Remember in 2008 when Beyoncé topped the charts with ‘Single Ladies’? It was a song reminding single men that “if they liked it, then they should ‘a put a ring on it.”
It may have been conveyed with a catchy chorus and killer choreography, but Beyoncé did have a valid point: if you don’t make an effort to commit, you can’t complain when someone else dives in and takes your place!
Well, just as it is in the dating world, the same applies to your intellectual property. However, rather than getting all our lawyers together to recreate the “Single Ladies” music video, we thought a simple blog would suffice.
Ensuring your company owns and controls all its intellectual property is critical, and failure to do so can cost you in more ways than one.
Unfortunately for many businesses, the issue of intellectual property ownership only arises when it’s too late, for example, mid-way through a business transaction.
So, how can you “put a ring” on your intellectual property?
Firstly, what is intellectual property?
Before we talk about protecting your intellectual property, let’s be clear about what that term means so that there’s no confusion. Intellectual property refers to:
‘the rights that exist to protect creations of the mind.’
This means intellectual property represents your unique inventions: physical creations such as artistic or literary works, images, designs, films and music. The idea you once had for a sci-fi novel doesn’t count – unless of course, you’ve finally started writing it.
As a business owner, you’ll find intellectual property at the heart of everything you do: from the name of your brand, your website and your logo to the products you offer to your customers. Intellectual property encapsulates everything within your Unique Selling Point: it’s the soul of your business – and in that sense, it’s the last thing you want stolen.
When it comes to protecting your IP, understanding which type of protection you need is essential:
This type of protection is used for inventions and is granted by the government to prevent other businesses or individuals from replicating it or selling it without permission. When a patent is granted, the invention becomes the property of the inventor, and just like any other business asset, it can be bought, sold, rented or hired at the inventor’s discretion.
If you’re looking to protect your brand (i.e. your company name, your logo, the words or colours you use) you should consider registering a Trademark. Trademarks serve as a ‘badge of origin’ to indicate the source of a product and distinguish it from other traders. Once your brand is registered as a trademark, it’s protected from counterfeiters. You can still license and sell your brand if you wish, but anyone looking to use your brand will have to gain permission.
Copyright protects the original work of an author from unauthorised use or distribution. Web content, software, photographs, illustration or film recordings are all automatically protected by copyright: there is no need to apply or pay a fee. By marking your work with the copyright symbol (©) you are preventing anyone from copying, renting, lending or distributing your work. You’re also preventing them from putting it online or making their own adaptation of it.
By registering the look of your product, you can stop others from copying its appearance, its physical shape, its decoration or configuration. Take Crocs for example. This design is registered to prevent any other shoe manufacturers from replicating it.
Who owns my intellectual property?
When a business creates something: a piece of software, a website or a brand-new product, the issue of ownership isn’t always clear. Often, neither employers nor employees know where they stand with their creations: a common cause for dispute, particularly within the creative industry.
The first mistake you can make is to assume. Don’t!
Just because your business instructed and paid for work to be carried out, it doesn’t necessarily mean your business is automatically the legal owner. In fact, when it comes to ownership, your legal position will differ greatly depending on who created the work and the contents of your original contract.
Take an employee, for example. Under the UK Patent Act 1977, if an employee produces work for their company during the time they are employed, the owner of the intellectual property rights is the employer. This is because the work they produced was an expectation set out in the original terms of employment. Simply put: they were hired to be creative.
Unless of course, you failed to mention intellectual property in their terms of employment. If you don’t know, it’s worth checking!
You might think a director, or another senior member of the company may have more swing when it comes to the rights they have regarding their inventions, but, the UK Patent Act 1977 covers them too. As a director, your duty is to further the interests of your company. Therefore, anything you create during this time will still belong to your employer rather than you as an individual.
As a business owner, you wouldn’t be the first to assume that your company legally owned the work you instructed an independent contractor to carry out. However, unless there is a written contract in place that transfers ownership as soon as the work is complete, the independent contractor will almost always own the IP they have created.
Understanding who is the owner of an invention or creative works is essential in determining who can make money from it, and who can apply for IP rights.
What happens if I don’t own my intellectual property?
Think back to Beyoncé. If you don’t put a ring on it, then all you have is the assumption that you will stay together forever, no matter what. For a business, the consequences are on par with a break-up.
With no ownership of your intellectual property, your business is unable to prevent competitors or counterfeiters from using it, distributing it and basically doing whatever they want with it. With no protection over your IP, you’re letting absolutely anybody use your creation for their own financial gain. That’s a significant risk.
But it goes deeper than that……
Let’s say it’s early days for your business: you’re just getting off the ground and you’re looking for funding from a VC firm or investor. They’re going to perform what’s known as ‘due diligence’ – an investigation into who you are, what you do and whether you’re worth investing in. If they find that you don’t own your intellectual property, this will ring some very loud alarm bells.
Investing in your business will now seem risky; as you don’t have sole ownership of the product you’re selling to your customers. If they choose to proceed, it could still drastically lower their original valuation.
This same issue can arise during the due diligence process of a business transaction. If an acquirer is looking to potentially buy your business, only to find it doesn’t have control over its intellectual property, this will make you look pretty unattractive. And, even if they decide to go ahead with the transaction regardless, any intellectual property ownership issues will have to be resolved prior to the acquisition, putting everything on hold for a considerable amount of time.
I could go on, but I think you get the picture.
Failing to protect your intellectual property early on can have some profound consequences for your business.
So, what should I do?
A good idea right about now would be to assess all of your company’s intellectual property to determine legal ownership. While it might be difficult, (but certainly not impossible) to claw-back the IP from another party’s hands, there are certainly some proactive steps you can take to ensure this kind of issue doesn’t arise in the future.
Once your intellectual property ducks are all in a row, you’ll gain the peace of mind that your company’s unique creations aren’t open to theft or counterfeit.
As your business grows, developing ideas, inventions and unique products, remember the importance of taking action to minimise risk and prevent costly disputes.