Intellectual property (IP) rights are not always top of mind when trying to run a business. However, IP infringement is serious, and failure to respect intellectual property rights could have dire financial and legal consequences for your business, whether the violation was intentional or not.
We’ll explain the various IP types, how they’re protected by law and how to avoid accidentally infringing upon someone else’s rights.
Types of intellectual property protections
Avoiding IP infringement can be challenging if you don’t know what protections apply. Identifying IP types is the first step toward ensuring the proper use of someone else’s intellectual property.
“The first step in protecting intellectual property is determining what the intellectual property actually is,” explained MaryAnne Armstrong, partner at law firm BSKB. “Is the intellectual property something that is best protected by a copyright, trademark, patent or trade secret?”
The primary IP protections you might encounter include the following:
- Copyrights: Copyrights protect the rights to “original artistic works,” including literature, drama, music, video, architecture and computer software.
- Trademarks: Registering a business trademark protects brand-defining elements like words, phrases and symbols that identify goods, services and companies.
- Patents: Patents cover inventions and protect the rights to that innovation for a predetermined time. Patent types include utility patents, design patents and plant patents.
- Trade secrets: Trade secrets protect proprietary information, including formulas, programs and data. Trade secrets grant one party an economic advantage over competing interests.
Understanding IP types, how they differ and what they apply to will help you recognize protected material more easily. You should never use content that could be protected under any of these classifications without explicit permission from the owner.
Avoiding intellectual property infringement
Unfortunately, avoiding IP infringement is not always cut and dried. Entrepreneurs risk violating the legal limits of IP rights in many ways. It’s crucial to consider IP issues in every decision you make about graphics, slogans and product components.
“There are many ways that entrepreneurs could unknowingly infringe upon someone else’s intellectual property or leave themselves open,” warned Mary E. Juetten, founder of IP protection service provider Traklight.
Here are some common IP mistakes business owners make:
- Business owners risk IP infringement by using work they don’t own: One of the costliest IP mistakes entrepreneurs and small business owners make is using work they don’t own the rights to. When you hire an independent contractor or outside source to create something for your business, the work’s ownership, such as graphics, written content, coding and websites, doesn’t transfer to your company automatically. It must be explicitly stated in a contract that the creator grants you ownership rights. Juetten gave the example of hiring a web designer to build a business website. If the work is completed without a contract or with a contract that doesn’t mention who owns the website files, IP issues can arise. For example, the designer may want to use the files they created for another purpose.
- IP theft can occur without appropriate product patents: IP theft can also occur with product development if the entrepreneur hasn’t secured patents for the product. “If patents are not all assigned to the company, there may be a risk that one [developer] can commercialize the product on their own,” Juetten warned.
- IP issues can arise when hiring new employees: Businesses can open themselves to IP violations by hiring employees if they hire someone who relies on protected information in their work. “A new employee could bring trade secrets from [their] prior employer and use them for the benefit of [the] new company,” explained Eric Ostroff, partner at Miami-based law firm Meland Budwick. “It is important for companies to use the employee onboarding process to inform new employees that they are not permitted to use any intellectual property from their old employer. In certain circumstances, it is worth getting the new employee to represent in writing ― sometimes in an employment agreement ― that they do not have any other company or individual’s intellectual property.”
Whether copyright, trademark, patent law or trade secrets apply, protected material must remain unused unless you have explicit consent and the appropriate licenses from the owners. Anything short of that could land your business in hot water for IP infringement, which can have serious consequences.
Consequences of intellectual property infringement
Failure to respect IP rights can have steep consequences for businesses, including reputational and financial damage. Left unchecked, IP rights violations could even lead to criminal charges and jail time.
“The potential consequences of intellectual property infringement can be serious,” said Robert Freund, an attorney focused on advertising and business litigation. “Depending on the nature of the violations, penalties may include civil damages in the dollar amount of damages and lost profits, an injunction to stop the infringement, payment of the attorneys’ fees by the infringer and felony charges with prison time.”
Willful and repeated IP violations could result in a business’ complete failure and the violators’ imprisonment. Accidental violations are also costly, exposing a business to lawsuits and reputation damage.
How to avoid intellectual property violations
Given the steep cost of violating IP rights, business owners must take the necessary steps to verify that they’re not improperly using protected content.
Freund advises small businesses to check the United States Patent and Trademark Office database to ensure a business name, product name, corporate logo or design isn’t already registered. Additionally, business owners should take the following steps to avoid accidentally violating someone else’s IP rights:
- Create original images or music in advertisements: Businesses may use contractors and freelancers to create original graphics, content, music and more for marketing materials. In this case, it’s crucial to include a contract clause that states all rights to the created material belong to the business. Otherwise, freelancers could conceivably register the material and sue the business for IP infringement.
- Obtain the appropriate licenses from copyright holders: If you plan to use registered material, obtaining the appropriate licenses and explicit, written consent from the content owners is crucial. Without licenses and consent, you should never consider using protected content
- Use royalty-free media: Royalty-free media is often available online and not subject to the same restrictions as other types of IP. Royalty-free media can generally be used freely without reprisal, although it is best practice to give credit to the creator wherever their content is used.
- Consult with a lawyer: If you’re unsure whether you’re infringing on IP rights, it’s wise to consult a lawyer just to be safe. Never leave IP issues to chance; it’s not worth the risk. “Business owners who are unsure whether they are running afoul of intellectual property laws or are facing the threat of litigation related to intellectual property, should speak with an attorney with expertise in this area,” Freund advised.
Hiring an online legal service could save your company time and money. These services can help with copyright registration, patent filing and trademark registration.
Intellectual property rights and your business
Intellectual property rights cover copyrights, trademarks, patents and trade secrets. These protections concern many aspects of a small business’ operations, such as creating a successful product, building a powerful brand and implementing an effective marketing plan. IP rights can be complicated and the consequences for violating them are serious, so businesses must be diligent about avoiding any potential intellectual property infringement.
Following these tips can help your company avoid accidental IP infringement, but it’s always best to consult a lawyer specializing in intellectual property law when in doubt.
Tom Anziano and Nicole Fallon contributed to this article. Some source interviews were conducted for a previous version of this article.