Six steps for entrepreneurs to approach Intellectual Property Rights

Constance Luetolf-Carroll

Many artists, web designers, writers, and musicians start jointly collaborating without a clear understanding of the importance of intellectual property (IP) rights. In fact, many entrepreneurs fail to realize that the IP of their businesses may be their only fundable asset!

Hence it is extremely important for future graduates to be educated about IP and for potential entrepreneurs to be made more aware of the need to properly identify and protect IP rights.

The Case Centre and the Esade Entrepreneurship Institute (EEI) recently published a new case titled “Gun Nose – Aiming at Digital Comics”, authored by senior lecturer Constance Luetolf-Carroll with editing by Suzanne Jenkins, EEI case developer.

The case is about a creative artist and writer, Tom Carroll, who is at the very earliest stages of starting up a business with a loose consortium of graphic designers who hope to capitalize on the growing trend of digital comics. The case was developed for MBA students and executives wrestling with digital disruption in the publishing, media and entertainment industries and offers six handy steps to approach intellectual property rights:

1) identify, 2) protect, 3) allocate, and 4) monetize the intellectual property rights; 5) structure the terms and conditions of licensing contracts among collaborators, and, if necessary, 6) pursue enforcement against infringers.

Step 1. Identify the types of intellectual property rights to be protected in the relevant jurisdiction.

The main types of IP are these: copyrights, trademarks, patents, and trade secrets.

Copyright law protects original creative expression, meaning authors or artists cannot copy or reproduce unoriginal portions and claim them as their own. Copyright does not protect abstract concepts, or the ideas in a work; only the author’s way of expressing these ideas.

Trademark law protects the use of a word, slogan, symbol, color, sound, product design, or product packaging that consumers recognize as identifying a business or its products or services or both and distinguishing them from competitors.

In the US, patents are only granted for inventions that are novel and not obvious to a person skilled in the art of invention. In the EU, a patent can be granted for any invention having a technical character provided that it is new, involves an “inventive step”, and industrial application. “A patent covers how things work, what they do, what they are made of and how they are made.”

Design patents provide legal protection to the ornamental design of a functional or utilitarian item under US law (e.g., a design patent protects the iconic shape of the Coca-Cola bottle). The EU recognizes a similar concept known as Community design rights to protect the visual design of industrial objects which have aesthetic value.

Trade secret laws protect confidential and proprietary business information. Business information may include formulas (e.g., Coca-Cola’s famous recipe is protected as a trade secret), practices, processes, designs, instruments, and patterns.

Step 2. Protect the various types of IP rights identified.

Copyright is inherent to the creation of the work. Thus, if you, as an author, write down your original ideas on paper, they are automatically copyrighted without having to do anything else. To show ownership, the convention is to add the phrase Copyright © year and your name to the work. To further protect your work, you should register it with the copyright office in your local country. This allows better enforcement if someone infringes upon your copyright.

The trademark owner establishes rights to the trademark once it is put in use. But the rights are limited and apply only to the geographic area where the business is providing its goods or services. For national rights, one needs to apply to the country’s trademark office to register the trademark. A registered trademark provides broader and stronger protections than an unregistered trademark.

To obtain a patent, the inventor must file a patent application with the patent office. The rule is first to file for obtaining patent protection and not first to invent.

Design rights in the EU may be unregistered or registered. As with trademarks, stronger and broader protection is conferred by registration. Design patents must be applied for with the US patent and trademark office.

Step 3. Allocate the rights.

Once the various IP types and rights have been identified and protected, then the entrepreneur needs to decide how to allocate or apportion the creative rights amongst the team members. This step goes hand in hand with the next step on commercializing the rights.

Step 4. Monetize the intellectual property rights.

The most common way to monetize IP rights is by licensing them. A license is like a rental contract. The licensor owns the IP and rents it out to the licensee, normally in exchange for an upfront fee and a royalty percentage contingent on sales (either gross or net).

Therefore, a key problem for a startup team is to figure out who owns what rights and who deserves what percentage of the upfront license fees and royalties.

Step 5. Structure the terms and conditions of the licensing contracts among collaborators.

In the Gun Nose case, the protagonist has not dealt properly with the issues raised in our framework so far, and this complicates any effort to structure the licensing contract with potential comic publishers. The key message is to get those written contracts in place earlier rather than later.

Step 6. Pursue enforcement against infringers.

IP rights must be enforced against infringers. Bear in mind that merely owning an IP right doesn’t prevent someone else from misusing it. The entrepreneur needs to seek proper legal advice to stop the infringers.

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