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Protecting Your Company’s Most Important Assets

By David A. Allgeyer
Lindquist & Vennum PLLP

If this is the information age, then it follows that information is one of the most — if not the most — important assets your company possesses. Protecting that information from the beginning can make the difference between having a proprietary product or service your company has sole rights to, or having a great idea that your competitors are free to pilfer and profit from.

The Need for Protection

Consider this situation. Your company has developed a prototype of a new medical product, a monitoring system that utilizes an implantable heart monitor for seriously ill patients that is connected to a computer by a transmitter instead of wires. After the information is transmitted to the computer, new software your company has developed provides many ways to view and summarize the patient’s information. Your company has good market information that this technology is needed and should be successful. You have a snappy name for the product, too: “The Heartwatch System.” How do you develop the product, get it to market, and still protect your company’s many new ideas and methods in the product?

Keep Secrets, Get Money

The company has developed a great product, and the only way to get the ball rolling is to show it around. But be careful. You are entitled to protect certain aspects of the product under the law as a trade secret, but only if you take reasonable steps to keep the information secret. Showing or providing details of how the product works to anyone who asks is not how you keep it secret.

To preserve the information as secret, you need to make sure your employees do not take your company’s information elsewhere to make a competitive product. The law will protect you from theft of confidential information, but only if you, again, take reasonable steps to keep the information secret. This means limiting access to your facility, having employees sign confidentiality agreements, and making it clear to them that your company regards technical information about the product as secret.

One other use of trade secrets comes when you sell The Heartwatch System. Because it uses computer code, you want a license agreement for the software whereby buyers acknowledge the computer code is proprietary and a secret. Some companies even mark their instruction manuals confidential and include a requirement in the sales document that they be kept confidential.

Products and Patents

A patent right granted by the U.S. government excludes others from making, using, selling or offering for sale products that have your product’s patented features for a period of 20 years. To be entitled to a patent, the patented feature must be “novel”; that is, an actual new invention. The company may be able to patent different aspects of the new product. Depending on the structure and design of The Heartwatch System’s implant, it may be eligible for patent protection. The method of monitoring, sending, recording, and manipulating data, if it truly is new, may be eligible for patent protection. The unique combination of steps for using the product may also be patentable along with the software that is used in combination with the System’s computer hardware.

To determine patent eligibility, engage a patent lawyer to work with your company’s product development engineers and file a patent application or applications with the patent office. As part of this process, be sure you also obtain a clearance search. You wouldn’t want to find out someone already holds a patent that blocks your company from selling the product after you have developed it.

There’s something else to be careful of. Patents are always issued in the name of people, not companies. The inventor owns the invention unless he or she has given someone else rights to it. In some circumstances you may have employees who claim they, and not the company, own the patent. To avoid disputes later over patent ownership, you should obtain agreements from your employees to assign inventions to the company. Different states have different laws on what rights your company can require employees to sign over, so you will need to find out what the legal requirements are in the states where your company has employees.

Of the different means of protecting intellectual property, patents typically are the most expensive; but they usually provide the greatest protection. If your company does not want to apply for patents right away, it can probably wait awhile and rely on the other means of protection discussed in this article. But don’t wait too long. If the company waits more than one year from the date of the product’s first public use or offer of sale, the opportunity to patent it disappears forever.

Copyright “Expressions”

Copyrights protect expression of ideas, not the ideas themselves. In our example of the Heartwatch System, ideas might be expressed in a number of ways. The computer programs used to run the product are eligible for copyrights. So is the instruction manual. Make sure at minimum to include a copyright notice in the software and on the manual. You are familiar with the format: “© 1999 Your Company.” For added protection, you may want to file for protection with the U.S. Copyright Office. This is a matter of filling out a form, paying a fee, and filing your copyrighted material with the Copyright Office. But be careful here. Copyrighted documents are public records (although you can keep most computer code secret). You may decide to simply rely on the copyright notice to deter copiers and actually file at a later date.

One other caveat with copyrights: If the company hires an independent contractor instead of an employee to write computer code or the product manual, they — not you — own the copyright on their work. Get an assignment of the copyright from all independents before they start work.

Names and Trademarks

Your company wants to protect the name of its new product, “The Heartwatch System.” Your first action is to conduct a clearance search for the name. Similar product names confuse customers and can lead to lost sales. Similar names can also lead to infringement suits with competitors.

Once you have clearance, you want to obtain rights to the trademark you have chosen. If your sales activities are confined to a few states, most states offer protection at the state level, which is less expensive and may suffice. Your company has big plans for The Heartwatch System, though, so you want to apply for a national registration with the U.S. Patent and Trademark Office.

The advice above applies to many areas in which your company develops proprietary information. Customer lists, unique business practices, names under which services are provided, and a host of other aspects of products, processes and services offered by your company, are usually eligible for some type of intellectual property protection and often more than one type of protection.

Protecting intellectual property is not nearly as much fun or interesting as developing new products and ideas. Nevertheless, taking proper action to protect these critical assets goes hand-in-hand with the development process. Wait too long and your company may never receive the protection to which it was otherwise entitled. Consulting with a qualified intellectual property lawyer you trust, or who comes well recommended, can save you from a fatal misstep and reap great rewards in the long run. 

ABOUT THE AUTHOR

David A. Allgeyer is partner with the Minneapolis law firm of Lindquist & Vennum PLLP. He has been litigating intellectual property cases for 16 years and provides clients advice about intellectual property matters.

riskVue | The webzine for risk management professionals
September 2002