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The Need Of The Start-Up Or Existing Company To Protect Its Intellectual Property Rights If It Wishes To Maintain Its Value

T. Randolph Catanese, Esq. © 2000.  All Rights Reserved.

In the previous article in this series, we discussed what intellectual property rights are and how they are normally protected.  In essence, intellectual property is something unique, special and proprietary to the business.  Recognized means for protecting intellectual property take the form of trademarks, service marks, patents, copyrights and trade secrets.  This article will discuss what steps the owner of intellectual property may take in protecting intellectual property rights if infringement occurs.

Intellectual property rights are normally infringed upon by one of two sources – a former employee (or in some cases contracted independent contractor) or a competitor (sometimes the competitor is initiated by a former employee or third-party independent contractor).  It is usually these parties who do the infringing because they had access to “inside information” and were privy to the business plans of the company and how the company planned on using its intellectual property.  Having this information in hand, the infringing party acts upon it hoping to make the profits which the developer of the intellectual property had hoped for.

Normally, the owner of intellectual property will detect infringement in one of several ways.  A vendor or other business associate will advise them of the competition.  They may detect it over the Internet through a competing site or through other media (most notably printed media).  When detection occurs there are several steps which the proprietary owner of the intellectual property must take in order to maintain protection against future infringement.

First, the owner of the intellectual property must put the infringing party on notice, preferably in writing, that they have detected the infringement, that it is an infringement upon the holder’s legitimate rights to the intellectual property and that the infringing party must immediately cease and desist from further infringement.  In most cases, this type of demand will be sufficient to deter further infringement by the offending party.  But, in some cases it is not enough requiring the institution of a civil lawsuit.  Where a party violates an existing trademark, service mark, patent or copyright, there is federal and state statutory authority for a court to intervene by issuing an injunction requiring the offending party to cease and desist from further infringement.  And, statutes and common law theories permit the recovery of damages caused to the holder of any intellectual property right by the offending party.

However, court intervention will not be so readily obtained in the event that the party claiming ownership of the intellectual property cannot clearly establish its rights.  For example, if a party claimed intellectual property misuse by another, but is unable to establish the existence of a trademark, either at common law or through a certificate of trademark, then the court may not issue an injunction requiring first a trial on the merits of whether or not the party claiming the intellectual property actually has the right to the property as opposed to the rights claimed by the opposing party. Therefore, it is extremely important to perfect and protect intellectual property rights if the start-up or existing company wishes to protect its intellectual property from later infringement.

Another key area for protection of intellectual property is in the use and management of Non-Disclosure Agreements and Employment Agreements (including outside vendor and independent contractor agreements).  Employees, vendors and independent contractors all have access to proprietary information.  In order for this information to remain protected, it is imperative that the company seeking to protect its proprietary information obtain agreements from these parties confirming that the parties acknowledge – the information is proprietary and trade secret, they will not utilize the information for any other purpose other than to serve and benefit the holder of the information, they will not duplicate or otherwise disseminate the information for any purpose other than to benefit the holder of the information and upon termination of any relationship they will return all proprietary information, retain no copies and will not act upon it in any way.  These types of covenants (or promises) from these parties are critically important to protecting intellectual property rights.  In the fast paced arena of the Internet, especially with human resources moving to and fro, absent such agreements from these parties, it is very likely that the information will be acted upon by these third parties to the detriment of the holder of the intellectual property.  Again, it would be naïve to think that these parties would not violate these covenants in some way, but with these agreements in place if a violation were detected, the third party could be enjoined (stopped) from using information and would also be subject to damages if they did so.  Hopefully, that would be a sufficient detriment to these third parties from acting in any significant way on the proprietary information.

Given the above, how is a company to protect its proprietary information internally?  What means and methods should be used to identify what is or is not a “trade secret”?  These questions will be answered in the next article in this series on intellectual property rights.