Intellectual Property Agreements – Write Them Down!

I know that you have heard it a million times, but I have to say it once more: Write it down! Entity agreements (of which a portion may include intellectual property issues) for the startup should be written down.  By now, you’ve read about the Crunchpad lawsuit, where its looks like the Crunchpad is no more and one of the founders is seeking to create a similar product (the JooJoo) in a new startup. The lawsuit did not mention a signed agreement and it is unclear what each party’s rights are in the involved intellectual property. Some background information can be found in the below links:

http://www.techcrunch.com/2009/11/30/crunchpad-end/

http://mixergy.com/joojoo-crunchpad-chandrasekar-rathakrishnan/

Unfortunately, startups come and go all the time. Fortunately, new potentially successful startups can rise from the pieces of a failed startup. Some of the desirable leftover assets include the  people and the intellectual property.  However, there will be questions on both. What happens with the people and the IP on failure? Are the departing people immediately free to work in the same space as the failed startup? Who has what  rights in the IP?

These issues should be addressed at formation of the startup, not when a failure or dispute occurs. Having the deal documented makes it easier to start making products and minimizes litigation potential and scope in the case of a failed business. Some issues relevant to this dispute often addressed in an intellectual property agreement include:

  • What intellectual property is being contributed to the startup? This should be a detailed description, not just a general intellectual property transfer. It appears that the Crunchpad included hardware, operating system, and application components. Did all of those exist and were they transferred to the startup?
  • What happens to rights on IP derived from the contributed IP? There were some reports that a Crunchpad prototype was the contribution to the startup? Assuming those reports are accurate, who has rights in the IP derived from the prototype. It is possible that the hardware, operating, system, and/or application components were further developed during the operation of the startup. Who has rights in those improvements?
  • What happens to the IP upon the failure of the new formed business or departure of its contributor? Does the IP remain with the startup? Do all rights revert to the contributor? Does the startup retain any rights?

Answering those and other questions at formation can minimize later problems with the intellectual property of a failed business. Failure to address the questions could lead to questions of ownership, unwilling investors,  and product (read: income) delays.

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Advantages of Trademark Registration for Startups

Recently I had a discussion with a business who had been using a trademark since about 2004. Unfortunately, it had not registered the trademark. In the meantime, another business had started using a similar version of the mark and also had substantially completed the registration process. Thus the business was in a difficult situation. Sure, the business probably had superior rights. But asserting those rights could be costly and time-consuming. If negotiations with the other company aren’t successful, some sort of proceedings may be necessary to assert rights in the trademark. GULP!

This situation leads to some lessons on the advantage of registering a trademark for a new business.

  • The trademark registration is used by the trademark office against other applicants for registration – This advantage is often overlooked because the trademark owner usually doesn’t know when this happens. In some cases, a different startup performs a search before it use the trademark and sees the existing similar trademark registration. It then uses a different mark. In the case where no search is performed, the existence of a registered trademark will serve as a barrier to a second comer’s trademark application when the trademark office performs its search. In both cases, the advantage was achieved at no more cost than the registration itself. Going back to our first business, had the business registered its mark in 2004, the possibility of a proceeding to assert its ownership may not be lingering.
  • Presumption of validity – Upon successful completion of the registration process, the registrant has the presumption of validity of the trademark in proceedings. Effectively, that means that the burden is placed on a challenger to show that the trademark is invalid. Thus, if the first business can’t find records and/or other evidence to show that its used the mark in 2004 (before the other party), it loses.
  • Public access – A registered trademark (and its owner) is published by the trademark office for the world to see. Because of this, the “he said, she said” scenarios are minimized. Thus instead of a proceeding, a trademark owner may choose to send a takedown notice directly to the host requesting removal of the infringing material. The host is in a difficult situation when two strangers each claim ownership of the mark. The published trademark registration showing the owner makes it easier for a host to decide remove infringing material.

Each of the above advantages enhances the ability of a startup to protect its brand.

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Trademarks and Infringement Concerns for Startups

Recently a suit was filed against Microsoft based on the name of its Bing search engine for trademark infringement and other bases. The complaint was recently filed, so a lot of information is not yet available. However, useful information for trademark and brand planning for startups can be gleaned from the news articles, court filings, and USPTO records, and company websites.

http://www.cio.com/article/511289/Design_Company_Bing_Sues_Microsoft_Over_Trademark?source=rss_news

The complainant, Bing Information Design, calls itself a design firm on its website. It’s trademark application states that “Bing!” has been used in connection with services including, in part, advertising and design services, advertising via the internet, and promoting the goods and services of others. Microsoft’s trademark application seeks to use “Bing” in connection with advertising services, dissemination of advertising for others via the Internet, promoting the goods and services of others, and other products/services. The “Bing” and “Bing!” marks are similar and the services seem to overlap. There are multitude of other factors in determining trademark infringement, but at first glance the lawsuit does not seem baseless, even if the court holds that Microsoft did not infringe Bing Information Design’s mark.

It is hard to say what will be the outcome of the lawsuit based on the current (and future) information. However, from a startup’s perspective (or others launching a brand name), this article should highlight a couple of issues:

  1. Before launching a brand name, perform as thorough a search as possible. Proactively searching can minimize later problems. It is usually preferable to know about a similar mark before spending time and money creating the goodwill associated with a mark. Also, Bing Information Design had not applied to register the “Bing!” mark and had not registered bing.com, thus a brief level search may not have located its presence.
  2. Be open to multiple possible brand names. Microsoft has stated that its believes the lawsuit is without merit and that it does not believe there is any confusion in the marketplace. However, assume for a moment that a startup (with a smaller budget than Microsoft) is seeking to use “Bing” as a mark in connection with a search engine that generates revenue from advertising. And assume further that the startup knows of another company using the name “Bing” in connection with providing advertising services. Even though it is an ambiguous situation, it may be prudent to uses a different mark. Microsoft would surely survive such a situation, but that startup may not be able to survive the lost employee time and money involved in a potential lawsuit.
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Common Factors on Timing to File a Patent Application

Frequently, I am asked when a patent application should be filed . I often start the discussion with questions in two areas:

  1. Is the new product or process complete?
  2. What is (or will be) happening to demonstrate and monetize the new product or process?

Is the product or process complete?

In asking this question, I am,  in part, trying to determine if the inventor can meet disclosure requirements for a patent application. The disclosure needs to be sufficient and precise enough to show what the inventor knew at the time of filing the patent application. Additionally, the disclosure should contain enough information to enable one knowledgeable in the technology at issue to make and use the technology.

In one conversation, I talked to a musician who wanted to alter input sounds and music in a certain manner. At the time, he was not clear whether he wanted to alter the sound mechanically, electronically, or other means. In his case, it was far too early for him to proceed with a patent application. He needed to work further on his idea to define, refine, and possess it. On the other hand, I have met with people who have had the idea for a new product, drawings, and were able to effectively discuss the creation and operation of the new product. In some cases, those individuals had sufficient disclosure to file a patent application, even before a prototype was built.

What has been done and what will be done with the new product or process?

Frequently innovators are trying to monetize the new product or process (no surprise there). This may involve demonstrations, pitching to angels/VCs, sales, offer of sale, distributing information on the product, etc. In the United States and other countries, patents rights are impacted by public disclosure, public use, offers of sale, or sale of material which is the subject of a patent application. Generally all of those actions cause a loss of foreign patent rights. In the United States, a patent must be filed within a year of those actions to avoid a bar to one’s patent rights. However, as a practical matter, even if one expects to only seek patent rights in the United States, the patent application should be filed before any of the mentioned actions. One risk in exposing the idea is that another may file a patent application prior to your patent application.  In the U.S., the first person to file usually succeeds in litigation when there is a dispute as to who owns the intellectual property. Thus, one is in a better position by filing a patent application prior to public presentation, public use, sale (or offer) of the new product or process.

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Trademarks – An Overview of the Registration Process

 

Frequently, the owner of those rights may choose to seek the advantages of registering the trademark. Typical steps involved in the registration process include:

  1. performing a search

  2. preparing and submitting the trademark application

  3. and responding to issues raised by the trademark office

During the process of creating trademarks, such as brand names or logos, a search should be initiated. A search based on your potential trademark is performed to minimize the chances of using a mark that is unavailable. If a similar mark is located, it may be prudent to create a different brand name or logo rather than proceed with that brand name in business or in a trademark application. The search can locate other possibly confusingly similar trademarks, as well as reducing other issues in the trademark registration process. The sources searched can vary, but may include trademark registries, company filings, company directories, product databases, trade journals or other sources.

After the search report is reviewed, an application may be submitted to the appropriate trademark office(s). In order to draft the trademark application, information on the mark will be gathered and analyzed. Some information under consideration will be a sample of the mark itself, how and where the mark is being used, who will own the rights in the mark, and evidence of use of the mark. This information will be used to draft and submit a trademark application.

In time, the trademark office will review the submitted trademark application. The trademark office will perform its own trademark search, as well as review the application for other compliance issues. Common issues raised by the trademark offices include:

  • likelihood of confusion with other trademarks
  • descriptive marks
  • generic marks
  • merely ornamental marks

The applicant needs to address the issues raised in the trademark application. If successful in addressing those issues, the applicant’s mark will be published for opposition, where parties with standing may oppose the application. If there is no opposition, the mark will be registered.

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