Is Your IP Worth Protecting?

Corporate counsel often relay their client's concerns about the importance of zealously protecting their company's Intellectual Property (IP), but do these clients appreciate what that entails or appreciate some of the pitfalls? Consider a few questions: If your company creates something, does it own it? If it owns it, is it protectable and, if protectable, what is the cost to fully protect it? Where should it be protected? Does it have commercial value?

The purpose here is to raise the issues that address these questions and which will provide counsel some of the information needed to take a more measured approach when considering their company's IP. This summary is broad, and the focus is on copyrights, because of their prevalence.

Corporate executives often assume that their company's “property” is truly IP and has inherent value, simply because it was created and owned by the company or is marked as “proprietary and confidential”. Many times this “property” is not truly IP, and even if it is, has minimal ' if any ' commercial value. Also, the efforts to protect it can limit the commercial opportunities of your company and divert the scarce resources and budget available to in-house counsel for more pressing issues.

What is Intellectual Property?

There is a general belief that: “If we created it, we own it. It's our IP and should be protected at all costs.” Even if this were true, it should be considered in view of what IP is and is not. IP is any product of the human intellect that is unique, novel, and unobvious and has some value in the marketplace.

IP refers to creations of the mind and can include: an idea, invention, expression or literary creation, unique name, business method, industrial process, chemical formula, computer program process, presentation. IP is generally divided into two categories: 1) Industrial Property (patents, trademarks, industrial designs, etc.), and 2) Copyright (literature, music, art, etc.).

“IP” broadly speaking refers to rights to the “intangible” elements of certain types of property. Property can include both physical (tangible) and intangible aspects each of which can possess economic value independent of the other. Both the tangible and intangible elements of IP can be sold/assigned/transferred, either separately or as a whole. Consider a book ' one party can own the tangible property – the book, and another the intangible property ' copyright in the contents of the book. Whether tangible or not and all IP is protected through national and international laws that govern the ownership, and there is always some level of registration needed to formally protect these ownership rights and there are designated agencies in place to oversee the awarding of these rights.

However, just because your company counts something as its property, puts a label or notice on it, or marks it as “confidential and proprietary” doesn't deem it protectable, commercially viable IP. Most companies have property of varying types that may be proprietary, but not protectable as IP or commercially viable.

The most important exception are company's trade secrets, confidential, proprietary and undisclosed information. This includes protected information which is: 1) not generally known among, or readily accessible to, persons that normally deal with the kind of information in question, usually within the company or even the most senior management; 2) has commercial value because it is secret; and 3) has been subject to reasonable and internally known steps to keep it secret by the person lawfully in control of the information.

For example, a company may have created software which it deems to be extremely valuable and which enables it effect its business. This could be protected through patents, copyrights and/or trademark filings, but these filings require the disclosure of the property and its components to the public. As a result the entire method of making and producing this product is publicly revealed and may be copied, imitated or subject to numerous commercial intrusions and legal fights. However, if the product's design and production are treated as proprietary trade secrets, the methodology need not be publicly disclosed.

It's important to note that just because something is stamped “Confidential” doesn't mean it's protectable IP. For example, your company evaluates a production method for a client and creates reports, the contents of which are confidential to the client. However, that doesn't make the contents of the report protectable IP for your company or for the client. Work products are proprietary and should and do remain confidential, but that does convert them to protectable IP.

In dealing with confidential information one should consider: 1) if it can be fully disclosed to the public, and 2) does it have reasonable commercial value? If not then you are not dealing with IP that is commercially protectable. Mailing lists, company records, human resources information, business plans and other materials may be created, owned by and confidential to your company, but that doesn't meant they are IP that can or if it can should be protected. In fact, the converse is often true. Once you establish that information, in whatever format, is confidential and should never be disclosed in the ordinary course of business, it immediately loses any connotation the elements that would otherwise make it protectable and commercially valuable.

If Protectable, is it Worth Protecting?

Once a determination has been made that a work is truly IP, one must consider whether it has commercial value that would make it worth protecting.

First, just because your company created and own a work, doesn't mean that it has intrinsic resale value in the marketplace. For example, the company's software used to produce client reports, may be very valuable, but would have no value to another party. Often the software is built on another company's platform, which immediately limits any third party value. Don't fight to protect something that has little or no value outside of your company.

Second, it rarely makes any sense to protect IP whose primary value is for internal use. If the property doesn't have external commercial value, why invest your company's time and money in litigation over its protection? For example, a proprietary new management system may cause a great deal of pride and may even generate measurable efficiencies in the organization, but that's not a legitimate reason to protect your ownership rights. The exception to this may be if there is a reasonable possibility that the internal IP could have some sort of future commercial value; then protection may be prudent.

Third, corporate counsel need to appreciate that protecting IP does not have to be a zero-sum game of all or nothing. In fact, in most cases of contested IP, there is some logical way for two or more parties to co-exist in a manner that helps everyone accomplish their own business objectives without protracted litigation. For example, FTI Consulting found that the uses stated in our trademark filing were possibly in conflict with a trademark application of another party using the same acronym in its corporate branding efforts. Rather than engage in a battle over the initials, we agreed to carve out uses so that each could market ourselves with the “FTI” brand name and maintain the protection.

Finally, let's assume that a company's creation is, in fact, unique, original and commercially viable. The overriding decision should be based on whether the IP has a connection to the company's core brands and its ability do business under and through those brands. If the IP doesn't, it can be sold, licensed or assigned. There are several reasons why protecting your IP may be a bad idea, but the chief is that the effort can squander management resources, time and funds, and that assumes a successful outcome, without challenges.

Moreover, beyond the direct costs of lost time and money, the fact is that these types of initiatives can cause your company to lose out on possible new customers and valuable strategic alliances ' either of which can be revenue-producing opportunities for the company ' by leading you to walk away from contracts that require some concessions on IP ownership rights. To that extent, it may not be just time you're wasting by zealously protecting that IP with minimal commercial value; it could actually be new business opportunities passing you by.

How Can Your IP Be Protected?

Assuming that a specific company asset has been found to be true IP and the decision has been made that it is indeed worth protecting, there is a third and final test that corporate counsel should perform before going to war ' can we actually protect this asset and is the benefit worth the cost? Below is a brief summary of two ways the property can be protected.

Copyright, in its simplest form, means the right to copy. Some companies are both users and creators of copyrightable works. As users, individuals make copies and as creator's products, marketing materials, software programs and other creations are developed as part of the regular activity of a business. In the U.S., the rights conveyed upon a creator are set out in the United States Copyright Act.

Copyright is created automatically at the time a work is authored and no special action is required in the form of applying for a copyright notice or registering the copyright in order to enable the copyright owner to enjoy the full protection of the copyright laws. Under the terms of the United States Copyright Act, to be eligible to receive copyright protection a work must meet the following three criteria: 1) originality, 2) fixation, and 3) nationality of creator/place of publication. Originality, while not specifically defined in the United States Copyright Act, is characterized by the following features: the work must originate with the author and not be a copy of another work; it must be the fruit of independent, creative effort; and it must be created using the skill, experience, labor, taste, discretion, selection, judgment, personal effort, knowledge, ability, reflection and imagination of the author. Fixation implies that the work is expressed in a material form capable of identification with more or less permanent endurance.

Historically, to secure copyright protection, one needed to attach a copyright notice to the work, and while this is no longer the case, it is still customary to attach a copyright notice on copyrighted works in order to be eligible for certain types of damages. In the copyright notice below, notice the four elements that include the copyright symbol, the term “Copyright”, the year of copyright, the name of the copyright holder, and the phrase “All Rights Reserved,” eg, Copyright (c) 2003 FTI Consulting, Inc., All Rights Reserved.

One needs to be cautious of depending on copyrights as some works are not protectable because they have entered the public domain and are free to everyone to use without permission. Works in the public domain include those that: i) were originally non-copyrightable such as ideas, facts, titles, names, short phrases, blank forms, ii) lost copyright, iii) have expired copyright, iv) were authored by the federal government, v) were specifically granted to the public domain.

In addition, companies need to aware of the “Fair Use Doctrine” under the Copyright act of 1976, as amended. Often, the use of material of another is allowed under the provisions of the Copyright Act under the exception for Fair Use. The Fair Use Provision requires that four factors be considered to determine if a use is an exception to Copyright. While no single factor will generally be determinative but one factor may weigh heavily enough to overcome a weak finding in another.

• Purpose and Character of Use
• Nature of Copyrighted Work
• Relative Amount
• The Effect Upon Potential Market

In Closing

It's time for many corporate counsel to get over the notion that something has value to their company simply because it is considered IP. A number of companies have lost possible customers and missed out on attractive strategic alliances because they refused to budge on IP considerations. These deals would have been completed if the general counsel would have realized that the IP they were so concerned about protecting had very little commercial value to their companies.

Sometimes those of us who are entrusted to serve as corporate legal counselors have to decide whether we're going to be deal makers or deal breakers. If we choose to be the latter because of an insistence on protecting our IP, it should be over something truly important, not an abstract concept of worth.

Corporate counsel often relay their client's concerns about the importance of zealously protecting their company's Intellectual Property (IP), but do these clients appreciate what that entails or appreciate some of the pitfalls? Consider a few questions: If your company creates something, does it own it? If it owns it, is it protectable and, if protectable, what is the cost to fully protect it? Where should it be protected? Does it have commercial value?

The purpose here is to raise the issues that address these questions and which will provide counsel some of the information needed to take a more measured approach when considering their company's IP. This summary is broad, and the focus is on copyrights, because of their prevalence.

Corporate executives often assume that their company's “property” is truly IP and has inherent value, simply because it was created and owned by the company or is marked as “proprietary and confidential”. Many times this “property” is not truly IP, and even if it is, has minimal ' if any ' commercial value. Also, the efforts to protect it can limit the commercial opportunities of your company and divert the scarce resources and budget available to in-house counsel for more pressing issues.

What is Intellectual Property?

There is a general belief that: “If we created it, we own it. It's our IP and should be protected at all costs.” Even if this were true, it should be considered in view of what IP is and is not. IP is any product of the human intellect that is unique, novel, and unobvious and has some value in the marketplace.

IP refers to creations of the mind and can include: an idea, invention, expression or literary creation, unique name, business method, industrial process, chemical formula, computer program process, presentation. IP is generally divided into two categories: 1) Industrial Property (patents, trademarks, industrial designs, etc.), and 2) Copyright (literature, music, art, etc.).

“IP” broadly speaking refers to rights to the “intangible” elements of certain types of property. Property can include both physical (tangible) and intangible aspects each of which can possess economic value independent of the other. Both the tangible and intangible elements of IP can be sold/assigned/transferred, either separately or as a whole. Consider a book ' one party can own the tangible property – the book, and another the intangible property ' copyright in the contents of the book. Whether tangible or not and all IP is protected through national and international laws that govern the ownership, and there is always some level of registration needed to formally protect these ownership rights and there are designated agencies in place to oversee the awarding of these rights.

However, just because your company counts something as its property, puts a label or notice on it, or marks it as “confidential and proprietary” doesn't deem it protectable, commercially viable IP. Most companies have property of varying types that may be proprietary, but not protectable as IP or commercially viable.

The most important exception are company's trade secrets, confidential, proprietary and undisclosed information. This includes protected information which is: 1) not generally known among, or readily accessible to, persons that normally deal with the kind of information in question, usually within the company or even the most senior management; 2) has commercial value because it is secret; and 3) has been subject to reasonable and internally known steps to keep it secret by the person lawfully in control of the information.

For example, a company may have created software which it deems to be extremely valuable and which enables it effect its business. This could be protected through patents, copyrights and/or trademark filings, but these filings require the disclosure of the property and its components to the public. As a result the entire method of making and producing this product is publicly revealed and may be copied, imitated or subject to numerous commercial intrusions and legal fights. However, if the product's design and production are treated as proprietary trade secrets, the methodology need not be publicly disclosed.

It's important to note that just because something is stamped “Confidential” doesn't mean it's protectable IP. For example, your company evaluates a production method for a client and creates reports, the contents of which are confidential to the client. However, that doesn't make the contents of the report protectable IP for your company or for the client. Work products are proprietary and should and do remain confidential, but that does convert them to protectable IP.

In dealing with confidential information one should consider: 1) if it can be fully disclosed to the public, and 2) does it have reasonable commercial value? If not then you are not dealing with IP that is commercially protectable. Mailing lists, company records, human resources information, business plans and other materials may be created, owned by and confidential to your company, but that doesn't meant they are IP that can or if it can should be protected. In fact, the converse is often true. Once you establish that information, in whatever format, is confidential and should never be disclosed in the ordinary course of business, it immediately loses any connotation the elements that would otherwise make it protectable and commercially valuable.

If Protectable, is it Worth Protecting?

Once a determination has been made that a work is truly IP, one must consider whether it has commercial value that would make it worth protecting.

First, just because your company created and own a work, doesn't mean that it has intrinsic resale value in the marketplace. For example, the company's software used to produce client reports, may be very valuable, but would have no value to another party. Often the software is built on another company's platform, which immediately limits any third party value. Don't fight to protect something that has little or no value outside of your company.

Second, it rarely makes any sense to protect IP whose primary value is for internal use. If the property doesn't have external commercial value, why invest your company's time and money in litigation over its protection? For example, a proprietary new management system may cause a great deal of pride and may even generate measurable efficiencies in the organization, but that's not a legitimate reason to protect your ownership rights. The exception to this may be if there is a reasonable possibility that the internal IP could have some sort of future commercial value; then protection may be prudent.

Third, corporate counsel need to appreciate that protecting IP does not have to be a zero-sum game of all or nothing. In fact, in most cases of contested IP, there is some logical way for two or more parties to co-exist in a manner that helps everyone accomplish their own business objectives without protracted litigation. For example, FTI Consulting found that the uses stated in our trademark filing were possibly in conflict with a trademark application of another party using the same acronym in its corporate branding efforts. Rather than engage in a battle over the initials, we agreed to carve out uses so that each could market ourselves with the “FTI” brand name and maintain the protection.

Finally, let's assume that a company's creation is, in fact, unique, original and commercially viable. The overriding decision should be based on whether the IP has a connection to the company's core brands and its ability do business under and through those brands. If the IP doesn't, it can be sold, licensed or assigned. There are several reasons why protecting your IP may be a bad idea, but the chief is that the effort can squander management resources, time and funds, and that assumes a successful outcome, without challenges.

Moreover, beyond the direct costs of lost time and money, the fact is that these types of initiatives can cause your company to lose out on possible new customers and valuable strategic alliances ' either of which can be revenue-producing opportunities for the company ' by leading you to walk away from contracts that require some concessions on IP ownership rights. To that extent, it may not be just time you're wasting by zealously protecting that IP with minimal commercial value; it could actually be new business opportunities passing you by.

How Can Your IP Be Protected?

Assuming that a specific company asset has been found to be true IP and the decision has been made that it is indeed worth protecting, there is a third and final test that corporate counsel should perform before going to war ' can we actually protect this asset and is the benefit worth the cost? Below is a brief summary of two ways the property can be protected.

Copyright, in its simplest form, means the right to copy. Some companies are both users and creators of copyrightable works. As users, individuals make copies and as creator's products, marketing materials, software programs and other creations are developed as part of the regular activity of a business. In the U.S., the rights conveyed upon a creator are set out in the United States Copyright Act.

Copyright is created automatically at the time a work is authored and no special action is required in the form of applying for a copyright notice or registering the copyright in order to enable the copyright owner to enjoy the full protection of the copyright laws. Under the terms of the United States Copyright Act, to be eligible to receive copyright protection a work must meet the following three criteria: 1) originality, 2) fixation, and 3) nationality of creator/place of publication. Originality, while not specifically defined in the United States Copyright Act, is characterized by the following features: the work must originate with the author and not be a copy of another work; it must be the fruit of independent, creative effort; and it must be created using the skill, experience, labor, taste, discretion, selection, judgment, personal effort, knowledge, ability, reflection and imagination of the author. Fixation implies that the work is expressed in a material form capable of identification with more or less permanent endurance.

Historically, to secure copyright protection, one needed to attach a copyright notice to the work, and while this is no longer the case, it is still customary to attach a copyright notice on copyrighted works in order to be eligible for certain types of damages. In the copyright notice below, notice the four elements that include the copyright symbol, the term “Copyright”, the year of copyright, the name of the copyright holder, and the phrase “All Rights Reserved,” eg, Copyright (c) 2003 FTI Consulting, Inc., All Rights Reserved.

One needs to be cautious of depending on copyrights as some works are not protectable because they have entered the public domain and are free to everyone to use without permission. Works in the public domain include those that: i) were originally non-copyrightable such as ideas, facts, titles, names, short phrases, blank forms, ii) lost copyright, iii) have expired copyright, iv) were authored by the federal government, v) were specifically granted to the public domain.

In addition, companies need to aware of the “Fair Use Doctrine” under the Copyright act of 1976, as amended. Often, the use of material of another is allowed under the provisions of the Copyright Act under the exception for Fair Use. The Fair Use Provision requires that four factors be considered to determine if a use is an exception to Copyright. While no single factor will generally be determinative but one factor may weigh heavily enough to overcome a weak finding in another.

• Purpose and Character of Use
• Nature of Copyrighted Work
• Relative Amount
• The Effect Upon Potential Market

In Closing

It's time for many corporate counsel to get over the notion that something has value to their company simply because it is considered IP. A number of companies have lost possible customers and missed out on attractive strategic alliances because they refused to budge on IP considerations. These deals would have been completed if the general counsel would have realized that the IP they were so concerned about protecting had very little commercial value to their companies.

Sometimes those of us who are entrusted to serve as corporate legal counselors have to decide whether we're going to be deal makers or deal breakers. If we choose to be the latter because of an insistence on protecting our IP, it should be over something truly important, not an abstract concept of worth.