Understanding intellectual property: A strategic overview for business leaders
At Replogle Legal Group, we help Illinois and New York businesses negotiate complex deals, build strategic partnerships and protect innovation. Schedule your free consultation today using the online calendar at the link below or contact Ryan Replogle by phone or email.
The importance of intellectual property
You know that intellectual property (IP) is important to your business. You’ve built something valuable—an innovative product, a distinctive brand, or compelling new content—but navigating IP protections can feel overwhelming. The nuances of IP law sometimes seem like a puzzle designed by lawyers, leading startups and small businesses to delay strategic decisions about IP until they have more people or greater financial resources. Yet, taking advantage of IP protections early in your business journey can be key to safeguarding your competitive edge and positioning your business for growth.
Below is a practical guide to the primary types of IP rights in the U.S., along with key economic considerations for your business.
Copyright: Protecting creative works
Copyright protects original works of authorship, including books, music, artwork, films, and increasingly, software code. Even the arrangement of a database—such as a proprietary client list—may qualify for copyright protection if it meets originality requirements.
Copyright protection applies once a work is recorded in a physical or digital format. While neither publication nor registration is required to own a copyright, registering a copyright with the U.S. Copyright Office enhances enforceability and is generally required before pursuing an infringement lawsuit.
A copyright owner holds the exclusive right to reproduce, adapt, distribute, and publicly display or perform their work, though there are important legal exceptions, including the well-known fair use exception. The copyright owner may license some or all of these exclusive rights to others. Such agreements define usage terms, exclusivity, payment structures, and geographic limitations.
In general, copyrights last for the life of the author plus 70 years, or 95 years from the date of publication for corporate-owned works.
“It’s a work for hire”
One of the most misunderstood concepts in copyright law is “work for hire.” Generally, the author of a work is its owner. However, when an employee creates a work within the scope of employment, the employer owns the copyright. On the other hand, simply paying a third-party business or independent contractor to create a work does not automatically grant ownership to the hiring business. In this case, the work must meet specific legal criteria and be explicitly designated as a “work for hire” by the hiring party and independent contractor in a written agreement.
Example: A coffee shop’s mobile app
A coffee shop develops a loyalty rewards app with original code. Copyright protects the original code and creative elements, such as text, images, and audiovisual components, but does not extend to the app’s functional aspects or underlying ideas. While competitors cannot directly copy the expressive elements, they can develop similar functionality using independently written code. The shop can license the app to other businesses through a license agreement, ensuring further control over the reproduction, distribution, and modification of the app’s original code and creative content.
The economic advantage of copyrights
Copyright protection is automatic and relatively inexpensive compared to patents, making it an accessible IP tool for businesses developing creative content, branding materials, or proprietary software. Because the threshold for originality is low and administrative costs are minimal, copyright offers a cost-effective way to secure rights over valuable assets.
As digital commerce and online marketing continue to expand, copyright infringement has become a growing concern. Ensuring copyright protection for website content, marketing materials, and software code can provide businesses with legal remedies against unauthorized use by competitors.
Patents: Protecting invention and innovation
A patent grants an inventor the exclusive rights to their invention for a limited period, typically 20 years for utility patents. While patents provide powerful protection, they are costly and complex to obtain.
There are different types of patents, but the most common and valuable type is the utility patent. Utility patents protect inventions that are novel, useful, and non-obvious. What qualifies as a patentable invention is a complex topic, but in general processes, machines, manufactured goods, compositions of matter, and improvements to the same, can all be patented.
Once granted, a patent provides its owner a kind of “mini-monopoly” over their invention, giving them the ability to stop others from making, using, selling, or importing the covered invention during the term of the patent. A patent owner can license their rights to others on an exclusive or non-exclusive basis, collecting royalties from one or more markets or territories. However, patents are narrow in scope, meaning that competitors may develop alternatives that do not infringe upon the patent.
The long patent journey
The patent application process, made with the United States Patent and Trademark Office, is not easy nor is it quick. It includes preparation of detailed specifications, claims, and illustrations; payment of large application fees; and an extensive review process that can take several years. Retaining a patent lawyer in the relevant field of expertise is often necessary, and expensive. To obtain a granted patent, expect to pay at least $25,000 in fees and legal expenses.
Companies should carefully evaluate whether the potential exclusivity justifies the high costs associated with patents.
Example: A coffee shop’s new coffee brewer
A small business invents a new coffee brewing system. By securing a utility patent, the company prevents competitors from copying its unique brewing method. However, if another business develops a similar system using a different mechanism, the patent may not apply. Before pursuing a patent, the coffee shop should assess whether the cost justifies its market advantage and whether copyright, trademark, or trade secret protections could provide alternative safeguards.
Copyright vs. patent
Copyright and patent protection protect different aspects of innovation. Copyright protects the creative expression of an idea, such as written code or artistic design. Patents protect the functional workings of an invention, including novel processes and machines.
For example, copyright can protect the written code of a software program, while a patent would be needed to protect a novel algorithm or technical process that the software performs.
Small businesses should evaluate whether an IP strategy favoring copyright or patent is best suited to their needs.
Trademarks: Protecting brand value
Trademarks are used to identify and distinguish the source or origin of a company’s services or goods in the market and can cover a wide variety of “marks”, including names, brands, symbols, domain names, colors and sounds. In one sense, trademarks are a legal recognition of the goodwill that their owners have built through brand and commercial development. For that reason, trademark protection law is often grounded in the same legal framework as laws against unfair competition.
A valid trademark gives its owner the right to prevent others from using that mark (or a similar mark) in a way that is likely to cause confusion in the marketplace about the source of goods or services.
Example: A new coffee brand
A coffee shop launches a unique brand name and logo. By securing a federal trademark, it prevents other businesses nationwide from using a confusingly similar name. However, if the shop only operates regionally, state trademark registration may be a more practical option.
State, federal and common law trademarks
In the United States, trademarks are most comprehensively protected through federal registration with the United States Patent and Trademark Office. A trademark owner may also receive limited protection through state registration and may even secure certain common law trademark rights merely by using their mark in commerce without any registration at all. Before registration at the federal level, a trademark applicant should identify potentially conflicting applications by searching the USPTO’s trademark database.
In Illinois, the Secretary of State, Department of Business Services, Trademark Division, handles trademark registrations, providing enforceable rights within the state. Similarly, the New York Department of State, Division of Corporations, State Records and Uniform Commercial Code, administers New York’s trademark registrations. State-level registration can potentially be a less expensive alternative to federal registration for companies focused on regional markets.
Trademarks last indefinitely if actively used and are renewed on time every ten years. Like patents and copyrights, trademarks can be licensed and used both exclusively and non-exclusively.
Trade Secrets: Protecting business secrets
A trade secret is any secret business information that provides a competitive advantage or economic value to the business, and for which the owner makes reasonable efforts to preserve its secrecy. Trade secrets are not registered with the government.
Trade secrets are often market plans, engineering drawings, client lists, chemical formulas, software source code, recipes, and production processes. Trade secrets may also be copyrighted works, and a trade secret may form the basis for a patent application.
Importantly, for your company to secure and maintain trade secret protection it must make reasonable efforts to preserve their secrecy. The ability to protect and enforce trade secret rights may be lost if, for example, you disclose trade secrets to third parties without NDAs in place, allow employees to store files on their personal devices, or do not implement security measures on your IT systems.
Trade secret owners can bring a lawsuit under state and federal law if a third party steals or otherwise improperly acquires their trade secret.
Example: A coffee shop’s secret recipe
A coffee shop develops a unique caramel syrup recipe. By keeping the formula a trade secret, the business ensures exclusivity without time limitations—as long as the recipe remains confidential. If the shop later franchises, it can require franchisees to sign non-disclosure agreements (NDAs) to protect the secret.
Why trade secrets matter
Trade secrets can be attractive because they avoid the high costs of patents and do not require registration, or indeed any public disclosure at all. However, protection is lost if the secret becomes public, making them tricky to enforce in certain cases.
Final Thoughts
Strategically combining patents, trademarks, copyrights, and trade secrets can help businesses protect their innovations while balancing costs, enforcement, and competitive advantage. Careful evaluation of economic considerations and business goals is essential when choosing the right form of IP protection.
At Replogle Legal Group, we help Illinois and New York businesses negotiate complex deals, build strategic partnerships and protect innovation. Schedule your free consultation today using the online calendar at the link below or contact Ryan Replogle by phone or email.