Using Someone Else's Intellectual Property Comes At a Price
Entrepreneur's New Year’s Guide
There's no such thing as a free lunch but, for many entrepreneurs, clicking around makes the Internet look like an intellectual property candy store.
That why's Darrin Grandmason watches his interns like a hawk.
"I have to maintain a vigilant watch to make sure that something my interns are doing isn't violating someone else's IP," says Grandmason, the owner and chief executive of DNA on a Shirt, a company, based in Phoenix, Ariz. that creates T-shirts and customized artwork based on people's DNA.
Just last month, an intern -- he has several long-term ones, some of whom are musicians -- found a music track on a news aggregator site, and presented it to Grandmason, who immediately asked whether the music was free of a copyright. More scrutiny on the part of the intern, in the presence of his boss, revealed the music had an owner. The intern's reaction was incredulity because his friends apparently used other people's IP as a matter of course.
"There is a gray area, even among educated individuals who are trained in these matters," says Grandmason. "They believe, because digital material is 'out there,' that it's okay to 'borrow it.'"
Grandmason, who has terminated one intern for poor IP diligence, is acutely aware that business owners can't be too careful. "Ultimately, with IP infringements, I would face a loss of credibility and integrity, my company would get sued, and I'd be the one who'd get the cease-and-desist letter."
One entrepreneur who did receive a cease-and-desist -- from the U.S. Internal Revenue Service -- is Jonathan Weber, founder of Marathon Studios, a startup that develops interactive portals, apps and media properties, and is based in Stroudsburg, Pa.
Marathon maintains a tax-information site. Two years ago, Weber's designer added the IRS logo to a feature banner on the homepage to make the content look more inviting to readers. "Several months later, I got an email from the IRS that was very specific about my having to remove that logo -- which was IRS-copyrighted property -- within seven days, from the website," says Weber. "Then, the next day, I got a follow-up phone call from an IRS lawyer.
"I wasn't even aware the government held copyrights. But then I learned that, although information published by government agencies is public domain, certain pieces of government IP, including logos, identifying marks and slogans, can be subjected to copyright protection, just as they are in private industry." Weber removed the logo.
"The incident was a warning shot fired past my head," he says, adding those couple of days were seriously stressful. "It woke me up as to how important it is for all entrepreneurs to always check their content for potential IP infringements. This was a really big learning experience for me and my team."
Kevin Grierson, a partner and intellectual property co-chair at Culhane Meadows, in Washington, D.C., says that, even as recently as a decade ago, many IP infringements would have slipped under the radar. "But now, search engines keep companies exposed, alerting attorneys to become aware of even the slightest IP infractions," he says.
Often, illegal IP usage is due to business owners' assumptions. For example, Grierson says many people think that by getting their company name registered with their state's corporate commission, they're good to go. "These people aren't aware that the state hasn't checked whether your company name is similar to someone else's trademark," he says, noting that, if there is a strong similarity, there might be an IP infringement.
So why wouldn't a fledgling enterprise take precautions? "Many new companies are going at a hundred miles an hour and are in a rush to get to market," says Grierson. "They often take a 'Shoot first, ask questions later' approach to IP, and have every intention of picking up the pieces later on. Many times they do not, unless forced to when they receive a nasty letter from an attorney claiming IP infringement."
When it comes to IP, entrepreneurs should ideally do a cost-benefit analysis for each IP issue they face, says Ashlyn J. Lembree, clinical professor of law and the director of the Intellectual Property and Transaction Clinic at the University of New Hampshire School of Law. "For the benefit gained -- for example, launching a company quickly -- the financial and other costs of doing it right may exceed the benefit," says Lembree. "And ultimately the balance here depends on business owners' level of risk-tolerance."
Lembree gives business clients who attend the clinic percentage assessments of their cases. "I may tell them, for example, that if they adopt a certain trademark, there's a 15 percent chance that a larger company will come after them, but that they also have a 60 percent probability of success," she says. "Based on their level of risk tolerance, a client can then use this information to help them in the decision-making process."
Lembree says that business owners with a proclivity to worry that their decisions may come back to bite them down the road should play it cautiously and seek the advice of an IP attorney. For others, who are either more comfortable with simply crossing their fingers about an outcome or do not have a budget for attorney fees or access to free law-school clinics, she advises conducting a thorough online research to determine if they're infringing on someone else's IP. "This strategy is better than nothing," she says.
Because entrepreneurs are often under tight budgets, the ongoing services of an IP attorney are often out of reach. That set Mary Juetten thinking. In 2011, Juetten launched Traklight, software that educates small business owners on how to protect their IP and also how to ensure they don't accidentally infringe on someone else's.
Another common misconception is people assume they "own" what they've paid for. "For example, a business may have paid a videographer to shoot a video," she says. "But the videographer may still own the files to that video and, therefore, the rights to control its future use."
For Grandmason and his interns, using Traklight regularly -- to the tune of about a $50 subscription annually -- provides peace of mind.
"You have to develop a tight set of parameters," he says, noting that many interns believe a lot of IP is up for grabs. "They think they can borrow it and, I'm like, 'No, we can't.' Actually, I don't say it that way. I use a few extra choice words."