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Intellectual property basics for entrepreneurs

07/06/2021

From patents on inventions to copyrights on software, trademarks, and designs for visual elements of your corporate identity to valuable trade secrets, intellectual property is one of the most important competitive advantages a company can have. In this blog post, you will learn what types of intellectual property (or short “IP”) there are, why you as an entrepreneur should care about IP, and why it pays off to have a solid strategy to protect it. 

What is intellectual property?

IP protects creations of the human mind and covers non-tangible assets, as opposed to tangible assets such as real estate or goods. In today’s economy, the value of the intellectual property of your company is often much higher than the value of the tangible assets. Your company’s IP is the collective intellectual output of your employees and additional rights you purchased or licensed. 

Given the value of your IP, it is vital for your company to put the effort into the protection of your innovations, your brand reputation, and your product’s appearance.  

Not every type of IP can be protected easily, but with a solid strategy, you can create tradeable assets which you can use to generate a competitive advantage, gain recurring license income, or attract investors. 

Before diving into the protection of intellectual property, we set out what the most important types of IP are.  

Which types of IP exist?

IP can be divided into registry rights and non-registered IP. Registry rights, such as patents, trademarks, or industrial designs, need to be entered in a public registry to get protection granted. They are essentially state-granted monopolies and therefore generally limited to specific geographic areas.  

In addition, non-registered IP such as copyright or trade secrets is created and, to a certain extent protected, without requiring any registration. While it is simpler to create, the effective protection of non-registered IP tends to be more difficult. 

Patents

What are patents?

With a patent registration, you can protect your company’s inventions. Such inventions have to be solutions to a technical problem and could relate to a product or a process. A new method for coffee brewing such as Nespresso’s capsule machines, a substance for the vaccination against a virus, or a tool for more efficient drilling: patents can be used in a wide range of industries. Generally not patentable however is software – you can register it only if it is part of a technical solution such as an electric control system for a machine. 

A patent is a right granted by the state in exchange for full disclosure of the invention. It is a limited monopoly, granted for a certain area and for a limited period of time (generally 20 years). 

Patent requirements

NoveltyThe invention cannot yet be disclosed to the public anywhere in the world before the application for registration, so your solution cannot be part of the current so-called ‘State of the art’. Inventors often destroy novelty themselves by publishing their inventions before registering them – be careful not to miss out on a great business opportunity that way! 

Inventive stepBased on the prior art, the invention must not be obvious to a person having average skills in the respective art. This means that if you’re thinking of patenting a new process for generating meat substitutes, you need to consider the average skills of a food scientist, not the average skills of a home chef. 

Industrial applicability: The invention needs to be applicable in industry in a general sense. 

Why should you register a patent?

  • As a patent owner, you can exclusively use your invention commercially – and so prevent others from producing or selling it.  
  • You can trade your patent as you would other goods. For example, you can sell it or you can license it.  
  • Based on your patent rights, you can take legal action against anyone who copies your invention.  
  • Patents are proof of a company’s innovative strength. They can enhance a company’s reputation, help with marketing and facilitate the search for investors.    

Patent registration costs

The official registry fees in Switzerland start from CHF 700.- for up to 10 patent claims. Patent claims are concise and clearly formulated statements that explain what the invention consists of and the protection that is being claimed. It defines the invention in a legal sense. Since this definition is typically done by specialized patent attorneys, the actual costs of registration are often much higher than the official fees. International applications soon add up to several thousand francs, which makes it often too expensive to apply worldwide without external funding, especially for startups and SMEs. 

Trademarks

What are trademarks?

Trademarks are signs capable of distinguishing the goods or services of one undertaking from those of other undertakings, so for example our “LEXR” startup package from startup packages of other law firms. 

Trademarks may be words, letters, graphics, three-dimensional shapes, even sounds, colors, or smells. You can protect the trademark only for specific services, “RICOLA” for example is registered for sweets, but not for cars.  

With registration, you’ll get an initial ten years of protection, but other than with any other IP right, the protection is indefinitely renewable. 

Trademark requirements

Trademarks have to be distinctive, meaning mainly not descriptive for the goods or services you want to protect them for. Steve Jobs could protect “Apple” for tech, but registration of “Apple” for fruits wouldn’t be possible. The same applies to picture marks, you cannot register a shape that’s in the nature of the goods or that is technically necessary. 

Trademarks cannot be contrary to morality or public order, should not be misleading or too close to state emblems. 

And of course, you should take existing 3rd party rights into consideration: If your new trademark is identical or too similar to an older trademark, the owner of the older trademark can oppose your registration based on the likelihood of confusion between you and products/services. 

Why should you register a trademark?

  1. It gives you the freedom to operate: You do not have to be afraid of third parties claiming your brand infringes their trademark rights because a trademark grants you the right to use it for certain goods or services. 
  2. You deter others from registering similar trademarks: If others see that your registered trademark is too close to their intended brand, they usually search for a different, more individual brand. 
  3. You can enforce your rights easily: You can enforce your rights not only by taking direct legal action against infringers but also by stopping counterfeit goods at the customs or efficiently request internet platforms such as Amazon or Facebook to take down postings of infringers. 
  4. Build up your brand and monetize it! Generate licensing revenue or even trade your brand. George Lucas made most of his money not with the rights for the Star Wars movies, but with the licensing revenues from toys, clothing, and so on.  

Trademark registration costs

Official registry fees in Switzerland start from CHF 550.-, if you want to go international you need to count with more. A registration in Switzerland and the EU for example costs CHF 2’419.-  

Design

Design rights are very similar to 3D-Trademarks. They protect unique creative forms that are new and have an individual character. With costs starting from CHF 200.- and attractive volume discounts, designs are often seen as a cost-effective alternative to trademarks. Contrary to trademarks, however, they are temporally limited and their range of protection is narrower. 

Common use cases for designs are packaging designs, clothing, consumer goods or graphical user interfaces. 

Copyright

What is a copyright?

Copyright is an exclusive right to use or authorize third parties to use original works. It is not a registry right: You do not need to do anything to protect your work, it’s protected almost worldwide simply by its publication for a duration of usually 70 years after the author’s death. 

Copyright protects original works of authorship. Works can be expressed in any form from movies to music over software to books. The form of expression is an important part of a work and contributes to its individuality. 

While copyright does protect the specific work, it does not protect the ideas behind the works. This is particularly important for software: Only the actual software code is protected, not the idea and the concepts behind the software. Most software companies, therefore, do not rely on copyright to protect their software, but simply keep the source code secret.  

Copyright requirements

The minimum requirement for copyright protection is that the work possesses an individual character. This is often difficult to assess, but for example, a text like “LEXR AG is a legal service provider offering fast delivery, transparent pricing and expert advice” would not be protected, since it states merely facts in a non-creative way. Pay attention though: Photographs are protected irrespective of whether they have an individual character or not. 

Trade Secrets & Data

But what about information that cannot be protected by patent, trademark, design, or copyright protection? This can be data or know-how specific to your company, that only you have and that serves as a guarantee for your success. 

Such trade secrets have certain protection by law if they are actual secret information – meaning not generally known or readily accessible. Trade secrets also need to have a commercial value because they are secret. 

For the protection being granted, the company owning the secret needs to furthermore take reasonable steps to keep it secret. Such steps may for example include imposing contractual obligations of secrecy on employees or business partners. 

This is used often in the industry – Coca Cola for example managed to keep its recipe secret for over 100 years. If you compare this to a patent, where after 20 years everyone could have used the publicly available information, this is quite a success story.  

Mere data such as weather information, historical oil prices, or consumer preferences are typically not protected by law and the best strategy is often a combination of keeping the information secret and enforcing strict contractual limitations to persons with access to the data.  

Conclusion

Intellectual property may be a complex topic, but it is relevant to some degree for every entrepreneur. Whether your business is reliant on its technical innovations or simply has a great brand reputation, learning more about intellectual property and how you can efficiently protect it is key to every corporate success story. 

In our next blogpost in this series, we’ll share some pragmatic steps every entrepreneur can take to protect the company’s IP. 

By Thomas Kuster

Legal Counsel

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