Asset protection

Intellectual property is one of the most valuable assets that a business can possess. Yet you may be shocked by how often businesses freely and unknowingly give it away. Every company, irrespective of size or type of business, has intellectual property which generally consists of trademarks, copyrights, trade secrets and patents.

Intellectual property covers a broad spectrum of business assets ranging from patented inventions, engineering designs, computer software and technical processes to confidential and proprietary information, advertising campaigns, Web sites, company names, logos, designs, and more. Intellectual property provisions are routinely found in most business agreements, even in those where you would not expect to find them. Are you aware that many of these agreements restrict, impair or, in some cases, transfer away your rights in your own business assets? Therefore, it is very important for companies to take a proactive approach in protecting these assets before it's too late.

One of the most important steps in this process is to carefully review every agreement before signing. Although you may think that this is simply stating the obvious, it is the one precaution that is most often overlooked. Many executives and managers assume that the agreements that they are asked to execute are appropriate for a given transaction, but many are not. These agreements are often too broad in scope or not broad enough. Some may have been previously used in unrelated transactions where the facts, circumstances and business risks were vastly different, or perhaps, as is all too common, they were pulled off of the Internet.

Whatever the case may be, these agreements need to be thoroughly vetted to ensure that your business assets remain your business assets.

As a case in point, manufacturing companies often design and manufacture products for numerous customers. Although each product is comparatively different, they are typically produced utilizing the same intellectual property assets of the manufacturer (i.e., patented inventions, copyrighted designs and software, proprietary manufacturing techniques and processes, etc.). Manufacturing agreements are notorious for including provisions that seek to impair, restrict and/or transfer away these assets.

A common example of such a provision is where a manufacturer is required to transfer all of the intellectual property rights associated with a product to the receiving party. These rights necessarily include the intellectual property assets (and all associated components) utilized and/or incorporated into the product. If this provision were to be accepted without change, then the manufacturer would be technically "giving away" its right to manufacture products for its other customers since many of these other products rely on the same intellectual property rights and assets. Unfortunately, provisions such as this are very prevalent and can affect not only manufacturers, but any company that is in the business of creating, designing or inventing.

What about your business's confidential and proprietary information, or trade secrets? Are they being protected? These assets include customer information, business strategies, manuals, handbooks, prototypes, methods, procedures, financial information, inventions, marketing and product plans, etc. The law provides protection for these assets provided reasonable effort is expended to maintain their secrecy.

Therefore, it is highly recommended that all employment and independent contractor agreements contain appropriate confidentiality and non-disclosure provisions. In addition, businesses should implement proper safeguards to ensure that these assets are not purposely or inadvertently disclosed to third parties. Some examples include storing particularly sensitive information in one place, requiring proprietary documents to be signed out, or perhaps marking documents as "confidential" or "private." The secrecy of this information must be reasonably maintained, or it will not be afforded protection.

A company's Web site is also an important asset that should be protected. If a Web design firm or graphic artist is engaged to design your company's Web site, you should make certain that a written assignment is obtained of all original works of authorship incorporated into the Web site that the designer specifically developed for the company (i.e., designs, logos, artwork and content). Under copyright law, the author of such works is deemed to be the owner of the copyright in those works unless otherwise agreed to in writing. Without a written assignment, the designer will retain ownership of these works, leaving the company with only the right to use or display them and nothing else.

Imagine your surprise when you see the designs, logos, artwork and content you thought you owned displayed on your competitor's Web site.

Protecting your business assets involves a lot more than just reviewing agreements. It also involves properly identifying these assets, monitoring them and taking appropriate action when necessary to protect them. For example, every business relies on trademarks and service marks to distinguish their products and services from those of their competitors. These marks may include the name of your business, the logo or design on your company's letterhead or product packaging, or perhaps a phrase or slogan used in an advertising campaign.

Although trademark law provides protection to trademark owners for the unauthorized and confusing use of these marks by others, it is ultimately the responsibility of the trademark owner to ensure that this does not occur. Whether these marks are registered or not, if an unauthorized use occurs and no action is taken, then over time a trademark owner may lose its right to prevent others from using these marks in the future.

This is the classic case of "what you don't know, will hurt you" Although the mark cannot be said to have been "given away" in this instance, certainly a substantial value associated with it has been. To lessen the chances of this occurring, it is important to protect your marks against infringement and to oppose the adoption, use and/or registration of any mark which may be too close to your marks.

There are many more intellectual property assets that can be lost if you're not careful. But if you must relinquish these assets, at least do so knowingly, with your eyes wide open and, preferably, for a profit.

Paul Deyhle is an attorney practicing primarily in the fields of intellectual property and business law with the law firm McDonald Carano Wilson.