Intellectual Property: Clear the Confusion with Contracts

Male hand presents a contract document

What’s black and white all over? NOT intellectual property (IP). That intellectual property is defined as ‘creations of the mind’ makes it a decidedly gray matter. Its complexity makes it easy to shove IP aside as we deal with the “more pressing” (read: easier to deal with) issues of the day.

However, most entrepreneurs only have their IP as the company asset, so it is important to protect that asset. Whether we recognize it or not, IP plays a starring role in many of our businesses, with the U.S. Patent and Trademark Office recently crediting IP for employing 18 million Americans and generating $5 trillion annually. On the downside, IP theft took a $300 billion and 2.1 million job-bite out of these totals, according to the IP Commission on Theft of American Intellectual Property.

As an entrepreneur or small business owner, you are often charged with creating, protecting and serving this influential, yet confounding entity known as intellectual property.

There are a number of protections available depending on the intellectual property in question, copyrights, trademarks, and patents might be in play. The U. S. government is proposing stronger “hack-back” legislation and working with international law enforcement agencies to catch IP violators.

To ensure your business is protected on the tech side, a recent Verizon report (with data from international cyber crime fighters like the CIA) contains a list of security recommendations to cross check against your system. Hacking, malware and data breaches are responsible for most IP theft.

When it comes down to it, IP is all about people. People create intellectual property, protect it, and often steal it, either knowingly or unknowingly. And because people are involved, contractual protections strengthen traditional methods of protecting the property itself. Contracts set down in black and white what is okay, and what isn’t, banishing any confusing gray area.

As entrepreneurs, you often sit at the crossroads of the intellectual property firestorm. On the design and development side, your company is a target for IP theft of new innovations and processes. The Verizon report found two-thirds of data breaches targeted financial and government sectors, with IT and manufacturing next in line.

On the network administration side, your company is a target for bribery-schemes and data breaches resulting in IP theft.

You create it and protect it, but what is “it?” Look to your contracts to cut through the gray and see what’s in black and white.

Whether it’s your IP or not, you should study your contracts (that you may have already signed as a customer, contractor or employee) or determine which obligations you’re under and how to uphold (or dispute) them.

Here’s how to get started:

  1. Determine the Intellectual Property. Define your firm’s IP, whether as the entrepreneur, the IP creator or as employee of a business built on IP (2/3 of American businesses are focused on IP’s “intangible assets”). IP is the exclusive right to a “creation of the mind.” It can be a brand, invention, song, dance, process, or any intellectual creation. It can be a trade secret, like the mystery ingredient in your favorite hot sauce. It’s the key differentiator, and these intangible assets can be owned, bought and sold.
  1. Determine the IP’s existing protections. Is it covered by a patent, registered design, trademark or copyright? In general, patents protect processes and formulas. If you are a botanist, there are even patents on plants. Trademarks protect logos and brands. Designs protect three-dimensional shapes, and copyright protects publishable material. If your IP is not covered by legal registration, you may want to file for protection immediately.
  1. Look at the contracts involved. Examples of contracts include non-disclosure agreements, confidentiality clauses, non-compete agreements and other restrictive covenants. IP clauses can be added to employment or collaborative contracts. These days, it can be as easy as a clickable “I agree” box on a pop-up screen. If you’re employing a contractor or employee, check to see where their contribution falls in the IP mix. Are they restricted from using the work in a work portfolio? Are they clear if the work becomes the property of your company? The more questions you ask and clarity you get, the better off everyone will be.
  1. If it’s your personal IP, keep in mind that contracts must be state and business-specific. Don’t bother with boilerplate “legal” documents and contracts downloaded online. You may save a few dollars with a fill-in-the-blank, but it may be an issue should you have to use it. The big question being, ‘- will it be enforceable?’ That depends on whether you’re lined up with each state’s different parameters and the specific regulations governing your particular industry. In this age of IP crackdowns, you’ll want something strong enough to hold up in court. You’ll also want to give some thought to the concept of privity, which basically sets out who is covered by the contract. Does every person who comes into contact with your IP need to sign something? If not everyone, then who?
  1. Walk through a couple of what-if scenarios. If you are the IP creator, and you have a staff, what happens to the IP if the co-creator changes jobs? If your company goes out of business? If something happens to the IP creator? Think through these questions and set your plans in black and white as part of a succession plan.
  1. One last cautionary note: If IP plays a determining role in your business or employee’s job description, you may want to talk to a legal counselor to figure out the best course of action for your individual scenario. You don’t need a lawyer for everything, but as IP law becomes more complicated, make sure you are totally protected.