Lawrance B. Smerin
Hudson Advisory Group, Inc., 1997, 1998, 1999, 2000.  All Rights Reserved.


Intellectual property, such as copyrights and trade marks, and proprietary information, such as trade secrets and patents, is owned by an individual or a business entity. Violating the copyright protection, or obtaining the trade secrets, can be detrimental to a the stability and success of a business. Copyright infringement can be general, such as citing information from a text without author and text attribution, or specific, such as illegally and willfully copying and selling compact CDs of popular songs. With regard to intellectual property issues, much of the intellectual property is available to the public. The entrepreneur with intellectual property ownership must therefore know his/her rights in terms of securing profit from said property, and be able to monitor its sale and use for compliance.

Proprietary information, on the other hand, is for the sole knowledge of its owners, and is normally not available outside the business. The proprietary information critical for business success includes company financials, tax compliance, client financials, customer lists, and pricing information, as well as trade secrets, such as R&D, formulas, and software programs. While it may be illegal for an unauthorized individual or entity to access or usurp the information, the burden remains on the owner to protect the property from theft. The extent of criminal culpability is often directly linked to evidence that the owners made serious and sustained efforts to secure the information from outside interference.

Obtaining proprietary information by competitors can provide them with valuable intelligence, for example, by knowing what bid package is being put together by the entrepreneur for winning a contract. Skillful "espionage" techniques can allow an corporate opponent or criminal entity to tap into proprietary information without the owners even being aware. Remember that, in regard to intelligence work, stealing the opponents secrets is often the second hardest task, whereas the hardest task is keep him/her from knowing that the secrets have been compromised.

  1. PROPRIETARY INFORMATION: includes such things as business strategies, financial history and reports, customer lists, market studies, personnel files, and technical information developed and held in confidence by a business
  2. TRADE SECRETS: information, including but not limited to, formulas, patterns, compilations, programs, etc. that a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value b) is the subject of reasonable efforts to maintain its secrecy
  3. PATENTS: a grant of a right to exclude others from making, using, or selling of an invention during a specific time; it constitutes a legitimate monopoly. Violating this monopoly is known as patent "infringement;" 
    1. patents give the inventor exclusive rights for 17 years;
    2. steps for obtaining a patent through Patent and Trademark Office (PTO)
      • establish novelty
      • document the device
      • search existing patents
      • submit patent application
      • pursue patent application through PTO confirmation
    1. if application is rejected, the applicant can appeal to the Board of Patent Appeals

Copyrights: the protection of the works of artists and authors, giving them exclusive right to publish their works or to determine who may so publish. The time period is usually the life of the author plus 50 years.
Violation is also considered "infringement" a) a copyright does not protect an idea, but only the form in which the idea is expressed b) once it expires, it is considered public property 

Trademarks: any word, name, symbol, or device used by a manufacturer or merchant to identify his goods. Trademarks may be protected by patents or copyrights;  a) register the trademark with the PTO; b) the trademark must be used properly - if it is idle for more than four years, it is considered abandoned

Safeguarding proprietary information or trade secrets

  1. employees are the most likely source of compromise, either willfully (malfeasance) or unknowingly (nonfeasance)
  2. employee education and physical safeguards are means of protection;
  3. "espionage" and "electronic eavesdropping" (cellular phones, hotel faxes, etc.) are critical sources for theft of proprietary information
    • 60% of theft = pricing information
    • 33% of theft = product development and specifications
  4.  National Stolen Property Act: prohibits interstate or international commerce for any amount over $5,000 if the individual or corporation knows it is stolen or fraudulent - only applies to physically tangible items (e.g., computer files), as opposed to the spoken word.

In a competitive and dynamic marketplace environment, it is essential that a business retain its proprietary information (e.g., financial position and pricing strategies), as well as its trade secrets (e.g., product formulas) in order to maintain its competitive advantage and provide unique value-added services to its customers.

Relevant WWW sites:

The following two sites contain information relevant to patent searches and registration:

  1.    U.S. Patent and Trademark Office site. It provides general information about application for and granting of patents, as well as extensive information on patent and intellectual property issues.
  2.   Site for the World Intellectual Property Organization (WIPO), a specialized UN nongovernmental organization (NGO) located in Geneva, Switzerland.  Provides information on intellectual property issues and agreements, and information pertaining to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
  3.    Intellectual Property magazine website.  Published monthly, the site focuses on cyberspace issues of intellectual property law and rights.


Gifis, Stephen H. Law Dictionary. New York: Barrons, 1984.

Mandell, Steve A., et. al., "Safeguarding Proprietary Information" Seminar. Vienna, VA:  The Mandell Law Firm, January 22, 1996.


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