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I. Intellectual Property - Copyrights, Trademarks and Patents

A small business faces many challenges and decisions as it struggles to emerge into a self-supporting, healthy organization. The entrepreneur that has assembled the appropriate resources and energy to form an organization to push forward with developing a product or service must deal with decision making and resource allocation on many fronts. Should the vendors be paid immediately or do we stretch the payment term to 30 days? Do I launch an ad campaign prior to the product's full scale production to muster orders to generate cash flow now? Limited time and funds are typical situations that the entrepreneur must deal with, and quite often important aspects to growing the emerging business go unmanaged and even ignored for what appears to be more pressing issues.

Intellectual property (IP) is the domain of an organization's assets that are not thought of as hard and physical assets such as plant, machinery and inventory. Intellectual property includes trades secrets, copyrights, trademarks, confidentiality protections, third party agreements and employment agreements that embody what an organization is, how it differentiates itself from competitors, and how it functions to be its own unique self. The more recognizable elements of intellectual property include copyrights, trademarks and patents that serve to protect the ideas, trade secrets and identity of an organization so it may maintain its organizational differentiation and competitive advantage.

Quite often a new business venture is solely driven by one unique thought or idea to meet the demand in a marketplace that has not been met by other companies. As an emerging business venture moves forward with trying to develop its idea into a viable product or service to sell, great efforts are often expended to keep the development confidential for fear of word getting out and a larger more resourceful organization beating the concept creator to market. Furthermore, the need for protection of intellectual property does not stop once the concept is developed, prototyped or even brought to market. Protection and proper management of intellectual property is an ongoing process that is always present as a business venture is continually developing new ideas, improving old ideas, and expanding its realm of business. Therefore, it can be seen that the need for proper protection of intellectual property is a requirement that a business at any point in its life-cycle must pay attention to and take appropriate steps to ensure that the company is adequately protected.

Victor Polk is a partner in the law firm of Bingham, Dana & Gould LLP located in downtown Boston, Massachusetts. BD&G is a law practice that is over 100 years old and has over 250 lawyers involved in legal matters including corporate financial transactions, business dealings, tax issues, and real estate. Victor is a trial lawyer for matters of intellectual property issues and is involved with handling cases regarding copyright, trademark and patent infringement in various courts and forums. Vic sat down with the EM to discuss the importance of intellectual property for small and large companies focusing on issues of copyrights, trademarks and patents, the type of work he performs when these matters are disputed between different organizations and have gone to court, and the efforts a company can take to examine and improve their intellectual property structure and protection.

II. Bingham, Dana & Gould LLP

Historically this organization handles corporations as over 90% of its client base. Individuals are dealt with on a much smaller basis because the firm is primarily a business firm. However, as will be seen later in the article, BD&G is among the many service providers that is shifting its attention to the small business sector and entrepreneurial ventures as a potentially prosperous area of future clientele. The types of clients BD&G works with have included the likes of large organizations such as the Bank of Boston and Digital Equipment Corporation, medium size organizations such as Just for Pets pet superstores, and smaller companies such as Equine Technologies. The client base for BD&G is distributed throughout the world which is a reflection of not only their large corporate clients, but the increasing capability of smaller organizations being able to do business globally due to enabling technologies and the trends towards a global marketplace, "In this day and age the world has become a smaller place so even small companies have to think about how they are going to sell internationally, what kind of agreements they are going to do, what kind of dispute resolution clauses they are going to put into those agreements, all kinds of considerations. There is a different psychology to people who are from different countries and you have to clue into that."

The type of work conducted at BD&G varies among the practices from preventative legal work to reactionary trial work, "At BD&G the corporate people work to create the agreements to set up a company with correct legal structure and the litigation people do the trial work. There is also a mixture of the two with what I call 'preventative medicine' that go in and see how a company is doing with its legal work, and what they have already set up." Vic's experience as a trial lawyer has allowed him to garner a large amount of information and experience from the legal work he has conducted in defending and opposing matters of intellectual property for the various clients he has represented, "This sounds silly but you learn a lot from the litigation process and that experience lets you see what someone is doing and you say to them, 'If someone had just told the company this, or why aren't you doing that...'"

III. Intellectual Property - Definitions

For a little background on the language that will be used in this article, here is a short list of terms and definition of the elements that are most commonly thought of when intellectual property is discussed. These are the definitions for a copyright, trademark, and patent as defined by Karen Mathiasen, ESQ of Perkins, Smith & Cohen, LLP located in Boston, Massachusetts. These are basic definitions that do not necessarily present the entire realm of what these IP elements are, but suffice in presenting the concept behind each:

Copyright- a legal right, granted by law, to exclude all persons except oneself (and those that one has licensed), from copying (or modifying) a literary, artistic, or musical work that one has created. Copyrights do not extend to ideas themselves, but only to the expressions of those ideas.

Trademark - a word, name, symbol, or device used by a manufacturer or seller of goods to identify those goods and distinguish them from goods sold by others. This is set forth in Section 45 of the Lanham Act (15 U.S.C. Section 1127). Closely related is the service mark, which is used to identify services rather than goods. Unless otherwise stated, all of the points set forth below apply to both trademarks and service marks.

Patent - a legal right, granted by a government agency, to exclude all persons (including possibly oneself), from commercializing an invention for some period of time, generally 20 years from filing (since June 8, 1995) in the United States. Compositions of matter, products, machines, and processes are all proper subjects of utility patents. Plant patents and design patents are also available.

IV. The Need for Protecting Intellectual Property

For organizations both large and small, Vic's experience articulates the fact that one of the most important possessions a company has is their reliance on their IP, "People say when you ask them what are your most valuable assets they tell you it's their ideas, and in this world of growing business it is their most valuable asset." This being the case, a company founder must pay close attention to their business environment to determine just how volatile their IP position is, and what opportunities there are for others to breach one's security, particularly in an small business venture, "The small business world works in an amazingly volatile and prolific arena." This is particularly true with employees in a small start-up fueling their own desires to start a venture from the knowledge they have gained from their employer, "Small companies face the problem of having employees leaving and competing with new companies with allegedly taken ideas. This happens all the time because of the 'He can do it, I can do it' mentality." What this presents to the entrepreneur is the aspect of do they know if an employee has the right to leave with an idea or not, and what has the entrepreneur done to ensure the idea can be proven that it is theirs and protected?

There are many other types of IP protection issues such as the one mentioned above, and what they all foster is the need for considering how much time and effort has been placed on properly protecting ones bread and butter, "When you ask people in business what resources have they put towards protecting themselves on these fronts, often they are spending more on the little man in the lobby for guard service rather than the correct protection!" Even if a company realizes the need they have for legal work to protect their IP, it can go ignored because of other reasons and priorities, "People know what they should have done and just don't pay attention to it." What does this mean towards the overall integrity of the organization with its protection for its IP, "To me this behavior does not seem completely rational in terms of what a rational economic business decision should be in protecting their assets."

So why does a company not take the proper steps to establish correct legal protection of its assets and IP? The reasons can depend on the size of a company and point on the life cycle that it is at, but often boils down to the immediate benefits that can be realized from this investment versus other investments, "Small start-ups are going hand to mouth so any extra expense they can reduce, they do it - it's typical in small business. Large companies like Digital have their own staff doing what needs to be done. But even now I have clients that are of large size that are lax in this area. You see their problems now, look at what should have been done beforehand, and they have not done it all. This is an obvious area for money to be shunted away from because it does not generate immediate and positive value in someone's head." Evidently the priorities that are placed on the protections and insurance of a company and its assets do not always take into consideration the pitfalls of breached IP when considering what priorities are to be invested in first, "There are companies that would never cancel their key-man insurance policies, but will let their IP stuff slip. It's not at the forefront of what people think about."

V. Your IP has been Contested - What can happen?

Once an IP breach has occurred, the ramifications on the organization that has lost its idea or trademark can be extensive and even company threatening. These affects span many facets of the business in both the value of its product or service, the value of its identity and uniqueness in the marketplace, and the integrity of the strategy and business concept that the company was founded on and intended to grow with, "Once it's done, it's done. You either have trademarks and trade secrets or you don't. If you've put money into a trademark, and lose it, there is a physical cost of re-doing all your promotional brochures, and it only starts there."

Quite frightening but true that the ideas, images and identities that a small business has struggled to establish and promote can be contested and lost due to improper handling of these assets or improper protections. And when the court rules on such decisions, the ruling is firm and binding, "The law business is funny because it's a lot of paper pushing and sometimes you forget to realize that at the end of the day these courts enter legal rulings! In a trademark and copyright dispute the court says 'stop the use of that trademark' or 'you have one month to use up the rest of your brochures' and you have to do it. No one waits for the damage ruling." It's an amazing concept to grasp that when a company is founded and embeds its identity and image into its products and services, the loss of these elements can serve to undermine and destabilize the entire organization and what all its businesses are, "Imagine being a small company that has worked for several years building a product, making sales, and getting recognition for your name. Having to then stop using your name that is attached to that recognition can cause major upheavals in your operations. The economic impact is underestimated in my opinion. Just think that you have to redo everything."

Other areas of damage to a company in a situation such as this are not as tangible as brochure and packaging recalls. Aspects of the company's identity and how they are perceived in the marketplace are affected as well, "You also have the good will. Despite a small company not having that much good will, telling a company you can no longer use your name can cause a lot of physical cost and potential identity problems. Clients have suggested that credibility gets damaged. Being forced to stop using a mark casts a cloud over what the problem is. When it comes to trademarks I don't believe a change is as easy to make as people think."

VI. The Preliminary Injunction - "It really is that's that"

According to Vic one of the b eneficial things about the preliminary injunction, which is a court proceeding utilized in disputes about IP, is that these cases are tried quickly and generally not drawn out for years and years, and the decisions can be severe and swift, "The orders can be really major efforts such as pulling back all the software and manuals you have sold, and redoing the program and collateral material. They are taken very seriously." Here is Vic's overview of the preliminary injunction regarding IP matters, "Generally you're before a judge and you can go in without discovery, with just your own affidavits, and make the other side demand discovery. The amount of discovery in this litigation is far smaller than a full trial. This context is helpful to small companies that couldn't last long in a large case when it can go on forever and people demand all kinds of pleadings. For example, with damages the idea is to prove what damages were incurred. A preliminary injunction is a strategic strike. You get something in a relatively short period of time, and the courts will hear the cases relatively expeditiously and then make a decision. For IP cases the preliminary injunction won't wait six months because courts realize it's important to business."

A question that often arises in legal matters is what is the level of commitment and resources that go into such a proceeding for an organization? Again, that can come down to the size of the company, the complexity of the issue, and the resources available to the company, "Big companies have deep pockets and the little entrepreneur typically doesn't. A big company often has a real edge within practical realities in this kind of fight. However, the world has historically sided with the little guy which poses a potential problem for the organization that is representing the large company. In the end, the advantage typically goes to the side with deeper pockets." As stated before with the preliminary injunction, the expediency that these proceedings are conducted in function to benefit the small business with less resources, and generate a decision as timely as possible, "There is a time issue that largely dictates the level of effort in a case. A couple of months lets you concentrate on key issues and get depositions, and so forth. Three year long cases means more money spent and more work to be done. Not to say it will be cheap for a small company, but time allotted will help gauge the scope of the case."

Once a court has made a decision, the opportunity to appeal the decision to change the verdict appears to be less likely in these preliminary injunctions according to Vic, "The company that has lost the injunction and must cease will always appeal to seek what is called a stay. The stay would halt the injunction while it goes up to the first circuit which will hear the appeals in a reasonably fast time frame. However, the fiber of the preliminary injunction ruling is that the company that won did so because of the potential of being irreparably harmed if the competition continues. So, going to an appeal that has that weight in the case of the group that is appealing, they rarely get the stay."

VII. Measures to Strengthen a Company's Legal Protection

Determining when a company should explore what steps it should take to set up legal protection for its intellectual property can vary depending on how important these things are to the company. "Almost out of the gate a company should speak to someone and say look, here's what we're doing..." Vic believes every company should make a lawyer part of their team. "It doesn't have to be expensive, just speak to someone and say what do I need to do? What makes sense?" Essentially one has to make an informed judgment up front as what should be done, how detailed it should be, and how much should be spent. "To not do that up front is stupid because the amount to make that judgment of how much to spend up front is not huge. It's not a lot of money to have that conversation and get that kind of advice."

Vic feels the role of a lawyer is changing as the business environment the economy works in is continually evolving. "Lawyers are now becoming business advisors. They don't just say 'you must do X...', they work with you to consider what can be spent in the best interests of the company, and then do that. It's what a lawyer must do to be a good lawyer."; Just as emerging companies are focusing in on new markets and services to grow a venture in, legal professionals are also specializing in emerging business practices that can make them particularly tuned-in to the needs of an entrepreneur, "It is good to sit down with someone who is not just a generalist, but someone who is practiced at intellectual property. This area is one where people who know it and know it well, and those that don't, don't. One should be able to get a general overview in literally a couple of hours for what should be done and how much it would cost. Then you make the judgment, an informed decision. The idea of running naked doesn't make much sense."

There are steps that can be taken by an organization to prepare them for the more formal efforts that will eventually need to happen. While they are no substitute for proper legal counsel and IP protection establishment, becoming familiar with the rules and regulations can only help the cause for an emerging business, "There are resources available publicly for a company to do research on its beginnings on this road to protection. Law firms are putting out publications that contain information all about IP issues. These publications are in-depth and give you much of the information that is available as well as introducing one to the firm." Fundamentally it is the responsibility of the organization to realize its position on IP and how important it is to the firm to protect. "You have to get people in the mindset that IP is a cornerstone of the company so all practices and activities done in this area are done seriously and properly. That's not a dollar thing, that's a priority thing."

VIII. Attention to the Entrepreneurial Sector

As organizations are looking to expand their business into new markets and to develop new products and services to meet evolving needs in the marketplace, the legal profession is no different as BD&G looks to the small business sector as a viable market for future work. "There is absolutely a rise in new ventures that are seeking legal advice in parallel to developing their companies. The small business area is seen in the legal field as a red hot area." Vic sees this area as strong right now and on into the future. "The early 90's had a major downturn in this area, but now it is ramping up again in both small and large companies, rapid change gives real opportunity to entrepreneurs and may cause problems to bigger companies. Bigger companies have to move into new market areas that may affect their current products." Either way both types of organizations are growing in new areas that result in innovation and the development of intellectual property that is subject to the influences mentioned in this article, and therefore require attention to their legal aspects.

A concern that many small business owners may have is that a large corporate law firm like BD&G would not be able to address the needs or pay enough attention to smaller client who aren't as high profile or prosperous. Vic states this perception is changing in as much as the firm's attention to small business client services are changing to focus on the entrepreneurial sector, "The thing that people get concerned with about going to a big firm is that they will get lost. The truth of the matter is everyone is looking to grow. You don't grow by just staying with big clients or trying to get big clients to change firms. A lot of firms are paying attention to the entrepreneurial companies because they want them to grow with their company. Younger professionals are adopting the more progressive mindset for where new opportunities lie and where the future opportunities will be. It's a good place for new legal professionals to build a practice. One can now go to large law firms and find people who are hungry and will work great for you." This is a trait this is evolving in other professional service providers business, and a potentially beneficial one for both the entrepreneur and the service provider as they mutually explore ways to grow new businesses in the evolving global economy. - ###


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