Protecting assets

Manufacturers have several options to keep their ideas safe

Posted on Nov 13, 2020 :: Back Office Operations
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Posted by , Insight on Manufacturing Staff Writer

All businesses have something unique about them, but sometimes that something special needs to be protected from competitors. That’s where patents, trademarks and trade secrets come into play.

Protecting intellectual property — whether it’s a process, product or idea — is also something businesses shouldn’t let lapse, says Stephen Jensen, a senior IP attorney with Davis|Kuelthau’s office in Appleton, who presented “Safeguarding your Intellectual Property Assets in Turbulent Times” during October’s Manufacturing First Expo & Conference.

Patents cost the most to procure and come with regular maintenance fees that increase over the 20 years the patent is active, he says. “When your business is in a famine state, you want to reduce costs and there are sometimes hard choices you need to make,” Jensen says. “Stopping paying maintenance fees on a patent is a drastic step and is something that needs to be carefully thought through.”

Derek Prestin, an IP attorney with Ruder Ware, says deciding to let a patent lapse should only be done in extreme situations.

“If it’s on technology that is out of date or related to a product you don’t make anymore, then it’s an easier call to let it go,” he says. “If it’s an industry that moves fast with new products coming out all the time, maybe you don’t need that patent in the first place. You need to weigh all of the options.”

Another option with a patent is to sell licensing for it, which would then generate income, Jensen says.

If a company does decide to give up its patent, Michael Bendel, an IP attorney with Epiphany Law, says it could cost a business its competitive advantage.

“If the patent expires and the product is out there, it won’t take long for other companies to reverse engineer it, and what made your product unique is gone,” he says.

Prestin says the government does offer a grace period if fees are not paid, which can help provide a business with a little extra time, but that comes with an additional fee. “Once you lose a patent, you can’t get it back, so you better think carefully before making that decision,” he says.

For businesses thinking about getting a patent, Jensen says the first step is to conduct thorough research to make sure the product or process you’re thinking of patenting isn’t already covered by another patent and isn’t too close to another company’s patent. The national average cost to obtain a basic utility patent is $8,800, according to the U.S. Patent and Trademark Office.

“You need to do your research — or work with a patent attorney — to make sure the idea you are looking to patent isn’t already under patent protection so you don’t go through the process and end up wasting that money,” Jensen says. “It’s also possible a patent examiner will reject your application, so one strategy is to write a narrow scope instead of cramming everything together.”

Trademarks are another way a manufacturer can protect itself. They protect logos, an indicator of source, not an idea, Prestin says. If a business decides not to pursue a trademark on its logo, for example, another company could create one very similar, which could confuse customers.

Bendel says it’s important for businesses to protect their trademarks and keep paying any fees since it protects brand recognition, which if lost, can cost the company sales.

Keeping it secret

When most people think of a trade secret, Kentucky Fried Chicken’s seasoning or perhaps Google’s search algorithm may come to mind, but businesses can label a process, product, recipe or more as a trade secret, and without paying a cent, keep that information inside an organization’s walls.

“You can label something a trade secret — maybe it’s a recipe for a vegetable mix — and limit personnel access to the secret as one way to keep it safe,” says Bendel, adding trade secrets are popular in food manufacturing.

While there isn’t a formal process to label something a trade secret akin to getting a patent, Bendel says businesses need to document how they’re keeping it confidential within their facility. One way to do that is to make sure only a few people have access to the secret and that it’s kept in a secure place, whether that’s in a safe or on a protected server.

Prestin says a product can never be considered a trade secret since once it hits the market, competitors will begin trying to reverse engineer it and make it their own. For example, the recipe for Coca-Cola is a trade secret, but there are other colas on the market.

“Companies may look at Coke and then create their cola to mimic the original product, but no matter what, that off-brand, Pepsi or Royal Crown (RC) is never going to taste exactly like Coke,” he says.

Jensen says when something is labeled a trade secret, employees know they can’t share that information with others. Employees also usually don’t stay at the same company forever, so when someone who knows the trade secret leaves, he says it’s important to remind him that the special recipe is a secret and can’t be shared.

“Of course, a person can’t unlearn what they have learned, but that’s where a non-compete contract may come into play,” Jensen says.