Enforcing Intellectual Property Rights in the Startup Phase

Mission critical assets of a startup business can include its unique products and its branding. If either is usurped, the emerging business may not survive for long. Because of that, the small business must consider protecting those assets. A frequent discussion in the analysis of securing formal intellectual property rights is, of course, the value in doing so. Frequently that discussion turns to the ability to enforce those intellectual property right(s) if those rights are infringed upon. Here is where a frequent mistake in valuing those rights is made. Sometimes the business thinks that the value is nominal and not worth the money because enforcing those intellectual property rights means going to court. Going to court can be expensive and out of reach, therefore the registered rights are worthless. The assumption that the only option to enforce the intellectual property rights is by going to court is incorrect. There are three primary options used individually or in combination in enforcing intellectual property violations.

1. Civil litigation

2. Criminal Action

3. Negotiation

Which option or options are chosen should not just be a legal decision. It should be a business decision. In other words, what approach(es) will best help your business? Will filing a patent infringement lawsuit increase revenue? Maybe. Will another person in jail for copyright infringement help your business? Maybe. Can you negotiate with a party who infringed your trademark? Maybe. What problem is being caused by the infringement? What unaddressed issues exist in the business?

First, to use an analogy, most would not think of not documenting their living arrangement, whether that be a rental agreement or a mortgage. And when a dispute about the living arrangement occurs, most people don’t just immediately charge off to the courthouse. Occasionally, I do some pro bono work in this area and this is one of the last recommended options. If a deposit is not returned to a renter, some of the effective solutions might be sending a letter pointing out the terms of the lease relating to the deposit and the penalty for not returning the deposit, blogging about the company that improperly took the deposit, or even possibly accepting the losses. Most people will not end up pursuing a small claims action.

With that being said, take a look at the linked article, discussing the pirating of the upcoming Call of Duty Black Ops game. At this point, the upcoming game is likely protected by copyright, trademark, trade secret, and other forms of intellectual property protection. Analyst Doug Creutz at Cowen Group estimates that Call of Duty Black Ops could sell 10.7 million units in its first year, or $642 million at retail. The game is clearly an important asset of the company.

Well, the game has been leaked prior to its release. The company employed investigators to track the unlawful copies. When the investigators located the infringers, the company had the above options to enforce its IP rights. Activision Blizzard did not charge off to the courthouse and file a civil suit, it didn’t turn the infringers over to law enforecment, and it didn’t put the Guido treatment to the alleged infringers. The game maker integrated legal, financial, marketing strategy into it decision as to how to handle the legal situation. One alleged infringer released a video saying in part “I never said I was going to leak this game… Was I going to give a copy to my friends? Yes…. I wanted to play my game…. The best game I ever played….I wouldn’t have sold the f****** for a million dollars.” Legal issues aside, that’s a pretty strong endorsement of a soon to be released product. (Ed. Note: I’d appreciate such a strong endorsement. Please comment below)

The standard civil and criminal solutions may not be effective in a startup situation. Alternative solutions must be considered. For example, where a trademark infringer is using a domain name unlawfully integrating your registered trademark and impacting necessary revenue, it may be prudent to negotiate immediate control of the domain name. This might be necessary where a small business could not survive until a Uniform Domain Name Resolution Policy proceeding (UDRP) decision or Anticybersquatting Consumer Protection Act (ACPA) based lawsuit could be settled.

What are the chances of the RIAA collecting from Jammie Thomas? Was it evident that collection would be a problem at the time of invesitgating or filing a lawsuit? Would a startup be able to pursue that type of legal strategy? For those reasons, registration of intellectual property with consideration of alternative enforcement strategies should be considered for startup phase businesses.

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