Amanda D. Francoeur, email@example.com
It’s essential for entrepreneurs and small businesses to consider their options carefully when selecting a protection plan that is ideal for their asset or innovation, as well as their budget, according to Stephen Schanz, a teaching associate professor in the department of management innovation and entrepreneurship at North Carolina State University in Raleigh.
Schanz published a paper in the September 2009 edition of Entrepreneurial Business Law Journal that breaks down protection plans into three categories: patents, copyrights and trade secrets, emphasizing each one’s advantages and disadvantages. Schanz forewarns companies and inventors about weighing the pros and cons in relation to stability against competition, expenditures and security, including how much protection the asset will need.
“All businesses are not created equal,” he said. “Each of them has a different inventory of protected intellectual property.”
Keep your options open
To promote an invention and safeguard its manufacture and sale in the public domain, many businesses and entrepreneurs seek patent protection. A utility patent, for example, protects revenue over a span of 20 years. Many processes, products and business methods are also deemed patentable, and obtaining the patent rights gives the holder full protection under the law.
Yet, according to Schanz, some people feel that a patent guarantees a profitable contract. They see it as though “anything that is patentable will be an automatic success,” which is not true. A business must evaluate its product based on whether it is a good and marketable idea and on whether it will generate revenue. “It doesn’t make a whole lot of sense to go through the time and effort to patent the idea if no one wants the product,” he added.
Therefore, in addition to being patentable, an idea has to be viable, because a patent is extremely expensive. Hiring a lawyer, filing an application and paying maintenance fees can significantly cut into profits, so it is important to assess expenditures when determining a patent’s worth. It is also imperative for companies to consider legal costs that may stem from re-examination of the claims or infringement disputes.
Furthermore, a 20-year patent protection plan begins on the application filing date. This is another disadvantage in that it can take two to three years before a patent gains final approval, resulting in the patentee losing that time in the period of exclusivity. Moreover, as Schanz stated in his paper, pharmaceutical companies that patent drugs could be subject to even less exclusivity time because of the time required for agencies to grant approval.
A protection outlet similar to a patent is a copyright, which protects original expression of authorship. This includes software, visual art, dramatic productions and published works. The copyright holder is entitled to reproduce, sell, publicly exhibit or perform, or digitally broadcast recordings of the work throughout the creator’s lifetime, and the protection remains in place 70 years beyond.
Third parties who engage in willful infringement run the risk of criminal charges to include fines not exceeding $500,000 and/or up to five years in jail for the first offense, while subsequent violations will incur a $1 million fine and/or 10 years in jail. However, a copyright doesn’t always protect against a third party developing the same concept. It is hard to prove that the third party had access to the defendant’s ideas and that the two works are similar to a considerable degree. As a result, the copyright holder could lose credibility and be surpassed by his opponent in the race to commercial success.
Those who do not want costly expenditures can choose the trade secret alternative, which requires no application or government approval. This third type of protection plan, which falls under state rather than federal law, involves withholding from the public domain information that is essential to a business’s success. A unique method, formula or discovery can belong to a business indefinitely and is maintained by confidentiality. Of course, security measures may be needed to keep the information private because anyone who discovers a trade secret fairly can compete openly.
Sticking to his standard
Schanz weighed his own options when choosing a protection plan for a legal medical software program he had developed. The program was based on a database of regulated occupations and involved identifying categories of information. “This software program did not house expressions [as required by a copyright], but functionality,” he said. And with a trade secret, “the only problem is if [a company] got the secret, there [would be] no consequence for reverse engineering.” So Schanz chose what was best for him and the product: “For functionality, you should always consider a patent.”