection from intellectual property infringement.

Reality:  An NDA is a fantastic start to protecting your IP and generally providing yourself with a good basis for proceeding with product testing, marketing or solicitation of services, joint ventures or investments, but you should never assume that an NDA is the only thing you need to adequately protect your IP.  The reality from a business standpoint is that an NDA only provides you as much protection as the amount of damages you can legally extract from someone who violates it, and unfortunately, more often than not people who violate NDAs don’t always have that much to lose in recoverable damages.  For most startups, it is unlikely that you will ever encounter a situation in which a company will violate a provision of your NDA to the detriment of your intellectual property and that violator will have significant amounts of money for you to recover; the simple truth is that well established companies don’t run these sort of risks, especially when dealing with small players in the market.

The best approach to really safeguarding your intellectual property is to manage your relationships and disclosures carefully and rely on NDA as more of a deterrent.  Do your homework before you give out confidential information to anyone and then if you do, consider from the beginning what resources and information you will realistically need to monitor compliance with an NDA and to enforce it if need be.

Lastly, remember that an NDA can serve other very useful purposes in relation to intellectual property other than as a form of outright protection, for example if you carefully monitor your disclosure of pre-patented inventions and have an NDA signed by any party with whom you share such information, you can successfully avoid unintended publication and the accidental beginning of that critical 1-year time period which we discussed above.  Another example would be utilizing NDAs in regular fashion both internally and with outside parties involved in your business if you have any trade-secrets to protect, because absent such basic confidentiality assurance, your trade-secrets could be ruled by a court to be inadequately protected and thus not enforceable if improperly disclosed.

Myth Number Nine:  If you have intellectual property in Europe, your IP is applicable in the US.

Reality:  If you have intellectual property in Europe you do not necessarily have any of the same rights in the US and you cannot gain such rights by simply “transferring” your IP.  In almost all cases, intellectual property is jurisdiction specific, though in some cases such as patent registrations through the Patent Cooperation Treaty (PCT) or European Community trademark registrations, a single filing can be utilized to establish a very broad jurisdiction in which such rights may be applied, and multiple countries can be included.  However, for most European startups considering establishment in the US, it will be necessary to begin with new registrations that are specific to the United States.  In some cases, such as with international patents, having a registration in Europe can actually prohibit the opportunity for a congruent US filing if that filing is not undertaken within a certain period of time.  On the other hand, having such preexisting filings can also provide for expedited processing of US applications if certain mechanisms like ‘patent prosecution highways’ are available and are used in a timely fashion.  For such reasons, any business which is even remotely considering establishment in the US should consult with experienced intellectual property counsel as early as possible (insert second shameless plug).

Myth Number 10:  A startup must have intellectual property to be successful

Reality:  A startup does not necessarily need to have intellectual property to succeed.  What every startup can and should do is simply consider its potential for intellectual property or how its business may come into contact with the intellectual property of others, and such consideration should be done as early in the process of starting-up as is possible.  However, there are plenty of situations in which having IP may just not create enough justifiable value to pursue it.  For example, if you develop an application in a crowded market space such as social/business networking or item/service resale, your application may simply not be original or novel enough to support a software patent, and you may not even have adequate funds to pursue one or even need one in the first place.  Likewise, maybe the name of your products and/or business is relatively generic or maybe your business and products utilize potential trademarks and/or code materials which are substantially in the public domain or subject to strict licensing requirements upon the basis of open-source platforms.  In all such cases, you still may be able to get intellectual property, but the extent of its enforceability or actual value may be so limited that expending any significant money to obtain it just isn’t worth it.

Now this said; the decision to not pursue intellectual property in any regard should never be made upon an assumption or without careful consideration.  At the end of the day it is just about knowing what your options are and knowing them as quickly as possible so you can make intelligent decisions.  You may not need IP to protect your business adequately or to increase its value in any significant way, but you damn well better be aware if your business may come into conflict with the IP of others and you damn well better be able to explain any lack of intellectual property to any potential investor or strategic partner in an articulate and confident fashion.

 Epilogue

So, for those of you who read this whole thing and have not poked out your own eyes…congratulations on your fortitude!  To the ones without eyes, I am sorry, but I believe Peter offers a comprehensive holistic recovery program…you’ll have to check with him.  To the survivors, here is a short list of bonus myths and realities to keep in mind!

M:  Copyrights and copyright assignments last forever.

R:  Nope, copyrights last in most cases for the life of the author plus 70 years and copyright assignments may be revoked under US law by statute after a certain number of years.  Entities and anonymous authors have slightly different rules.

M:  Patents and other forms of IP inhibit innovation.

R:  No, they don’t really; it’s just that some people use them like assholes.

M:  Google or Apple is going to piss on your IP if you even come close to their business spaces.

R:  Most of you will probably never be important enough to get their attention in a negative or competitive fashion unless you do something to infringe their own IP or significantly detract from their business interests…in which case, yes they can afford to piss on your IP, or buy you out, or do both in no particular order.

M:  Watching out for your intellectual property is like watching out for your children.

R:  You only have to be responsible for your kids for 18 years…patent monopolies last for 20.

For those who reached that far, take my appreciation, since this is not just the usual easy language. If you’re thinking on dealing with patents, I highly recommend  the San Francisco law firm Bounkova&Bennett founded by Ian and his Partner, Boyana Bounkova, because – as maybe it became clear from this article – they’re highly professional and working with flat rates. – Peter Kadas


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