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Management | August 1, 2014 | By:

Safeguard your intellectual property,
in the U.S. and overseas.

Theft of intellectual property (IP) causes U.S. manufacturers and service organizations $25 billion in lost sales and 75,000 jobs each year. This is a central message in a series of nationwide “STOPfakes Road Shows” sponsored by the U.S. Commercial Service, the trade promotion arm of the U.S. Department of Commerce’s International Trade Administration (ITA).

The severity of such financial losses is deepening every year. The U.S. Government cannot enforce the intellectual property rights (IPR) of individual U.S. companies if these companies don’t take proactive actions to register and safeguard their own IPR in the United States and overseas. This is the second message of numerous STOPfakes seminars organized by the federal government, with speakers from the United States Patent and Trademark Office (USPTO) and other institutions.

I attended one of these STOPfakes seminars titled “Protecting Your IPR in 2014” at Temple University in Philadelphia, Pa., on May 1.

Perform an IP “audit”

All five speakers at the Philadelphia STOPfakes seminar urged businesses to conduct an “IP assessment,” noting that safeguarding IP is not just for multinational corporations. Small businesses and entrepreneurs should also perform an IP audit. It’s highly recommended that small business owners and their management register their IP with the appropriate federal government agencies before they market their products and services at home and overseas.

A small business can protect four areas of intellectual property: (1) Patent, (2) Trademark, (3) Copyright, and (4) Trade Secrets.

A company’s products or services may fall under different IP categories. The best strategy is to register your IP in separate categories, because each IP category has its own definition and purpose and its own federal agency that offers legal protection.

One example is the Coca-Cola Company. Coca-Cola’s contour bottle shape is protected under a patent. The word “Coca-Cola®” is protected by a trademark to stop other manufacturers from using the same product name. Coca-Cola registers for copyright protection its advertising and publicity materials. The company protects its trade secrets, including the formula, manufacturing know-how, distribution channels, customer profiles and other information generally not known to the public.

To begin, small businesses should contact the United States Patent and Trademark Office in Alexandria, Va..

According to the USPTO, only 25 percent of U.S. businesses have patents. Filing (registration) fees for patents range from $110 to $850. For trademarks, fees range from $275 to $375. Copyright registration is $35 if filed electronically. To encourage small U.S. firms to register their IP, the USPTO has recently proposed some reductions in filing fees.

One attendee at the Philadelphia seminar asked a speaker from the patent office how much it would cost to file for patent protection. The answer from the speaker was: “It may take three years and $50,000.” There was an immediate stir in the audience. Two other speakers with USPTO working experience jumped into the discussion and assured the audience that the fees and time required to file for patent protection depend on the complexity of the application.

For small businesses, the initial investment is well worth the cost and time, not only for protection in the U.S. but also for legal protection overseas, if you are exporting or plan to export your product or service globally.

Territorial rights

In 2005 the USPTO conducted a survey and found that only 15 percent of small businesses that conducted business overseas were aware that having a U.S. patent or trademark only protected them within the United States. This is the “territoriality” concept in IP laws.

Intellectual property rights laws are national, and therefore territorial in nature. The fact that your patent or trademark is legally protected in the United States does not grant you automatic protection in China or elsewhere. A company in China can register your product name and stop you from making or selling your own product in the Chinese market. Apple Inc., for example, fought and lost a three-year-long legal battle with the Chinese company, Proview, which had registered the trademark name “iPad” in China years before Apple decided to sell iPads in China. Apple paid $60 million to Proview to buy the license to sell its own product in China. The reverse would also be true if a Chinese company wanted to sell its products in the American market but its trademark had previously been registered in the United States for a U.S. firm.

To seek international IPR protection, a U.S. company must have filed relevant registrations in its home country with the USPTO. The next step is to apply for protection overseas on a country-by-country basis or, through the Madrid system, to apply for international IP protection in multiple countries at the same time.

The Madrid system is used by one-third of all IP applicants worldwide. Approximately 80 percent of applicants are small businesses with one or two trademarks or service mark registrations. Businesses may file in one language (English, French or Spanish), pay in one currency (Swiss francs) and get protection in multiple countries with one application, which can be renewed once in 10 years.

The World Intellectual Property Organization (WIPO) is the international organization to contact to seek global protection of your IP. The global headquarters is located in Geneva, Switzerland. To begin the process, contact the USPTO for further information.

As of April 2014, you may file for trademark protection to 92 countries simultaneously by taking advantage of the Madrid Protocol. Also, through the Patent Cooperation Treaty (PCT), you may file a patent application
with the Receiving Office at the USPTO. The PCT included 148 member countries as of April 2014.

Trade secrets

USPTO and WIPO speakers at the seminar called attention to two other aspects of how small businesses could handle international IP protection. First, it is up to the owners of small businesses whether they want to register for IP protection without the help of experienced IP lawyers. Second, in applying for international IP protection, these owners can decide if they want IP protection for only one or several global markets. Fewer than five percent of U.S. businesses export products, and more than half of those businesses export to only one country.

Finally, speakers from the STOPfakes road show emphasized the overriding importance of a small business protecting its trade secrets. Trade secrets include business information such as a customer database, distribution methods, manufacturing know-how, marketing strategies and similar data that is an integral part of a company’s global competitiveness.

I fully concur with one USPTO speaker who said: “Make a list of your trade secrets and find out which ones on the list that, if lost, would be fatal to your enterprise. Those are the trade secrets you must keep.” What seems to be common sense is commonly ignored. A lawyer who spoke at the seminar told a story about a small business owner drawing up an agreement with an engineering consultant to help him invent a product, but never signing it. The contractor walked away with the owner’s IP.

James Chan, Ph.D., is an expert on global expansion and the export of American-made products and services. He is president of his independent consultancy, Asia Marketing and Management, in Philadelphia,

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