By DARREN DAHL
The two most precious resources for any small-business
owner are time and money. That’s why when the subject of intellectual property
comes up, many owners run in the other direction. They see images of expensive
lawyers and use that as an excuse to ignore the topic, reasoning that it is a
problem for big companies to worry about.
The trouble is, with the rise of competition through the Internet and on
the global market, understanding intellectual property is more critical than
ever for small-business owners. Let’s explore some of the common fallacies:
1. For small-business owners, it’s not
worth the time or effort to secure intellectual property rights.
Daniel Lubetzky, chief executive of New York City-basedKind Snacks, had high hopes when he and his company attended the Natural Products
Expo West in Anaheim, Calif., in March. And who could blame him, since his Kind
Plus bars had been named the best new product at the Natural Products Expo East
last October?
But it didn’t take long before Mr. Lubetzky knew something had gone
wrong: He kept hearing how one of his competitors had copied the packaging,
look and feel of his bars.
Fortunately for Mr. Lubetzky, he had secured crucial components of
intellectual property like trademarks, trade dress (the look and feel of a
product) and Web addresses after founding his company. Unlike a patent, which
can cost up to $25,000 to secure, trademarks and Web addresses can be obtained
relatively cheaply and without the aid of a lawyer.
With the legal documentation to back up his intellectual property
rights, Mr. Lubetzky sent the offending company a cease-and-desist letter,
which achieved the desired result. “Too many entrepreneurs forget there is more
to I.P. than just patents,” said Mr. Lubetzky, who happens to be a lawyer.
2. Once I get a trademark, my brand is
safe.
It may be. But consider what happened to Tracey Deschaine, who runs a
restaurant called Dixie Picnic in Ocean City, N.J.
When Ms. Deschaine opened her business in 2006, she secured trademarks
on her business name and logo and on the name of her signature item, “upcakes,”
which are upside-down frosted cupcakes. The problem, she says, was that even
though she had obtained the trademarks, someone monitoring the activity on the United States Patent and Trademark
Office’s Web site had spotted her
application and secured upcakes.com as the Web address, or U.R.L., before she could.
“I had no idea that even though I have a trademark, someone else could
just go register the U.R.L.,” she said. “I wish I had planned ahead and bought
the site before I did that.”
3. Having a patent gives me the right to
produce something.
This is a very fundamental misunderstanding. Actually, what a patent
does is give you the right to prevent someone else from producing what your
patent covers. “Having a strong I.P. position helps ensure that other people
pay you for your innovation like they would a toll on a road,” Mr. Kocher said.
But even if you do have a patent, there’s no guarantee that someone
won’t try to get around it. There’s also no guarantee that you will win if you
fight that person. But if you have your I.P. ducks in a row and a commitment to
do whatever you can to defend those rights, you do have a fighting chance —
even in a fight against a much larger company.
Consider the example of Cryptography Research, a 20-employee technology firm in San Francisco that specializes in
data security. Beginning in 2004, the company made the decision to pursue
litigation against the credit card giant Visa, which Cryptography asserted was infringing on its patents covering
smart cards. To pursue the case againstVisa, however, Cryptography’s founder, Paul Kocher, knew he needed a serious
war chest in addition to his patent portfolio.
That’s why he decided to sell off another piece of his business, patents
covering technology that protects Blu-ray discs from piracy, to Macrovision, which is now known as Rovi, in 2007 for $45 million. “All of a sudden we became a formidable
opponent for someone who thought we couldn’t fight,” Mr. Kocher said. In the
end, the gamble paid off, as the two companies settled out of court, with
Visa’s agreeing to license the technology from Cryptography.
4. If I have a patent or trademark in
the United States, I don’t need to worry about the rest of the world.
It depends on your business model. Intellectual property rights, which
also include country-specific U.R.L.’s, need to be obtained country by country,
some of which protect them better than others. The cost can vary, too.
In Japan, for example, it is notoriously expensive to acquire patents.
In addition, the annual fees required to maintain the patents there are often
prohibitively expensive for small businesses, said Gary Johnson, chief
executive of Blue Spark
Technologies, a manufacturer
based in West Lake, Ohio, that makes small, flexible batteries used in things
like radio frequency identification tags.
“What we have done is to develop a strategy to go after I.P. protection
in a limited number of countries that we think we are most likely to sell or
manufacture in, like the U.S. and China,” he said. “A lot of the choice comes
down to what your business plan tells you.” To decide what your international
I.P. strategy should be, consult a lawyer and conduct some cost-benefit
analysis to see if expanding your I.P. rights makes sense.
5. People who collect patents but don’t
actually make anything are “patent trolls,” parasites who can make money only
by filing lawsuits against real businesses.
The term “patent troll” was coined in the wake of the epic lawsuit fought between NTP, a small holding company, and Research in Motion, which makes the hugely popular BlackBerry. The focal point of the
dispute was a patent for wireless e-mail delivery held by NTP — something that R.I.M. eventually would pay millions of dollars to license. But what most
people remember about the story is the lawsuits and the notion that NTP was
somehow in the wrong for trying to enforce its patent, mostly because it didn’t
make any products itself.
But consider that many inventors never set out to build a company, only
to partner with someone who would bring their products to life. Thomas Edison, for instance, received more than 1,000 patents — many of which he licensed to other companies. “He created what we
might consider the first innovation factory,” says Mark Blaxill a co-founder of3LP Advisors, an intellectual property consulting company based in Boston.
A more recent example is Trident Design, a company founded by an inventor, Chris Hawker, which patented and
then licensed the design for the PowerSquid. Like Edison, Mr. Hawker’s company invents products, builds an
intellectual-property wall around them and then licenses them to other
companies.
The PowerSquid is now manufactured by a division of Phillips Electronics
and sold by a spinoff of Trident called Flexity. “Our entire business model is
leveraging our I.P.,” Mr. Hawker said.
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