Intellectual property is often the most valuable asset of a startup business. And yet, many cash conscious startups neglect to protect their potential intellectual property assets, preferring to allocate scarce resources to set up and initial operation costs. This article suggests practical and economical steps for startups, especially those with tight finances, to protect their valuable intellectual property assets.

Patent Protection Is Available at Modest Costs

Patents protect inventions that are new, useful and nonobvious. The three main categories of patents are utility patents, design patents, and business method/software patents. A utility product patent protects how a product is used, made, its function or structure. A utility process patent protects the inventive method of use or operation.

Patents are territorial, meaning a startup seeking international protection for its inventions needs to obtain protection in each country or jurisdiction. However, international treaties allow inventors to get the benefit of their priority filing date by filing a patent application in any member country. This allows startups to defer costs of protecting its inventions.

The first step in securing U.S. and international utility patent protection for a startup is as simple and inexpensive as filing a provisional patent application, which provides one year for the startup to test and get traction for its invention in the market. At the end of the year, the startup needs to decide the countries in which it will seek protection. If the startup needs even more time at the end of the year, it can “buy” an additional 18 months of time with its international priority date preserved by filing a PCT application.

Design patents protect nonfunctional aesthetic and decorative features of products, but do not describe the invention in words, as utility patents do. Rather, design patents show the nonfunctional aesthetic and decorative features of products in drawings. Keep in mind that many appearance and aesthetic aspects of products can be protected by design patents—even software is protectable by design patents. For example, the appearance of Graphic User Interfaces (GUIs) that make products more intuitive, attractive and enjoyable, can be design patent protected. Design patents are inexpensive to obtain, and can be a very lucrative asset. A well-known example of a successful assertion of a design patent is the ongoing Apple v. Samsung patent infringement lawsuit, where Apple got the jury to award it hundreds of millions of dollars for Samsung's infringement of its iPhone icons. Compared to utility patents, design patents are inexpensive and quick to issue.

Business method patents are a category of utility patents and can cover the way a company does business, including non-technical processes. Following a period of uncertainty as to their patent eligibility, it is now clear that, despite being subject to heightened scrutiny, software and business method inventions are indeed protectable under U.S. patent law. Examples of business method patents obtained in the 1990s and early 2000s include computerized postage metering and cash register systems; ordering products online, advertising management systems; and electronic shopping. More recent examples include electronic trading of stocks, bonds, futures, options and similar products, and producing accurate and realistic lip synchronization and facial expressions in animated characters.

Obtaining Copyright Protection At Little or No Costs

Copyright generally protects original works of authorship that are recorded in a retrievable format, including works of art, writings, software and architectural maps. Obtaining copyright protection involves very little expenditure of resources because copyright automatically attaches to the work upon its creation. Registration, which is very inexpensive, is required, however, for bringing an infringement suit in court. Timely registration, i.e., prior to the infringing act, does have significant benefits, including allowing the owner to seek statutory damages of up to $150,000, plus attorney fees in an infringement suit.

A key advantage of copyright protection is automatic international protection of the work. As a member of the Bern Convention for protection of copyrights, a U.S. copyright holder is automatically protected against copyright infringement in other convention member states.

Use Trademark Protection Is Automatic and Registration Is Inexpensive

A key to growth and prosperity of a startup is protection of its brand and other source identifying marks through trademark protection. Trademark protects any feature or characteristic, which identifies a product or service to the consuming public, and distinguishes products and services offered under it from those offered by competitors. Trademarks are most commonly a name or logo; however, other features, such as color, pattern, sound, decorations of restaurants and arrangement of items on menus can also be protectable as trademarks. Trade dress, a special type of trademark, refers to the outer appearance of a product or its packaging.

A key aspect of trademark law, helpful to new businesses who may be concerned about their finances, is that registration is not a requisite for trademark protection. Rather, “common law” trademark protection is obtained automatically by use of a mark in trade and commerce. Trademark registration provides owner with additional important benefits, such as nationwide protection as well as availability of “statutory damages” of up to $2 million as well as attorney fees in an infringement suit.

Trade Secret Protection Can Be Achieved With Minimal Expenditure of Resources

Trade secret can protect confidential business information, which provides a business with a competitive edge, including industrial know how, customer lists, business methods and the like. There is no legally set protection period for a trade secret; a trade secret is subject to legal protection for as long as it is kept a secret. A famous example is the Coca Cola® formula, which has been successfully protected as a trade secret for over a century. Startups should consider trade secret protection for their valuable information, especially those that may be difficult to obtain patent protection for and which is difficult to reverse engineer.

Effective protection of trade secrets need not tax a startup's scarce finances. Rather, trade secrets can be protected by implementing simple, cost efficient procedures that keeps the information from becoming available to the public.

Although intellectual property is often among a startup's most valuable assets, its protection need not be an unaffordable endeavor. By following the recommended steps, startups can reap the benefits of IP asset protection at surprisingly modest costs.

Dr. Dariush Adli is the founder and president of ADLI Law Group. His practice is primarily focused on business and intellectual property litigation, media and entertainment law, real estate, products liability, family law, labor and employment and transportation law. He can be reached at [email protected].