DO I HAVE INTELLECTUAL PROPERTY AND IF SO, WHY SHOULD I PROTECT IT?

    Why should you care about intellectual property as a start-up?  Intellectual property is your ideas, your inventions, and sometimes the creative processes that make your business unique and attract others to engage your idea. If you thought it into existence and want to use it in the world, the Federal Government is able to give you a property right to that idea or invention. There is a good reason large tech companies have entire departments devoted to collecting patents: they don’t want to waste time being dragged into court for every new line of code they write.  Intellectual property rights come in the form of patents, copyrights and trademarks.  Below is a list giving the legal definition and examples of each.

Trademark    

Word, phrase, symbol or design that identifies the source of a service rather than goods: logos, names, symbols catchphrases, mascots.

Copyright    

Works of literature, architectural design, software, graphic arts, motion pictures and sound recordings: books, building designs, photographs, computer games, drawings, any form of music

Patent    

Any person who invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent.
The invention also must have (1) some usefulness, no matter how trivial (2) be novel (3) be non-obvious to somebody who understands the technical field of the invention: apps, sporting goods, christmas lights, computer hardware, computer software, kitchen ware, make up, chemical compounds, prescription drugs.

    Your interest in Intellectual Property as a business owner is all about protection and investment. You want to protect your ideas and inventions from competitors by obtaining a patent or copyright.  Further, businesses often unknowingly use other entities patents in their business processes without permission, which can lead the way to patent infringement lawsuits.  There are companies–coined non-practicing entities or NPEs–out there whose sole purpose is to buy patents and engage in litigation against businesses infringing on those patents.  Being held hostage by NPE for patent infringement is a waste of time and money and can be prevented by having an attorney analyze your business practices and conduct a patent search.  Additionally, obtaining patents can make your business more attractive to investors as having secured rights to intellectual property provides an entry barrier to competitors attempting to enter your market space.
    Though intellectual property seems like a cumbersome idea and the last thing a busy start-up owner should be considering, including an IP strategy in your business plan is crucial to protecting your ideas and defending against frivolous law suits.  The first step is analyzing your business for any IP rights that your business is utilizing.  Once you understand the IP rights involved in your business you can search for any patents you may be infringing in addition to pursuing patents, copyrights or trademarks.

1. WHAT KIND OF BUSINESS ENTITY DO I WANT BE?

Maybe you are thinking, what is a business entity?  Do I have to pick one?  The short answer is no, you don’t have to choose a business entity but you are going to be considered an entity by the law anyway, so why not choose for yourself and take advantage of the options?  

There are several kinds of business entities, each with specific advantages and caveats.  While the process of becoming a business entity can be relatively simple, the choice is crucial.  The key things to think about when choosing an entity are liability, taxation, and ownership.  For example, a limited liability company (LLC) will typically protect you as an individual from contractual liability and certain tort liabilities incurred by your employees (but not torts committed by you personally even if in the course of business).  So, if you take out a loan in the business’ name and the business is unable to repay the loan, you will be protected from personally responsibility to repay the debt (as long as you did not sign a personal guarantee).  Or, if an employee accidentally makes a jalepeno churro too hot and you get sued for burning someone’s mouth, it’s likely that only the business will be liable.

Probably the most important aspect of entity choice is taxation. With both an LLC and a Partnership, pass through taxation requires both the owners and/or shareholders to pay taxes on their portion of the profits, just like you would on a pay check from a company you worked for.  However, if you form what the IRS deems a C-Corp then you will not be taxed on the profits and the corporation will be treated as if it is it is a person. Finally, entities can control the issues of ownership and authority.  Do you want to be in complete control of your business?  Do you feel comfortable handing over some decision-making power to a board of directors?  Do you want others to have a fiscal stake in the entity? If you choose an LLC you have flexibility to decide if you want to have sole control or if you would like to invite other members or shareholders to have a say in matters.  If you form a C Corp, you need shareholders, directors and officers.  In limited situations the shareholders can also serve as both directors and officers and retain more control of the company but the general structure is mandatory.  
 

Liability, taxation, and control are all things that add to the risk and decision making burdens in any start-up.  Understanding the differences between entity structures and choosing the one that best suits your business can minimize your risk and help you make efficient business decisions .