The Value Of Intellectual Property Rights For The Internet Start-Up

T. Randolph Catanese, Esq. © 1999. All Rights Reserved.

What gives an Internet site value?  Is it products, is it services or is it something more intangible?  In most instances the intangible factor is the intellectual property rights inherent to the site.  These intellectual property rights are commonly be known as trademarks, service marks, copyrights, patents and trade secrets.  Generally speaking, all would fall within the umbrella of intellectual property rights.  This series will focus on a general description of intellectual property rights, how these rights are protected and provide illustrations of what and what are not intellectual property rights.

As mentioned above, there are several species of intellectual property rights.  In many cases the presence of quality intellectual property or the lack thereof will usually mean the difference between success or failure for any start-up company, but particularly with respect to the company whose focus is the Internet business model.

Intellectual property is legally protected in one or more ways.  There is common law protection and there is statutory protection.  Common law protection generally arises where someone is using a trademark for a period of time thereby establishing right of first use.  Meaning, that they establish the mark in commerce, use it with their product (or services) and have done so without interruption for a regular period of time.  Moreover, the mark that they use has not been diluted by the use of other or different marks which would take away from the original mark.  A trademark may also be perfected at the state and federal level.  This would be statutory protection.  In order to protect a trademark at the federal level or state level a filing is required.  At the federal level the filing would be made with the Patent and Trademark Office (or the PTO).  When a filing is made at the federal level the intake department notes the filing date, reviews the application and if the application is sufficient will thereafter post the application for trademark recognition in the official registrar/gazette of the Patent and Trademark Office.  If no objection is made to the publication, then an official trademark registration certificate will issue.  This certificate is good for ten years and may be renewed.  The effect of filing and obtaining a certificate from the PTO office is the legal presumption that the owner of the trademark was the one who used it in commerce first and has the right to the trademark above all others.

In order to obtain a trademark, the party making application therefore must use the mark in commerce.  Simply put, that means that they must sell a product in commerce using the mark.  The same thing would apply with a service mark.  A service mark is identical to a trademark with the exception it applies to services.  For example, a trademark would apply to Coca Cola and the sale of soda, whereas, a service mark might apply to H&R Block which provides tax preparation services.  In connection with the Internet, a trademark might apply to the sale of a software program over the Internet, and a service mark might apply to services which are offered in connection with the software sold.

When a trademark or service mark is in application before the PTO office, it is appropriate to show on the right side of the mark the symbol “TM” or “SM” before the registration actually issues.  Once the registration issues, then you would see the letter “R” within a circle denoting that the mark has been registered.

The cost of filing a trademark or service mark application with the PTO office is relatively inexpensive given the protection it affords the owner.  The certificate creates value to the owner’s enterprise and provides a ground to protect valuable intellectual property should someone infringe on the proprietary mark.

Copyrights are also obtainable through first use and can be registered with the Library of Congress Copyright office.  Generally speaking, copyright protection applies to printed material, electronic images (photographic, computer or enhanced images (virtual reality).  Material which is subject to copyright protection can be denoted as such by the notation “Copyright © xyz 2000.  All rights reserved.”  Copyright protection generally attaches to a created work for a term enduring for the author’s life plus an additional 70 years after the author’s death.  For further statutory protection the owner of the intellectual property may submit the property to the Copyright office for registration. Copyright registration is not a condition of copyright protection, however, there are several advantages to registration including:  (1) establishment of a public record of copyright; (2) can be used as evidence in an infringement suit; and (3) may allow for statutory damages and reimbursement of attorneys’ fees in an infringement suit.

With respect to virtually all elements of any Internet web page or site most, if not all, of the site would be copyrightable.

Patents present a unique form of intellectual property.  Patents normally apply to intellectual property involving a specific process, device or formula.  For example, a patent would apply to a new configuration for microchip processing, but would not apply to a trade name developed for an Internet site.  Nonetheless, patent protection might apply to a business model if the business model presented a new proprietary process.  In order to obtain a patent, most entrepreneurs will need to retain the services of an attorney specializing in the patent area.  Only attorneys admitted before the patent bar of the PTO office are authorized to submit patent applications.  Even if the entrepreneur is in possession of a process that might be subject to patent rights, it is not always best to patent the process.  Because when a patent application is made , if it is granted, the basis of the patent is published and competitors would have the opportunity to view the process which was patented.  (In such situations the best means to protect the process is to treat it as a trade secret and exercise care in protecting it.  In later parts of this article this will be discussed in detail.)

The entrepreneur, then, normally will confine intellectual property rights to trade marks, service marks, copyrights and patents.  Nonetheless, there will be many instances where the intellectual property rights should be protected as a trade secret in conjunction with these methods or separately, as the case may be.

The next article in this series will discuss what steps the start-up or existing business should employ to protect their intellectual property rights.  And, how to use these intellectual property rights to increase the company’s value.

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