How to start a business if you’re lost in legal terms?

The thought of starting a business has probably crossed everyone’s mind. The thought of freedom, independence and leadership excite many people, and working on a small business and managing your daily duties became the biggest trends during the pandemic. Though most initial passion projects don’t survive long, owners with the strongest motivation and determination eventually succeed. The process is hard, bumpy, and the progress is barely linear at the beginning. The first serious panic attack usually hits people when legal paperwork becomes relevant. Each country obliges business owners to register their newly founded company, open a separate bank account and many more. But what about protecting an invention? Something you don’t want to be copied by other people? Something unique that never existed before? Something only your business can use or do? Let us take you through all the definitions, essential steps and good-to-know facts! This article was written with the help of Zsofia Pintz, European patent attorney and European trademark and design attorney, founder of the legal consulting firm Fillun.

Patent, Copyright and Trademark… What are the differences?

Let’s start with defining the concepts above:

1.    Things you should know about copyright

Copyright is a type of intellectual property that gives its owner the exclusive right to duplicate and distribute copies of creative work. It is usually valid for a limited time only. The creative work may be in multiple forms, such as literary, artistic, educational, or musical. Copyright is an automatic right, you don’t need to apply anywhere to obtain it, nor do you have to pay. In most countries, works of authorship are protected automatically upon creation, without the need of any formalities. However, most places have a system for voluntary registration of works. Even though it is only voluntary, it is highly recommended, as it guarantees to prove the validity of the copyright and makes sure that the creation is tied to the real owner’s name.

2.    Things you should know about trademark

Trademark is a type of intellectual property; it is a recognizable sign, design, or expression capable of identifying and distinguishing the goods or services of one enterprise from those of other enterprises. Well-known examples of trademarks are the logos of Apple, Nike, Adidas and Toyota. A registered trademark entitles its owner to the exclusive right to use the trademark. To obtain a registered trademark, you first have to file an application, describing the sign you would like to register along with the goods and/or services you wish to use your trademark on. To be eligible for registration, your designed trademark must be distinctive and must not describe what you sell. Generic and descriptive terms cannot be registered as a trademark, since nobody should be allowed to use them exclusively. For example, fast and loud would not be accepted as a trademark for a company that sells turbo engines, or merely laudatory terms such as “best” or “quality” are likely ineligible for protection.

3.    Things you should know about patent

A patent is an exclusive, territorial right granted for an invention for a limited time. They may be granted for inventions in any field of technology, from an everyday tool to a power plant, as long as the invention fulfills the patentability requirements. An invention can be a product, such as the machine, an apparatus or a chemical compound, or a process, for example, a manufacturing process. However, the protection it provides is not gained automatically, you first have to file an application, describing the invention in technical terms, in a form that meets a dozen of requirements. Any technical information that is not already in the public domain can be protected by a new patent. So if an invention has been displayed or sold, or its technical details were published, its inventor may not get patent protection later. Therefore, any discussion with technical partners, developers or investors before patent filing should take place in strict confidence. One of the things you should keep in mind is that a patent is only valid in a certain geographical area, and there is no worldwide or infinite patent. Though the process is expensive and very time-consuming (think in years), you cannot simply purchase these documents. Every procedure is different, and the final decision is always up to the patent office. There are tons of misconceptions circulating, one of them being that a patent itself will make you rich. Well, if your business takes a dive after you obtained it, it will only make you broke. Some patents are not worth anything, nor is it a guarantee that you can produce and sell your product. It also doesn’t mean that you are not infringing someone else’s patent while you market your invention. To properly evaluate your chances of success and relevantly see potentials we recommend you consult a patent attorney in your (target) area.

What risks can you avoid by obtaining a patent/trademark/copyright?

After the concepts became a little less alien, let’s talk about how you might come across issues related to them. You might have heard horror stories about having to call back products because of another seller owning the rights to them. This can mean a significant loss for the business, measured in long working hours and a lot of money. Unless you trademark your name, other firms can also practice under it. Nobody wants to lose customers, rebrand their entire business or let their reputation suffer only because of a competitor under a similar name, whose actions they have no control over. Customers easily confuse brands that target the same market with similar products. We use thousands of trademarked products daily, make sure to choose one that is specific to your company, and only yours.

Why is it important to think about these opportunities?

First of all, they increase the value of your business in many ways, by contributing to your public image and brand recognition. Investors (not including incubation projects) tend to give their money to businesses who own their IP, so patents and trademarks may provide you with extra revenue and room to improve in a stable environment. They also improve your company’s assets, meaning that you will be able to sell or license these rights anytime-
allowing you to make money later. License agreements are also possible and may drive you massive profit later. As trademarks and patents recognize you as the owner by law, they provide you with exclusive rights, which prevent others from using, selling, producing or marketing the same product, method, or brand. This limits your competition to your advantage, and also serves as an effective marketing and communication tool, by differentiating you from competitors on your market.

Zsofia also highlights the results of a 2019 study, conducted by the European Patent Office: “The IPR-owning SMEs outperform their counterparts that hold no IP rights. They are, for instance, more innovative, more likely to grow over time, and have almost 32% higher revenues per employee than SMEs that have no registered IPRs.”

Is it too late to think about patents and trademarks after you launched your business?

Short answer: no. As patents and trademarks are completely voluntary, many (mainly small) businesses operate without them. However, Zsofia recommends you act as soon as your plan is stable before you’d publish your idea or business. As no patent can be obtained over already known technology, machines, or production methods, you should start the process before you take steps about publishing any part of your innovation. Though the regulations on trademarks are a bit looser, it’s worth doing a trademark search before forming the company: the brand name should not be infringing others’ trademarks, and you also have to make sure that your chosen name is unique and non-descriptive.

What are the tasks, timelines and costs you should consider when applying for trademarks or patents?

The process looks different in each case. Trademarks can be filed within 1-2 weeks after appointing counsel and meeting the attorney, and the whole process takes a couple of months (4-7 months). The cost varies from country to county: about €2000 per trademark in Europe and the United States. National trademarks can be obtained for around €500-1000. An application for a patent can be filed within 1-2 months after appointing and meeting an attorney, and the process can stretch through multiple years (3-4 years in the majority of the cases). Preparations cost €5000 on average but are highly dependent on the attorney’s fees. The costs may go up to €5000-10000, as countless procedures require money.

You need to remember two of the most important things from this article: start thinking early and contact a patent and trademark attorney even earlier. We were honored to chat with Zsofia about the matter, and we both wish everyone the best of luck in business! If you ever feel stuck or just want to read more about these topics feel free to check out the articles on Fillun!