Business owner and patent attorney, Chris Paradise, breaks down intellectual property for us and why it’s important to business owners. From understanding copyrights to registering a trademark. He’s a wealth of knowledge who is passionate about saving small business owners money!
Welcome to Business Talk Sister Gawk! I’m Bekkah! And I’m Ruthie! And today’s episode is “What Is Intellectual Property?” Today with us we have a special guest, his name is Chris! He’s gonna tell us a little bit about what he does! Thanks so much for being with us today!
Chris: Thank you!
What Do You Do as an Intellectual Property Lawyer?
Bekkah: The first question really is what do you do?
Chris: I do a lot of things but what I like doing is help small business owners grow the value of their business using intellectual property.
Bekkah: How do you do that?
Chris: That’s an interesting question because the model that’s been in existence for a long time is of course kind of the law firm model. I’m a patent attorney, intellectual property attorney. I have my own law firm now. I was once working in a large law firm in one of those corner office things. But the billable rate for a lawyer in a corner office is somewhere around $650 an hour and most small business people can’t afford $650 an hour no matter how smart you are and how efficient you are. So I started my own law firm to use flat fees so that they’d be relatively reasonable and I could help more small business people grow their businesses but even that is expensive for a lot of businesses. I mean, especially when you’re talking about businesses these days. I’ve come up with a new and better way of doing that using online video training, offline video training, one-on-one sessions, and the IPmaster Class. Which Bekkah knows about that actually provides interactive help and coaching to help the business owner grow the value of their business without really spending as much time on my side doing all the work.
Ruthie: Okay, let’s ask a clarifying question here. For our listeners and for me because I feel like I don’t have a great grasp on this but explain to us what intellectual property is.
Chris: All right. Intellectual property is a legal way of protecting the intangibles in a business. We have to step back one and say, “What are intangibles?” Intangibles are things like the creativity, the creative works that you generate. It’s the know-how and ideas that you have. It’s the inventions you might come up with. It’s copyrighted works that are artistic in some way. It’s all of those things that bring value to a business but you can’t really touch them. You might be able to see them on a screen, you might be able to see them on a piece of paper, but there’s a creative element in there that is not something that you can touch.
That’s why it’s called “intangible”. That intangible property, all the things that add value to a business, those are worth more than 80% of the value of businesses listed on the S&P 500 and even more for innovative and creative businesses – artists and people that are coming up with new products, new services, and new ways of doing business. It’s substantially more than 80% of the value of the business that is locked up in those intangibles. The way that you protect that is with intellectual property. Intellectual property includes registered copyrights, registered trademarks, patents, trade secrets, which aren’t registered but are nonetheless protected under law. Intellectual property is a kind of law that allows you to own and protect those valuable intangibles that make your business worth something to your customers.
Why Is Intellectual Property Important to Protect in Your Business?
Bekkah: Tell us why is intellectual property important to have for your business.
Chris: Well, intellectual property is only important if it’s protecting something that is valuable, right? You could spend tens of thousands of dollars or even hundreds of thousands of dollars on a patent and it could bring no value to your business if it’s not protecting an invention that has value to your customers. I see that all the time; 90% of the people that come to me, maybe more than 90% of the people that come to me, looking for a patent don’t actually have a patentable invention that would benefit from ever having that patent issued.
I try and convince them not to waste their money which is kind of against my own interest but it’s definitely in their interest because they should be focusing on what will bring value to their company. If intellectual property itself doesn’t have value and that’s my belief. It doesn’t have value in and of itself, you have to look at what does have value. That’s your intangible property. That’s your creativity, it’s your know-how, it’s your inventions, it’s your copyrighted works. Those things have value to your company because your customers value those. They want more of what you’re offering and that builds your brand. It builds the value of your company and ultimately that’s the purpose of it.
Proverbs has an expression that “wealth has wings and flies away” and it’s so true! I’ve been around a while and it doesn’t matter how much money you make, you can always spend it. It doesn’t matter whether you bring that in and put it in the bank. Eventually, it’s going to leave the bank, right? You put it in stocks, eventually, the stock market’s going to drop, something will happen, and that kind of wealth, that kind of fungible cash, will eventually go away. You certainly can’t take it with you! But the value of a business creates wealth that sticks around forever. A brand can last forever and never expires. Just as examples, there are brands that are worth half a billion dollars like Apple, Google, and Amazon. Those are extremely valuable brands but yet they don’t exist except in the hearts and minds of their customers. The goodwill associated with those brands actually has value. But the trademarks for Apple, Google, and Amazon protect that goodwill and protect that brand. That makes them worth getting.
What Happens When Someone Infringes on a Copyright?
Ruthie: That is really valuable! I was just geeking out! Everything that you were saying. The way everything that you were saying was like, “Wow! That makes so much sense!” The way that you articulated that was really cool. What happens then if say someone tries to infringe on that copyright? If I were to say, “Oh! I’m with Apple now!” and I start producing products that are really low quality. What would happen? How is it protected with this intellectual property?
Chris: Well, you can imagine that brands that have a half a billion-dollar value to their brand are very jealous for their brands. They don’t want people disparaging and tarnishing them. I have a story about that. There was a fellow who I ran into and I was talking to him. He had set up a social media site for artists. I can’t remember what he called it but he called it something “book”. Within about six months a lawyer that was serving Facebook sent him a cease and desist letter even though the first part of it had nothing to do with “face”. No none of it seemed like it sounded like Facebook or anything. Just the fact that it had “book” in the name they sent a cease and desist letter. He, naturally, thought it was a total mistake because there was no chance of confusion between his little artist site and Facebook which everybody knows. So he called the attorney back and all his naivete and the attorney explained to him that he had a 50 million dollar budget without even asking Facebook for any more money and asked him how much his budget was. He didn’t have a budget for litigation so he changed his name. That’s just something when you’re looking for a brand name you have to consider that, right? Do the search. Find out whether or not some large company that’s going to have a team of lawyers suing you owns something similar and avoid that.
Come up with something distinctive of your own. He eventually did and the name was better. I can’t remember what it is. He sold the company off before he even met me and made some money on it, but he came up with a better name than his original whatever it was “book” and it turned out well for him. But it doesn’t always turn out well! You hear about all these like mom-and-pop coffee stores that get into lawsuits with some big company and it puts them out of business. That’s always a shame. Part of what I do is try to keep that from happening. That’s why I try and reach business owners early on before they get too carried away in their brand name and try and get them to do a search and make sure that they can actually own it because that’s the way you own a trademark. You own a trademark by using it. By building up goodwill among your customers. If you can find a trademark that can be distinctively yours then that’s a good trademark.
What Property Rights Can You Protect With a Copyright?
Bekkah: What intellectual property rights are protected by copyright?
Chris: Copyright is really an amazing intellectual property right because it lasts for your life plus 70 years if you’re an individual. If you’re a business it lasts for 90 years so it’s a really long time that you get to have the exclusive right to make, make derivatives of, use, and publish that copyrighted work. It is the longest period of time other than trademarks because trademarks never expire. Trade secrets never expire except trade secrets often get discovered and will eventually not be secret anymore. But trademarks can go on forever. Other than that, copyrights can go on for the life of the author plus 70 years! That’s a very long time.
What exactly does it do for you? Let me give you some concrete examples. Let’s say you have a copyrighted image that your company owns and someone else decides they’re going to go into competition with you. Instead of coming up with their own copyrighted images and their own copy on their website they just borrow yours. Well, you can close them down by contacting their internet service provider and their social media sites and they will remove those infringing copyrighted works by closing down that website. That’s a very powerful tool you have that you don’t even have to go to a lawyer or go to court to do. It’s relatively easy just to follow the instructions that the internet service providers have. The reason that that exists is because there’s a law called the “Digital Millennium Copyright Act” and it requires any internet service provider in order to get immunity from copyright infringement to have a reasonable takedown policy. The guidelines for that takedown policy are really favorable to copyright owners because within a few days like maybe five days, they need to take down that infringing website off of their site. The copyright owner wins. Most copyright owners don’t know this really. It’s a very powerful way of protecting your brand. Not only do you protect your brand with trademarks you can also protect it with copyrights because a lot of times there’s also copyright infringement when someone is trying to knock off your brand.
What Is The Difference Between a Trademark and a Copyright?
Ruthie: Tell us about trademarks. How are those different than copyright?
Chris: Well, a trademark is entirely different than copyrights because remember I just said copyrights give you the right to copy things and publish them and make derivative works? Well, that’s not what trademarks do at all. Trademark is just there to protect consumers from confusion. What does that mean? If you have two products and they’re in competition in the marketplace and one of the products is called “Alphabet Stew” and the other one is called “Spaghettios”? There’s no problem, right? “Alphabet Stew”. Spaghettios. No one’s gonna confuse those. But if someone comes and says, “You know I love that Alphabet Stew product. I’m going to come up with an ‘Alphabet Soup’ product.” Well, obviously consumers are going to be confused because Alphabet Stew and Alphabet Soup sound a lot alike and they’re going to think it’s the same brand. This means that they can no longer trust the same quality of that brand because the other company might have an entirely different quality standard.
Trademark law allows a trademark owner to stop an infringer from confusing the consumers by coming out with something that’s likely to cause confusion in the marketplace. It is there specifically to protect the trademark owner’s brand. Name, brand, identity even its trade dress, which is a concept most people don’t even know about. Trade dress is the look and feel of products so maybe the packaging of products or even the look and feel of a restaurant can be trade dress. It’s when a consumer comes in and they see it they recognize it as belonging to that brand. All of those things give consumers confidence that the product or the services they’re receiving is coming from a trusted source. When someone infringes that, they’re actually trying to confuse consumers or inadvertently confusing consumers. The trademark owner has a right to stop them from doing that.
What Is A Trade Secret?
Bekkah: Wow! Okay! The last question on that category that I wanted to clarify is what exactly is a trade secret? Can you give us maybe an example of what that would look like?
Chris: Sure, absolutely. A trade secret can be a wide range of things. Of course, it can be like the recipe to your secret sauce. The Coca-Cola recipe kept in a vault somewhere in the Smoky Mountains. I don’t know if that’s true but okay. At any rate, it’s kept in a vault somewhere. That recipe that no one knows except for two people and they only pull out the recipe when they need to confirm it and they scatter around the different ingredients and make sure that they only get mixed in one place or whatever. They go to great lengths to protect the secret of what goes into Coca-Cola. That is a trade secret, certainly! But it also could be a trade secret who your customers are. It could also be a trade secret of who your vendors are.
It could also be a trade secret how you train your employees. It could also be a secret the process you use in your factory for producing some product or chemical that would be altered if you weren’t following that process and it’s not easily figured out by somebody else. What we call in the trade “reverse-engineered.” If it’s easy to reverse engineer, it’s not a very good trade secret, because they can just look at it and figure out how you did it. But if it’s hard to figure out how you did it then it makes a good trade secret that can last years and years or like Coca-Cola. I mean all these years so trade secrets are very valuable and very common. In fact, I was a consultant for the aluminum industry when I was a Ph.D. graduate student. I was doing research and material science and that includes Aluminium smelting. I worked with two different aluminum smelters during my Ph.D. and they both had very similar trade secrets. Most people think that’s impossible you can’t have the same trade secrets but you actually can because those two companies had very similar trade secrets but a lot of other people out there didn’t know their trade secrets even in the industry. I was sworn to silence on what their trade secrets are but I guess I just told those two companies that they have similar trade secrets but that was like 30 years ago.
Ruthie: All right, tell us about these intellectual property classes that you’ve set up. You were kind of telling Bekkah and me a little bit about those and I’m really curious to hear more about it.
Chris: What I’ve done is I’ve broken up into easily digestible pieces the kinds of things that small business owners need because as I was explaining you really don’t want to spend thousands of dollars on something that doesn’t add value to your company. The first thing is to figure out what adds value to your company and I have a metaphor for that called the “Concertina Principle” because when I started my career it was not as a scientist or a lawyer. It was as a military officer. I graduated from West Point and went into the military for five years and the National Guard again for about six more years. What you learn there is through history, the West Point side, and through practice is whoever controls the high ground usually wins the battle even if they’re way outnumbered. The high ground is just what we in the military call “key terrain.” That key terrain is like a hill that can see the entire battlefield and you can see what’s going on and you can direct your soldiers and fire to wherever it needs to go on the battlefield and you have a significant advantage. Well, it’s the same thing with intangible property. In this case, intangible property gives you that high ground. It gives you something that your customers really value and gives you a competitive advantage in the marketplace. The idea in small unit tactics or even in larger unit tactics was to hold that high ground, hold that key terrain and win the battle. It’s the same with your intangible property.
Your intangible property that has value is what is valuable to your customers. They want your products and services because of what your intangible property is. It might be some better quality of your products or it might be a lower price than you produce through a trade secret or it might be your creativity. It might be your entertainment value on the internet, on Youtube. It might be any of those things but it’ll be different for every company. Every business owner has strengths and weaknesses and those strengths that you have if they’re distinctive and unique to your customers you will find customers that value that. Then what you want to do with intellectual property is you want to figure out how can I defend that key terrain. Concertina refers to “concertina wire” and my metaphor is that registering a trademark or registering a copyright is like rolling out a strand of this concertina wire.
I don’t know if you’ve ever seen concertina wire but it comes in these big bales or coils. A couple of soldiers can stake it out and they can pull out this concertina wire like a slinky. I don’t know, some people don’t even know what a slinky is anymore but a slinky is a wire that’s circular and you can pull it out and it stretches for a long way. It sets up a really quick barrier and that can be what your intellectual property does. The trademark registration that you file sets up a barrier that prevents your competitors from encroaching on your key terrain which is the intangible property that you have. That’s so valuable to your business because your customers put value on it. It builds value in your company that makes your company worth something even when you’re dead and gone. Just like the copyright registration that lasts for the life of the author plus 70 years, a business can outlast the owner of the business, the founder of the business. It’s real wealth that you can create that can go on for generations. Cash will never do that.
What Resources & Tools Can I Use To Learn More About Intellectual Property?
Bekkah: What resources and tools do you recommend to anyone who’s looking to learn more about intellectual property?
Chris: That’s kind of a multifaceted question. Certainly, I’m going to recommend my own tools
Bekkah: That’s ok.
Ruthie: Fair enough.
Chris: But there are also lots of free tools out there. There is no reason to go out and use a company like Legal Zoom or something. Those kinds of companies just put an extra layer over what the real tool is that’s doing the job. If you’re going to file a trademark registration you should file that trademark registration with your Secretary of State in your state if you’re using it only within the state. You should file that registration with the Federal Government through the United States Patent and Trademark Office if you’re going to file it with the Federal Government. They have their own interface. It’s not hard to learn. What I do instead, I think everybody’s heard the expression “if you give a man a fish, he’s not hungry for a day, but if you teach the man to fish he’s going to be not hungry his entire life.” My idea is that it would be much better to teach startup entrepreneurs and small business owners how to work with those interfaces that exist that are free than it is for me to charge twelve hundred dollars or something to file a trademark registration for them.
Even if they take half an hour or an hour of my time to teach them that they actually register as Bekkah did (disclosure if you end up buying something, we’re an affiliate). If they register and have a one-on-one call with me I can walk them through the application and teach them how to do it the first time and they’ll be able to do it every time after that. Well, taking that one step further I came up with the upscaling program which is online videos that they can look at and watch and learn from over and over again so that every time that they want to file a trademark registration they can go through the training, follow the step-by-step instructions, and file their registration themselves. Or have someone in their organization follow that training and file it themselves without the high costs and it goes from $1,200 or $1,500 that a trademark attorney would charge to $250 to $275 that the trademark office charges. That’s the government fee you can’t get less than that a state trademark registration in Florida is only $87.50. If you can do it yourself you can do a lot of them.
Ruthie: Ok, let’s get down to Florida I guess! Okay, Wow! I feel like this is a little bit sandblasted to my brain with all this knowledge but this is really good and thankfully it’s recorded audio so we can listen to it again and again!
Chris: Yes that is the benefit of having recorded audio and video that you can actually watch it again and again and sometimes it takes a couple of watchings to get through and really understand all the material but intellectual property sounds very confusing. It is very confusing to many people but it’s really not that hard to learn especially if you have a good teacher that kind of walks you through it a little bit at a time. That’s what I’ve done with the ips scaling.
Why It’s Important to Set Up a Limited Liability Company
Now breaking that down further I have broken into own, protect, and grow because the most important thing that any business owner needs to do is to make sure that you own everything related to your business. You set up a Limited Liability Company so you own the business. Then you make sure that Limited Liability Company owns all of its intangible property because you don’t know when you’re starting out which intangible property is going to be your most valuable intangible property. You don’t know if it’s going to be your creativity necessarily or you might come up with some trade secret inventive process or you might come up with something that’s patentable or you might just have a really cool brand that catches on and goes viral.
Any of those things can happen when you’re starting and it’s not necessarily what you think it’s going to be. You should make sure you own them all. Then the ones that are valuable, the ones that turn out your customers really appreciate, and it adds the most value to your business you should make sure that those are protected. You run those strands of concertina wire out there to give that key terrain some ability to defend itself. You start doing everything you can with copyrights, trademark law, trade secret law, patent law, and whatever else you need to build up that defensive perimeter so that if some large company comes after you and they want to take you out you can defeat them in the courts. You can defeat them because you’ve taken reasonable measures to protect that intangible property even though you might not have nearly the resources that they do.
