I don’t know about the rest of you, but I can’t believe we are already at the end of October – Halloween! In keeping with the Halloween season, I thought I’d reflect this month on some of the mistakes that I see clients routinely make when it comes to IP – and yes, they are the kind of thing that keeps me up at night! We work with a lot of emerging growth businesses, so often times these clients will have had spotty (or no) legal help before they come to us, and inevitably we are cleaning up past mistakes in order to better position them for continued growth (and investment). Alternatively, people find us when they are in the middle of an (often preventable) dispute. But even large companies shouldn’t assume that they are immune from these kinds of mistakes – I’ve seen mistakes like these happen, for example with acquisitions of smaller companies (as due diligence didn’t catch the mistake). So here are my top three Halloween Frights (in no particular order):
First, the biggest mistakes I often see are contract related – by this I mean having NO contract, poorly drafted contracts or even expired contracts. The amount of self-help among businesses is truly astounding – we regularly see clients who pulled agreements from Google, Legal Zoom or a myriad of other sources (you know who you are!) without really understanding their terms. Often the contracts do not even do what the client thinks they do. One of the ways we help is by creating a useful form of contract that can be used in various scenarios. This way the investment in the agreement will reap multiple benefits. For that process to be successful, we need to understand the client’s business and growth plans, so we can create documents that suit not only their needs now, but in the next 6-12 months.
What are examples of where things have gone wrong with contracts? One of the biggest repeat examples is where the agreement is not clear on who owns the IP or the purposes for which it might be used. In one example, a client hired a photographer to create some photos for their website. They had a short (self-drafted) agreement in place, but it was very unclear from the agreement as to whether or not the client could also use the photos on a third-party website. A couple years later, the client had a big opportunity to sell its products through several very large retail platforms . . . and the photographer took the position that wasn’t covered by the agreement and demanded significant extra money for the new uses. We helped the business owner work through this situation, but a good contract from the beginning would have avoided the issue entirely.
The second area we often see clients go wrong is in the selection and use of IP that ends up not being theirs. What does that mean? This scenario varies. I frequently see clients who – unlike our business owner in the prior example – do not hire someone to take photos for them, but rather just grab images from Google. Alternatively, they may pay to use stock images but from a site that does not guarantee that the use of the photos is free from IP infringement or has significant constraints on the permitted uses of the photos. On this one, the safest course is to have your own photos taken (with a good contract!), but you can also be more careful in your selection of photo site and choose one that has public domain photos or photos that are free of undue use restrictions. Another common example is adopting a brand/business name/trademark without having a professional trademark search conducted and coming to find out later that your choice is infringing someone else’s trademark. This one happens surprisingly frequently, both when the senior trademark owner accuses our client of infringement or when our client is seeking to register their trademark. In those scenarios, we often have to counsel clients on selecting alternative marks or developing other legitimate work arounds (e.g., like entering into a co-existence agreement). Similarly, when clients launch new products without having a professional patent search conducted, they are also taking a risk that the new product could infringe someone’s patent. Again, there are often workarounds that can be achieved in that scenario, with the help of a seasoned patent attorney.
The third area that keeps me up at night are clients do not seek to register their IP and/or clients who do not police their IP – e.g., conducting frequent searches to keep an eye on potential infringers or following up when they become aware of an infringement. We understand that too many businesses, trademark and copyright registration is an investment that may not seem mission critical, especially for a new business. But trademarks, for example, are typically the cornerstone of the business’ brand and goodwill. Clients invest a lot in building a brand, so why not protect that investment? Early registration of trademarks and copyrights (aka pre-infringement) can offer significant additional benefits. In addition, while litigation is undeniably costly, oftentimes infringement disputes can be resolved amicably without (significant) litigation. If you do not take steps to protect your IP, you can ultimately find it lost or having a significantly lower value that it might be otherwise.
These are only some of the issues that we help clients navigate every day. Studies show and we know that for most businesses, some form of IP is among their most important assets. As a lawyer whose job it is to make sure that IP is protected, seeing these scenarios present themselves day in and day out can be truly frightening.