Four different kinds of intellectual property are available to protect your business: patents, trade secrets, copyrights, and trademarks. Trade secrets protect proprietary information such as the Coca-Cola soft-drink formulation. Trademarks protect product brands such as the Coca-Cola® brand.

Patents protect inventions that can range from simple design elements to complex processes and inventions. Copyrights protect the creator of original works such as art, literature, music, video, architecture, and computer software. These types of intellectual property can also be referred to as intangible property or assets.

While intangible, these assets have significant value. For example, the New York Times has described Kentucky Fry Chicken’s Original Recipe as the company’s most valuable asset.

#1. Trade Secrets

As the name implies, trade secrets protect knowledge and information that are considered proprietary knowledge, and their owner must actively protect them. Trade secrets can be used to protect designs, processes, formulas, recipes, and tools.

Trade secrets often help a company differentiate its products and services from those of competitors. However, they do not have to be used in the manufacturing process. For example, a customer list can be a trade secret if the owner makes efforts to keep such information secret.

Trade secrets give a business a competitive advantage. A Coca-Cola secret formula is a prime example of a trade secret. Other trade secrets include sales methods, customer lists, and internal plans and processes. Furthermore, trade secrets also protect business plans, designs, formulas, and processes.  

To maintain the trade secret, the owner needs to take active steps to protect the secret, and access should be strictly controlled by the owner to maintain secrecy. Examples of means to keep the information secret can be keeping the information in a vault, encrypting the information, and requiring confidentiality agreements or NDAs before granting access to the information.

Trade secrets are different from other types of intellectual property because they don’t require any federal registration. The company that has them must take necessary precautions to protect them, such as implementing data and physical security measures, keeping a log of who comes and goes, and restricting access to certain parts of the company.

Nondisclosure agreements are also commonly used to protect the secrecy of trade secrets. Trade secrets can last forever, as long as the secret is maintained.  A Coca-Cola secret formula behind the company vault is a prime example of one.

Trade secret law protects the misappropriation of trade secret information. In order to claim misappropriation, a wrongful act must accompany the acquisition of the information such as an improper or unlawful attempt to steal the trade secret.  However, once the secret is out in the public, the owner may be out of luck.

For example, an August 2016 Chicago Tribune article noted that Joe Ledington of Kentucky, a nephew by marriage of Colonel Sanders, had claimed to have found a copy of the original KFC fried chicken recipe on a handwritten piece of paper in an envelope in a scrapbook. The recipe found by Joe Ledington and reproduced by Wikipedia reads as follows:

As the name implies, trade secrets protect knowledge and information that are considered proprietary knowledge, and their owner must actively protect them. Trade secrets can be used to protect designs, processes, formulas, recipes, and tools.

Trade secrets often help a company differentiate its products and services from those of competitors. However, they do not have to be used in the manufacturing process. For example, a customer list can be a trade secret if the owner makes efforts to keep such information secret.

Trade secrets give a business a competitive advantage. A Coca-Cola secret formula is a prime example of a trade secret. Other trade secrets include sales methods, customer lists, and internal plans and processes. Furthermore, trade secrets also protect business plans, designs, formulas, and processes.  

To maintain the trade secret, the owner needs to take active steps to protect the secret, and access should be strictly controlled by the owner to maintain secrecy.  Examples of means to keep the information secret can be keeping the information in a vault, encrypting the information, and requiring confidentiality agreements or NDAs before granting access to the information.

Trade secrets are different from other types of intellectual property because they don’t require any federal registration. The company that has them must take necessary precautions to protect them, such as implementing data and physical security measures, keeping a log of who comes and goes, and restricting access to certain parts of the company.

Nondisclosure agreements are also commonly used to protect the secrecy of trade secrets. Trade secrets can last forever, as long as the secret is maintained.  A Coca-Cola secret formula behind the company vault is a prime example of one.

Trade secret law protects the misappropriation of trade secret information. In order to claim misappropriation, a wrongful act must accompany the acquisition of the information such as an improper or unlawful attempt to steal the trade secret. However, once the secret is out in the public, the owner may be out of luck.

For example, an August 2016 Chicago Tribune article noted that Joe Ledington of Kentucky, a nephew by marriage of Colonel Sanders, had claimed to have found a copy of the original KFC fried chicken recipe on a handwritten piece of paper in an envelope in a scrapbook. The recipe found by Joe Ledington and reproduced by Wikipedia reads as follows:

11 Spices – Mix with 2 cups white flour

1.         2⁄3 tablespoon salt

2.         1⁄2 tablespoon thyme

3.         1⁄2 tablespoon basil

4.         1⁄3 tablespoon oregano

5.         1 tablespoon celery salt

6.         1 tablespoon black pepper

7.         2 tablespoon dry mustard

8.         2 tablespoons paprika

9.         3 tablespoons garlic salt

10.       1 tablespoon ground ginger

11.       2 tablespoons white pepper

Colonel Sanders’ Original Recipe of “11 herbs and spices” is one of the most famous trade secrets in the catering industry. The New York Times described the recipe as one of the company’s most valuable assets.

Applicability of Trade Secret Protection for Software

Trade secret laws provide great protections for products that are hard to reverse-engineer.  For example, chemical formulations are quite hard to reverse engineer, and thus trade secret laws have protected the formula for Coca-Cola in a safe for over a century.  However, for mechanical products that can be inspected after purchase, trade secrets may not be the solution.

Similarly, software that is provided on a disk or downloaded from the Internet can be inspected using reverse compilers or decompilation tools, and trade secret protection is not recommended. 

However, for Software-As-A-Service (SaaS), since the software only runs on the server and is inaccessible to outsiders, trade secret protection can protect software running at the data center and is subject to access control or other means of maintaining the secret by the company.

SaaS software running behind firewalled servers, manufacturing secrets, and recipes are frequently exploited as trade secrets. A company has a choice of trade secret or patent, but not both, as trade secrets cannot be revealed in a patent application or the final awarded patent document.

There is no way to go back and protect trade secrets with patents if they become public knowledge. If you have any questions regarding the confidentiality of a trade secret, be cautious and talk to your attorney before you patent the subject matter.

It’s critical to ensure that only the workers and licensees know to access the trade secrets. Employee confidentiality programs should be in place, and licensees should adhere to rigorous confidentiality agreements.

In addition to patent protection, trade secret protection is also a common form of intellectual property. Trade secrets are different from other types of intellectual property because they don’t require any federal registration.

The company that has them must take necessary precautions to protect them, such as implementing data and physical security measures, keeping a log of who comes and goes, and restricting access to certain parts of the company. Nondisclosure agreements are also commonly used to protect the secrecy of trade secrets.

#2. Patents

As discussed above, trade secrets require no government filings and can last much longer than patents, since they don’t expire. However, they are susceptible to reverse engineering. This could expose a trade secret to someone else who uses legal means to determine the trade secret.

Sometimes relying on trade secrets to protect your product may not work well.  For example, if people can inspect your product after purchase and see the secret at work, trade secret protection is useless.  Thus, manufacturing techniques and software running on servers outside of third-party inspection are good candidates for trade secret protection. 

For machinery, electronics, biotech, software, and a myriad of other inventions that can be purchased and viewed, patents are the preferred choice of protection.

As intellectual property, a patent is valuable to organizations as it protects valuable resources from being copiously copied by competitors.  But most competitors are smart and can imitate the pioneer without producing rip-off products.  For these situations, patents provide a wide-ranging breadth of protection and they can prevent the creation of inexact, but similar products or services by other companies.

Unlike trade secrets that require no registration, patents are government-issued property rights and require an application to the US Patent and Trademark Office (USPTO) and are granted upon a thorough examination.  The United States Constitution grants Congress the power to grant patents and is found in Article I, Section 8, Clause 8.  The legislative history of the 1952 Patent Act indicates that the patentable subject matter referred to in § 101 “include anything under the sun that is made by man.”  S. Rep. No. 1979, 82d Cong., 2d Sess., § 5 (1952); H.R. Rep. No. 1923, 82d Cong., 2d Sess., § 6 (1952).

Patents protect the creator of an idea from others’ unauthorized use. For example, a pharmaceutical company may patent a new drug, allowing them to limit who can use or sell the product. There are several different types of patents – design patents last 14 years, utility patents 20 years, and plant patents. A plant patent expires 20 years from the filing date of the patent application. As with utility patents, when the plant patent expires, the subject matter of the patent is in the public domain.

In comparison, a trade secret can be kept secret for a long time—for example, the Coca-Cola® formula or the recipe or how you train your artificial intelligence models.  In contrast, anyone may practice or utilize what has been disclosed after the patent period of 20 years has expired.

A utility patent can be obtained upon filing an application(s) for the invention of a new and useful process, the machine, manufacture, or composition of matter, or a new and useful improvement thereof.  The patent generally permits its owner to exclude others from making, using or selling the invention for a period of up to twenty years from the date of patent application filing, subject to the payment of maintenance fees.  About 90% of the patents issued by the US Patent Office (USPTO) in recent years have been utility patents, also referred to as “patents for invention”.

Design patents protect the ornamental and functional features of a product. Design patents are separate from utility patents, which protect functional features. Plant patents protect new varieties of plants, including pest-free fruit trees. Utility patents cover practical products, such as software, pharmaceuticals, and vehicle safety systems. They also require a fee and are generally granted for 20 years. Obtaining a patent is a complex process.

Applicability of Patent Protection for Software

Software patents are often criticized for not being patentable subject matter under the Patent Act.  Some developers claim it is difficult to identify non-obviousness or novelty. Others point out the high cost of obtaining patents and litigation costs in enforcing the patents, as reasons to not patent software.

Many startup inventors start out with very little capital. A startup that has $100,000 in seed money and then needs to pay $10,000 to $15,000 to protect its patents must make difficult financial decisions. It is not surprising that only 24% (Graham and co., 2009) of the 1332 early-stage tech companies filed a patent.  

However, the cost of not protecting yourself can be high, as one only needs to see the fate of Phhhoto when it can only rely on antitrust laws in face of the alleged predatory behavior of Facebook/Meta as alleged in their complaint.  In that case, Phhhoto alleged that Facebook initiated the calls for partnership, with Zuckenberg personally inspecting the app, and subsequent “slavish” cloning of the software and subsequent introduction of its own version of the Phhhoto app, sealing Phhhoto’s doom.

As you can see, patents protect strategic assets from being copied by competitors. While companies are clever, it is possible for competitors to imitate their work. Intellectual property is a valuable resource for many organizations. Utility patents protect an invention from direct copying for 20 years. In the software industry, patents can protect a new inventive app for twenty years. This provides a window of opportunity for companies to recoup their research investments.

#3. Copyrights

Copyrights protect the right to create, publish, or perform work. Copyrights in most countries last for 50 years. In some countries, these protections are longer. The Berne Convention, signed by 180 countries, sets a minimum period for copyright protection of 50 years.

Copyrights provide legal protection for authorial works such as songs, novels, movies, and photographs. The author or the employer of the author has the right to prevent others from copying, distributing, or making derivatives of such work.  For example, work created by an employee for their employer is considered the employer’s intellectual property. These rights can be transferred to other parties. Copyrights can also protect the production rights of work, including music, art, and design.

Copyright protection is used in virtually all software.  Copyright prevents people from using one’s software without permission.  For example, inventors of games frequently employ copyrights. Patents may protect a game’s functionality, whereas copyrights may protect the look of the game’s board and instructions. Copyrights can be registered with the United States Copyright Office and are valid for the author’s lifetime and an additional 70 years.

While registration is optional, it is essential in case you need to file a lawsuit for infringement. Copyrights are be used to protect software code and programs, images, theatrical productions, and even marine hull designs.

Due to the low cost and ease of filing copyright applications, companies should consider copious use of copyrights in their product development stages to safeguard their assets. For example, the company can copyright its product packaging, manuals, or the source code for a computer program during the software development process.

#4. Trademarks

Trademarks are a different type of intellectual property. They can be registered with the U.S. Patent and Trademark Office. Trademarks are words or symbols that identify and distinguish goods from those of other businesses. They indicate the source of the goods. Trademark coverage can be concurrent with other IP rights such as patents, copyrights and trade secrets.  For example, the KFC trademark is associated with the famously secret formula.

Trademarks can be used to protect geographical indications. Broadly speaking geographical indications are protected in different countries and regional systems through a wide variety of approaches outside of the US.  According to the World Intellectual Property Organization, there are four main ways to protect a geographical indication:

  • so-called sui generis systems (i.e. special regimes of protection);
  • using collective or certification marks;
  • methods focusing on business practices, including administrative product approval schemes; and
  • through unfair competition laws.

The name, logo, or slogan you use to promote or sell your software products or services can be trademarked. A registered trademark for many software products and services is “Apple”. A trademark can be applied to any materials that identify you as the originator of a specific product or service.

A trademark registration will protect your brand name and prevent competitors from using it to name a similar product or service. This protection applies only to products or services in the same market. There is a possibility that another company in a completely different space may use a similar name for a product or service.  For example, a furniture company can use the name Apple and argue that there is no confusion between Apple computers and Apple furniture.

The trademark does not protect the program from being copied or duplicated. Registering software copyright will allow you to protect the program’s design.

Trademarks are unique signs used to distinguish one product or service from another. Trademarks can be registered in various jurisdictions. In some countries, trademarks and patents can cover designs. In the European Union, they are referred to as design rights. Trademarks protect product names and slogans. A prominent trademarked logo protecting a brand can be the most valuable asset in a company’s entire IP portfolio.  For example, in 2020, Forbes assigned Apple a brand value of $241B and Google a brand value of $208B.

Applicability of Trade Secret Protection for Software

Because of the interconnected nature of the software market, trademark protection is more important than ever. Apps and programs with similar names or purposes can compete for customers on app marketplaces. These app owners often become involved in trademark disputes.

If one of the app owners happens to be a trademark owner, they can show proof of ownership and provide evidence that trademark rights were violated. Apps that violate trademark rights will be removed by the authority responsible for the app marketplace. This applies to all software, not just apps.

A trademark can be registered by any person or company that can be identified as the original inventor of software. Trademarks are used to protect any software’s name and protect its logo. They also prevent any other businesses from using the same names for their products. They help businesses establish a distinct identity in the software market by protecting important symbols and names.

Software brands are protected by trademarks. It should be noted, however, that trademarks don’t protect the code running the software. They do not protect the program from imitation or replication. Copyright protection is better than trademark protection.

Software’s popularity and other factors are other reasons it is important to have software trademark protection. After several months, all software and apps that are not the most popular experience a dramatic drop in popularity. It is important to obtain trademark protection as soon possible. Otherwise, you might not be able to reap the maximum financial benefits of the software.

Combining copyrights and patents with software trademarks works best. Patent protection is possible if the software is part of a new system, method, or device. The patent protects the method, system, or device that is related to the software.

Trademarks are a powerful tool to protect software and all that is associated with it from being stolen. Trademarks are a way for software owners to have greater control over their creations, along with copyrights or patents. If you are able to protect your software’s name or logo with a trademark, that will give it an important layer of protection.

Why Startups Should Protect Their Intellectual Property

Intellectual property is a valuable business asset that must be safeguarded to enhance successful business performance. Unfortunately, many startups have a lax attitude toward protecting their intellectual property rights; this is frequently due to their conviction that “ideas abound; execution is all that counts.”

The problem with this mentality is that delaying the protection of a startup’s intellectual property can cause severe and often permanent harm to the company, both legally and financially. IP is essential, which is why Google, Apple, and other tech giants spend billions of dollars suing to protect their intellectual property.

A tech startup’s most important asset is usually its intellectual property. The goods and services it brings to the market will help it gain market share and revenue, but neither will be safe unless the business can deter other businesses from gaining market share and revenue.

A combination of IP rights will cover most goods and services. Patents, copyrights, trademarks, and trade secrets, for example, can also be used to protect computer software. For example, patents are used to cover the features of Apple’s iPhones and other devices, and copyright is used to protect the actual code of its macOS and iOS operating systems.

In addition, the Apple name and logo are protected under trademark law. A startup must protect its IP rights since it represents its present and future assets. The type of IP in question will largely determine the specific measures required to secure IP rights. For example, startups often use non-Disclosure Agreements to ensure that employees or third parties do not misuse proprietary knowledge about their inventions. It’s also essential to start the process of registering trademarks and patents.

How To Protect Your Startup IP Rights

Even if you take the above measures to define your IP rights, including registration, other companies can still infringe on them. In such cases, it will be critical to act quickly to get them to stop and recover damages for any losses they may have incurred and the act of violating your rights.

IP protection is the term for this operation, ranging from easy to complex. The value of protecting intellectual property rights cannot be overstated. A startup is unlikely to succeed unless it has complete control of its intellectual property. If not addressed early on, some of the more common mistakes startups make, such as failing to obtain an IP address, can be extremely difficult to correct.