Lateral Capital Management, LLC

Perspectives on Intellectual Property

Lateral Capital believes that strong IP is a key investment consideration for every Early Stage company. Three reasons:

  1. Your claim to Intellectual Property tells others that you plan to practice your own technology. If you don’t put others on notice that you regard your IP as yours alone, no one else will know. Worse, you may be treading on the intellectual property of others … without knowing it. In the end, the primary reason to get a patent is to be sure you can practice your own technology.
  2. Strong IP defends the company from competitors while the business grows. Even the words Patent Pending on your device or service will serve to make people think twice about invading your space. What you are really buying is time – time to find out if your idea has traction in the market.
  3. Intellectual Property, particularly patents, is vitally important to large corporate buyers. Remember that big companies have the legal staff and financial resources to defend what you have invented – even though you may not.

Some general thoughts about Patents:

  • Patents represent the right to exclude others from producing or selling a product exactly the same as yours. Not similar to yours; exactly like yours. The definition of “exactly” is found in the Patent Claims. That’s where you need to focus your attention and where your Patent Lawyer earns their salt.
  • To get a patent, you have to disclose what you have invented. A patent filing is your agreement to tell the world exactly what you have invented and why it is better than other solutions to the same problem. Once it is filed, you are free (but not required) to tell anyone about the patented invention.
  • The first and most important benefit of having a patent is the right you receive to practice your own invention. Many companies forget this. They say “I don’t want to disclose my invention – I’ll keep it secret.” This is fine until someone else invents the same thing – and patents it!
  • Investors want to know what about your business is patented – or patentable. But they will also want to know whether your patent – or other aspects of your product of service – infringe on the patents of others. This is called Freedom To Practice (FTP), and is often capsulized in an FTP opinion from a Patent Lawyer. This opinion can provide comfort to investors on your ability to practice what you have invented.
  • You can speed up your patent process by filing an Accelerated Application. Accelerated patent applications can be “bought” for an additional fee of a few thousand dollars. This assumes your willingness to provide more information with the initial application on “prior art” in your area – this helps the examiner more quickly review your file. Information on prior art which is close to yours is essential and helps the examiner to know why your “claims” are reasonable and why you should have ownership of your innovation. (Ask your lawyer for more details on how this works.)

Some key points about Copyrights:

  • Copyright is established any time you put pen to paper, draw something, write software code, etc. By creating it, you are entitled to copyright protection.
  • To remind people of this, you may put © and the year with your name or company name at the bottom of any page or website address where the material is reproduced.
  • There is no registration requirement – or even the opportunity to register copyrights. It’s yours to own and defend. But copyrights can be very valuable: Just ask the Walt Disney Company. The company has used copyright law to keep Mickey Mouse out of the pornography business for 50+ years.
  • Your copyright lasts for a long time – 70 years past the death of the owner/author.

Some key points about Trademarks:

  • In the United States, different from most other countries, trademark rights are established by using the mark to define your product or service, not by registration with the PTO – Patent and Trademark Office.
  • You can get a ® (meaning Registered Trademark) designation for your mark only after you have proven you are using the mark in Interstate Commerce. But if someone can prove they were using “your” trademark to describe something similar, they can get your ® removed from the registry of marks. If they can prove that your mark is “confusingly similar” to theirs – usually based on simple research – they can sue you to get a court to stop you from using the mark.
  • No … spelling it differently doesn’t count: Kuik-E-Mart (“The Simpson’s spelling) and Quickee Mart would be confusingly similar. And speaking of confusing, The Simpson’s could probably use Kuik-E-Mart without either registration or legal right under some combination of free speech, parody and “fair usage” statutes.
  • Said another way, and even though it’s expensive, finding a good Trademark lawyer is very much worthwhile.

Some big points about Trade Secrets are summarized in a separate Lateral Capital piece on this subject.

IMPORTANT DISCLAIMER – This material is for general background only. It is not legal advice. Readers are strongly encouraged to seek the advice of qualified legal counsel before acting on any information contained herein. Importantly, this material is written from the perspective of Minnesota law and may not be applicable to every jurisdiction.