Intellectual property concerns are frequently overlooked within the financial services industry. With the rapid growth of the fintech space and the increased reliance upon contract employees and third-party vendors, intellectual property ownership can be in dispute more often than not if the proper steps are not taken. These disputes can prove costly in terms of time, litigation fees and awards, and corporate reputation. In this article, we’ll discuss some of the biggest areas of concern and what you can do to better safeguard your intellectual property rights in the financial services sector.
Types of Intellectual Property
While there are several types of intellectual property, only a few are regularly applicable to financial services companies. It’s important to know the differences before determining how best to plan your IP protection in a financial services environment.
Probably the most commonly thought of as a form of intellectual property, patents are formally filed protections with a government body. There are different processes based on jurisdiction, like the United States or European Union, but the general theory remains the same. The patented product or process can only be used by the patent holder unless the said enterprise has licensed another to use it with their permission.
It is easy to see how this can be a lucrative position as you can profit from allowing others to use something you have developed. The downside to a patented product or process is that the details become a part of the public domain due to the filed patent applications. After a certain term, such as 20 years in the U.S., the patent expires, and the product becomes available for free and public use.
Similar in application to a patent, trade secrets are another form of IP protection that can be applied much more widely than a patent. Unlike the limitations on patentable inventions, the trade secret designation can be applied to processes, products, formulas, databases, compilations, and more. The major perk is that trade secrets require no formal application or registration, and they remain secret from everyone outside the business involved, including the government. The caveat is that proactive steps must be taken for the protected IP to remain secret. Examples of those steps could be non-disclosure agreements or contract language.
It may not be immediately apparent, but many valuable assets could fall under the umbrella of copyright protection. While patents can only be applied to specific categories, the “literary work” in a permanent form required for copyright protection has been interpreted broadly by courts in the United States. It can be inclusive of financial data, computer programs, and databases created by financial service businesses.
When it comes to branding, trademarks are the gold standard. All of the money and time you have spent creating the brand recognition you desire can be lost by not applying for a trademark, allowing your trademarked brand to fall into the common vernacular, or failing to enforce your protected rights.
Protecting Your Rights
Now that we’ve covered what intellectual property you may wish to protect, how do you go about enforcing IP protection in financial services businesses?
Whether we’re speaking about contract employees or third-party vendors, the contract language is of the utmost importance when dealing with vendors, ensuring that your contract includes explicit terms that define your relationship and include applicable IP or that which can be reasonably foreseen to develop. Like some of our other tips for vendor risk managers, this preparation can pay dividends over the long term.
The contract is where you want to specify who retains the rights to IP assets and their derivatives. For example, suppose your contracted employee or vendor uses their own IP to develop a piece of IP on your behalf. In that case, you want it laid out that you have sole rights to that derivative work to avoid costly litigation down the line. Without that language, you could face patent infringement claims should you continue using that derivative work after the termination of your contract. Even if you were to prevail, the costs of retaining an attorney specializing in patent litigation, reputational damage, and supply chain interruption should an injunction have been put in place would already have been done.
Employee Scope of Work
While it’s presumed that any IP that results from your full-time employees’ efforts is the property of your enterprise, there are a few circumstances where this is not the case. If the employee developed the IP while acting outside their scope of work or can claim that the IP asset was created during their off time, then a case can be made that they retain ownership of the product of their efforts. This is why it’s important to ensure that your staff is encouraged to perform their tasks on company time and to review their job duties to verify that they accurately reflect their day-to-day tasks.
When it comes to protecting intellectual property that is established and in use, the focus shifts towards monitoring for any copyright, trademark, or patent infringement and pursuing civil claims for the same. Setting up a Google alert, running frequent internet searches, and taking other steps to actively monitor for the use of your IP assets by another party is a must. Failure to take steps such as these can result in your IP losing its value or even becoming available for public use.
Why It Matters
Your intellectual property is a valuable asset. It can be a secondary revenue stream for your business concerning licensing and collaboration. Your IP assets can even increase the valuation of your company, leading to better financing options or interest in purchasing the entire enterprise. Many times, small to medium-sized businesses are purchased outright by a larger corporation due to the valuable IP assets they hold. It is cheaper to negotiate a deal for the entire business than attempt to purchase the intellectual property itself.
At Venture Risk Management, we offer a full suite of risk management services, from third-party vendor risk management to operational risk management and intellectual property risk management. We can assist with identifying, assessing, and protecting your existing IP and developing an overall strategy to best fit your long-term business goals. Contact us today to see what specifics we can offer for your unique situation.