Business Advisors: Know the Three Intellectual Property Traps Ensnaring IP Holders

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By William H. Honaker

COVID-19 has exacerbated an alarming trend of businesses inadvertently losing their Intellectual Property. I suspect it is due to the distraction of keeping a business running with all the restrictions, loss of clients, and the challenges of working virtually. With all that’s going on, it’s not surprising that IP is taking a back seat for some. But these are very valuable rights and should not be lost by accident. A well-managed IP portfolio can be worth one third or more of the total value of the business.

Without a system to monitor your IP, you are at serious risk of losing it, thanks to the many traps that ensnare the distracted. Intellectual property is often misunderstood, misconstrued, and confusing. Although very valuable, many businesses treat it as an afterthought, even in the best of times. Add a pandemic to the mix and IP gets pushed even further down the list of competing priorities. But the deadlines – and the traps – never stop. If you miss them, the consequences can be devastating. Those serving as counselors for businesses need to know where the traps are and help clients avoid them.

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A typical horror story

I recently had a disappointing call — one that I have all too often. The inventor excitedly told me about a great invention; then he said sales are huge; and then ... he said it had been available for purchase more than a year. Those are words no IP lawyer ever wants to hear. He blew it; he missed the filing deadline. Like the spiked pits in those old Tarzan movies, his chance for patent protection had fallen in the pit and was dead on the spikes. 

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Patent Traps

 There are two major traps working against IP protection. The one that catches inventors most often is the filing deadline. U.S. patent applications must be filed within one year of offering an invention for sale, selling it, using it in public, or describing it in a printed publication. To make this even more treacherous, most other countries require absolute novelty, which means you cannot disclose the invention before you file. With markets being global, this can have devastating consequences.

The second major trap is not paying fees to keep a patent in force. In the U.S., maintenance fees are due 3 1/2, 7 1/2, and 11 1/2 years after the patent issues. (In most other countries dues are annual.) If you miss paying maintenance fees, the patent expires. According to the latest USPTO Annual Report, about 100,000 patents expire every year for failure to pay maintenance fees. Many of these are intentional, but some get missed. Lately, it has gotten tougher for business advisors to get clients to make decisions on paying these fees, as their focus can be elsewhere amid the pandemic.

For those representing businesses that are inventing new products or have patents, put it on your to-do list to mention this during your next meeting. They rely on and trust your business advice, so make this topic of ensuring their IP protection a priority.

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Trademark Traps

I speak regularly to business owners about intellectual property. In preparation for these talks, I review their trademarks. In an average group, I always have at least a few participants who have lost their trademark. Most of these lost registrations are extremely valuable, and their loss is a total surprise to the owners.

Federally registered trademarks have two important deadlines. The first is between the fifth and six year after a trademark is issued. You must file an affidavit stating you are using your trademark and submit a sample of how it is being used. The rules for showing use are complicated. If you miss this date or fail to follow these rules, your trademark is canceled.

The second trap occurs every 10 years after a trademark is issued. Every 10 years you must repeat the renewal process, or your trademark will be canceled. Business advisors should check with clients and ask about these anniversaries.

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Copyright Traps

Copyrights are everywhere in business: content, blogs, images, websites, computer programs, marketing materials, etc. They last for the life of the author plus 70 years, and for businesses, 95 years from the date of publication or 120 years from creation, whichever comes first.

The little-known trap is the deadline to be eligible for statutory damages. Statutory damages are $750-$30,000 per infringement, up to $150,000 for willful infringement, plus attorney fees, at the discretion of the judge. But to be eligible to receive these damages, you must register your copyright within three months of publishing your work or before the work is infringed.

Statutory damages can be very valuable. Because there is no requirement to prove actual damages, this is a protection you do not want to just give away.

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Takeaways

Traps are easy to avoid if you know where they are located. That’s why business advisors should raise awareness on IP traps. If your clients can spot them and take action, they will avoid potentially devastating financial and competitive losses – and be forever grateful for your advice.

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William Honaker is a member partner in the Troy office of Dickinson Wright. With more than 35 years of experience as an intellectual property attorney, he helps businesses protect their brands, inventions, and copyrights. 



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