Since the onset of the pandemic, there has been a massive wave of entrepreneurial ventures. While January 2020 saw 279,273 new business applications filed in the United States, January 2021 saw 481,995 and October 2022 saw another 432,834 new business
applications filed.
This increase in new business applications can be attributed to many different factors, from COVID related job loss, forcing individuals to step into entrepreneurship as a source of income, to personal reflection resulting in individuals venturing into the pursuit of lifelong dreams.
If history continues to repeat, this increase in new business applications will mean that there will also be a larger number of startups that fail. Statistically, an average of 90% of startups fail. This high percentage of failure can be attributed to many reasons, such as drained financial resources, miscalculating response by the market and much more. However, one reason that is not often considered is the lack of understanding of intellectual property (IP) law and, specifically, what IP is already owned without registration requirement, what IP rights can be obtained and strategies to procure only the necessary rights, and what IP rights of third parties may be infringed upon by the business.
Understanding IP rights can result in a company enjoying a limited monopoly on its technology, methods, creative works, names, slogans, logos and more, providing a competitive edge in the market. Such understanding can also decrease chances of a lawsuit for violating the IP rights of others.
Properly Research Names
A lack of understanding IP law can be unforgiving. For instance, many business owners believe that since they have searched the business name database of the Secretary of State, formed a new business and registered the business trade name with the Secretary of State, they are allowed to use the trade name as a trademark. This assumption is simply wrong and can result in serious legal consequences including monetary damages and/or equitable remedies, such as a court-imposed injunction preventing the sale of goods or the rendering of services by the business.
The corporate names directory of the Secretary of State is not a trademark searching database. The new business owner could find a corporate name clear for registering with the state yet infringe on the trademark of another when they use the name as a trademark. Just because the state allows a business owner to register a name as a business name does not mean that the business owner can then use this same name on products or services.
A trademark search would be required to ensure non-infringement of the trademarks of others. Public resources such as the U.S. Patent and Trademark Office website (uspto.gov) can prove helpful for top-level searching. However, even these resources have limitations, resulting in the need to hire professional trademark searching entities and professional reviewers of trademark search results.
IP Protection
This is merely one basic example of the need to understand IP law. Many startup owners are not aware of the “offer for sale” bar in patent law, which prevents business owners from obtaining a patent if more than one year passes after a product or service is sold (or offered for sale), and the product or service is ready for patenting, yet a patent application has not been filed within that one year.
Most startups have aspects of their business that are either automatically protected by IP law or that can be protected, yet many are unaware. For example, business coaches and life coaches produce content which is potentially protectable by copyright, such as websites and funnels, handouts and evergreen videos. The name of a program and logo may be protectable by trademark.
Inventors have products and services that may be protectable by patent, as well as the names of the products or services being potentially protectable via trademark. Artists have creative works such as paintings and drawings that may be protectable via copyright, while the name of a company owned by the artist may be protectable via trademark. Authors have online and physical books, other publications and websites, each of which may be protectable via copyright. There are countless examples.
Many business owners would benefit from a greater level of awareness and understanding of IP to decrease the failure rate of startups, prevent easily avoidable lawsuits and theft of embodiment of ideas by others, and add new potential revenue streams. Future jobs and innovation may depend upon it.
Peter Nieves is the founder of Nieves IP Law Group, LLC, an IP law firm. He also founded A to E Challenges, LLC, where he focuses on educating business owners on IP. He was formerly the head of the Patent Law and Intellectual Property and Technology Groups at Sheehan Phinney. For more information, visit nievesip.com or email pnieves@nievesip.com.