A small business owner might spend his days installing air conditioners, setting up pet sitting appointments, or taking the first steps toward building the next social media phenomenon. It doesn’t matter, says Richard Catalina, an attorney with Szaferman Lakind at 101 Grovers Mill Road. “All small businesses have intellectual property, whether they realize it or not.”
Intellectual property runs the gamut from the name of a company to the apps it sells or the next generation automatic thermostats it designs. “Customer lists, marketing plans, research, notes, databases, it’s all intellectual property,” says Catalina. And it all needs to be protected.
Catalina and his colleague, Lionel Frank, give a talk on intellectual property for small business, “Know your rights: What to Protect and How,” on Tuesday, December 11, at 8 a.m. at a meeting of the MIDJersey Chamber of Commerce at the offices of the United Way of Greater Mercer County at 3150 Brunswick Pike, Suite 230. Cost: Free for chamber members, $35 for all others. Call 609-275-0400.
Catalina is a 1983 graduate of Trenton State College who earned his law degree from Syracuse University. He and his wife, Marge, who works at St. Gregory the Great grammar school, have three children. A lawyer for most of his life, Catalina also got some experience in running a small business when his parents, Richard and Maureen Catalina, made a midlife move into the restaurant business, opening two Mr. C’s restaurants, one in West Windsor and one in Plainsboro, when he was in college.
The senior Richard Catalina had been a buyer for Sears, headquartered in the retailer’s New York City offices. “Then the Sears Tower in Chicago was finished and they wanted to move his whole department to Chicago,” his son recalls. But none of the four Catalina children wanted to move. “My parents considered going on their own,” he says, noting that he and his siblings were nearly independent by that time. But the senior Catalinas really didn’t want to leave West Windsor, either, and Richard Catalina had always wanted to start a business of his own.
So, for seven years in the early 1980s the family ran the restaurants while the youngsters continued their academic careers and their mother kept on working as the secretary to the West Windsor schools’ superintendent.
Catalina’s main takeaway from those years: “The buck really does stop with the business’ owner. If a bus boy doesn’t show up, you have to get out there and bus the tables. You have to be willing to do everything.” He says that when he meets with fledgling business owners who understand that, “I know they have a good chance of succeeding.”
Another ingredient in success involves a smart strategy for taking care of intellectual property.
Take a good look around. “What do you have?” is the first question to ask, says Catalina. Start to protect the intellectual property that defines and powers your company by making a list. Procedures, software, processes, product names, client addresses, mailing lists, and training manuals could all be valuable assets.
Let your plan guide you. If a business owner plans to stay small and local, minimal protection may be required. But any owner with thoughts of franchising or growing substantially needs to put in place a comprehensive plan for protecting intellectual property.
Start early. Catalina has seen time and again that where there is a successful product or a catchy name, “there will be knock-offs.” Sometimes lots of knock offs. Better to add protection, possibly via a copyright or a patent, before the knock-offs start.
One of his clients, a local company that once ruled the dietary supplement weight loss category, attracted legions of copycats that tried to roll out identical looking tiny bottles with very similar names and nearly identical labels. But the supplement name had been registered and courts ruled time and again that copycats had to remove the knock-offs from shelves.
Rein in employees. If intellectual property protection had an alarm bell, it would be the start of hiring — or of retaining independent contractors to work on projects. As soon as a young company begins to hire, it needs to have confidentiality and non-compete documents drawn up.
Catalina says that it’s prudent to allow employees and contractors access to intellectual property only on a need-to-know basis. But these people will still have access to everything from marketing plans to key software in the course of their work.
Sometimes, he points out, the information will be “in their heads.” Without a confidentiality agreement, any employee can take that information, walk across the street, sign on with a competitor, and seriously hurt a former employer.
A confidentiality agreement or non-compete contract can cause the employee to think twice. Courts, says Catalina, will enforce these documents if they are reasonable. A reason to retain an attorney to draw them up, he says, is that documents that are draconian, that effectively keep an ex-employee or contractor from earning a living, will not hold up in court. “You need to strike a balance,” he says. Perhaps the employee could agree not to work for certain direct competitors for a year or not to work in a particular geographic area.
Obtain a patent — or don’t. Patents provide protection, but at a price. Good for 20 years, a patent is public information. “The recipe for Coke isn’t protected by a patent,” says Catalina. And that has worked out well for the soft drink giant, which would face two problems if it patented the recipe for its cola. For one thing, competing companies would know just how to make the internationally famous drink. Also, the protection comes with an expiration date.
Often, says Catalina, it’s in a company’s best interest to keep vital information as a trade secret, as Coke has with its cola. Many of his clients are technology companies. For them, he says, it is often a good idea to hold software as trade secrets — which is where those confidentiality agreements come into play — but to obtain patents for its processes, say smartphone apps or next-gen home security alarms. This is so, in part, because, “the processes will be obsolete in 20 years anyway.”
Play offense. Multinational corporate giants have entire departments dedicated to fighting off the tiniest infringement on their patents, which are legion. (“IBM obtains 3,000 patents a year, every year,” says Catalina.)
A small business that has been diligent in obtaining patents can more easily hold its own in these battles, he says. What’s more, with patents in hand, it can threaten to initiate lawsuits of its own. “Licensing works both ways,” he says, “it can be a defensive or an offensive tool.”
Business, after all, is a game, and the winners will not only build up substantial assets, but will recognize the importance of every one of those assets — and will put in place the best possible protections to keep them working.