S.3 Ep.32 TMH Greg Stone IP in Construction
Many construction companies develop meaningful innovations that create strategic advantages in their market in a crowded field of competitors. Perhaps they develop a tool, a fabrication method, or an operational process that gives them the upper hand only to have an employee leave and bring that information to the competition, diminishing a hard-won advantage.
When you think of Intellectual Property (IP), the industries that come to mind immediately are manufacturing and software, not construction! Greg Stone, IP Attorney with Whiteford, Taylor & Preston, joins us to see how construction companies can protect and monetize their IP.
Transcript:
00:00
Speaker 1
Good morning. I'm not saying it works.
00:01
Speaker 2
I wish you God speed.
00:03
Speaker 1
Godspeed with all of that. I think that's really nice. You know, I'm not sure what kind of success you're gonna have with that today because the world, my friend, has changed. Right?
00:14
Speaker 2
Latin American construction workers, they have different needs. They have completely different.
00:20
Speaker 3
These awards have a huge, like, criteria that you have to fill out. And they usually have a community service or community relations portion, you know, the most with a high performance value. And, you know, sometimes it's 11 o' clock at night.
00:38
Speaker 1
Funny, isn't that? Yeah, not for me. Not for me. At 11 o', clock, I am guaranteed to be snoring.
00:45
Speaker 3
So.
00:45
Speaker 2
So.
00:55
Speaker 1
Hey, it's morning huddle time. For those of us, those of you who are joining us live, thank you for hanging in there. We the joys of live production. We are starting 11 minutes late and that is on. Really? Nobody? Just. It's on technology. I, I literally just had to do like, coding to get this. I, I had three panic attacks. But we're here and thank you, everybody. Thank you, Greg, for having such a. Being such a good sport about. Greg was like, so is this normal? Like, no, this is normal. I've had. I haven't had to deal with this in 30 meetings.
01:31
Speaker 2
Not a problem. Not a problem.
01:33
Speaker 1
You were very calm. Your calm brought a lot to the table. All right, Stacy. Greg. Thank you so much, Greg, for being here. Stacy, how are you today? What's going on in your world?
01:45
Speaker 3
I'm doing good. It's fall. The leaves are looking beautiful. Maryland.
01:51
Speaker 1
That it is. Yeah, it's, it's looking great. Greg, how about you? What's new in your world?
01:57
Speaker 2
Same sunny, nice day for now. Cool day in Baltimore city.
02:03
Speaker 1
So, yeah, we'll take it.
02:04
Speaker 2
All good?
02:05
Speaker 1
Yeah. So were getting like, as were killing time during the panic attack, one of the things that Greg and I were talking about was that Greg is in kind of has been a lifelong musician and has been playing out for a while. Greg, just give us the. What are you into and where are you playing?
02:27
Speaker 2
Yeah, sure. So I actually played out in a cover band from an 80s cover band. From 2006 to 2014, I was the keyboard player for Voodoo Economics. It's a nice 80s themed name there. And just after we stopped playing, I got the bug to go out on stage. So for about the past year, I've been doing a monthly gig, just me, my keyboards, microphone at an Irish pub in Severna Park. So you Catch me there one Saturday a month in the afternoon, just playing stuff that I like to play.
03:00
Speaker 1
That's awesome, man.
03:01
Speaker 3
Name of the pub?
03:02
Speaker 1
Yeah, I was just gonna say. Which club? Which pub?
03:04
Speaker 2
Yeah, it's called Brian Baru. So, yeah, giving them a quick shout out. But one, usually one Saturday a month, you'll find me in there playing music.
03:14
Speaker 1
Excellent. So if Greg says anything today that you either want to confront him about or you don't want to find the dude, once a month, you'll have an opportunity. Well, excellent. So Greg is an attorney at White for Taylor and Preston, is that right?
03:35
Speaker 2
Yep.
03:36
Speaker 1
He focuses specifically on intellectual property law. And Greg and I got into a conversation several months back just, you know, getting to know each other in a breakfast environment. And in that conversation, it came out that, like, you know, I said, well, yeah, there's no IP in construction. Right. Which naturally led Greg to be like, not so fast. That's right. Yeah, not so fast. And I started learning a ton in that conversation. Said, hey, this is a conversation we need to be having in the huddle, a conversation that the audience that we. That we work with every day, or, I'm sorry, every week would really benefit from. So we're going to get into intellectual property in the construction industry. And Stacy, assuming anybody did hang around live, please engage with those folks, you know, on the, you know, live chat.
04:29
Speaker 1
We'll pull you back and see if we have any audience questions to, you know, approach here. With about 10 minutes to go, so I have to, like, recalibrate my brain to make sure that we land that time correctly, but we'll see you soon. So, Greg, let's start off by talking just a little bit about what intellectual property means in a legal sense. What is ip, which we, you know, intellectual property, or ip, as we call it.
05:01
Speaker 2
Yeah, yeah. So when we're talking about intellectual property, generally that's a body of law, but fundamentally, we're talking about four different areas. Patents, trademarks, copyrights, and trade secrets. That's kind of the universe of categories of intellectual property. So patents protect new inventions, and particularly inventions that are embodied in a product, a process, a machine or a composition, some type of chemical composition. Right. And I can give examples, if you like, Chad, of how they relate.
05:44
Speaker 1
Yeah. So what's an example of a patent in, like, what. What's something that. That we think of that. That all of us would know immediately as a patent and then maybe give us, like, the construction example.
05:57
Speaker 2
So. So, I mean, you know, the. The first automobile engine, you Know the, the for the, an assembly line for making an automobile. I mean, you know that there are what, 12 million almost the issued patents now, you know that have issued over the last two centuries in the U.S. you know, so there are many, many and many different categories of invention, but particularly in the construction industry, it would be things like, you know, different machines. I mean Caterpillar for instance, has loads of patents for bulldozers and different machinery. You've got, you know, some of the stuff that we've done are concrete repair methods and apparatus. You've got, you've got monitoring drugs.
06:56
Speaker 1
Yeah, I can patent a method.
06:59
Speaker 2
Absolutely.
07:00
Speaker 1
Okay, so that's, you're going to talk about the difference between a patent and a trade secret because in my brain I'm going wait, isn't a method kind of a trade secret? But, but I'm sure you'll, you'll paint that picture. But okay, so we got it for patents. I think I can picture that's usually it's associated with what I get inventions. That term that you said we invented this new product or new way of doing something that we are then putting a patent on and saying nobody can do that but us or nobody can use that but us.
07:33
Speaker 2
Yeah, exactly. Yeah. And so importantly, fundamentally, the patent gives a right to block others from making, using, selling or offering for sale that new product, that new process, that new composition. But in exchange for that, you have to file a patent application that is a detailed technical description of exactly what the invention is. So you're telling the world exactly what it is that you've developed, how to go out and make it, how to go out and use it. And that's the trade off.
08:07
Speaker 1
Yeah, the trade off is the moment that patent expires, which is how long?
08:12
Speaker 2
It's 20 years from the time you first file the application.
08:15
Speaker 1
The moment it expires, everybody knows how to go out and replicate your.
08:20
Speaker 2
And the public is encouraged to why we make those documents public so that once it expires the world can use it.
08:27
Speaker 1
Furthermore, I can, I'm publishing my patent which says, you know, use a little from column A, column B and column C. And this is exactly how you do it. If somebody's really creative and they may be able to say actually we're going to use column D and it's going to be different and we're not going to be infringing on the patent. But you know, they actually by being able to see their recipe, they just Educated me on how to do something better.
08:50
Speaker 2
Yep. And there's a whole body of law how close you have to be infringing. You know, can you do D or can you maybe do C prime and come that close? Right. And, and still avoid the scope of the patent. And that's where you get into the big, heavy, nasty litigation.
09:07
Speaker 1
Interesting. Fascinating. All right, so then we got trademarks. Talk to me about trademarks.
09:11
Speaker 2
Well, if I may though, just to contrast, before we get to trademarks, I'd like to contrast patents from trade secrets. Trade secrets are really at the opposite end of the spectrum from patents.
09:24
Speaker 3
Right.
09:25
Speaker 2
Patents again become a public document, but they let you block anybody else from going out and making, using and selling the thing that you've invented. Right. Regardless of whether or not they know about your patent. A trade secret protects any type of information that has independent commercial value that you take reasonable measures to keep it locked up, to keep it secret. If you take those protections and you don't let the cat out of the bag, you protect the information by non disclosure agreements. You have a legal trade secret interest in that information so that if a former employee runs away with it to a competitor, if a competitor wrongfully gets access to that information, they're able to go out and use it.
10:13
Speaker 2
If they go out and start using it, you can assert trade secret protections against them and sue them for misappropriation of the trade secret. But the key difference between trade secrets and patents are the trade secret. You, you keep it secret, you keep that information locked up and that's great. But somebody out there that independently develops whatever the thing is, that is subject to that trade secret. So let's say you've got a, an installation process that talks about how you are coding a wall to make some multi level surface on a wall. And the way that you're doing that is really a secret process. If somebody else comes in after the fact and looks at the wall and is somehow able to figure that out, reverse engineer it, you know that's fair game.
11:06
Speaker 2
They're able to do that because it's not patented because you relied on trade secret. If somebody can reverse engineer it, that's fair game. If they wrongfully got access to your information, you can go after them for trade secret misappropriation. But if they didn't and they just figure it out, then that's fair game.
11:24
Speaker 1
So you have to make a decision. Do I want to go for a patent? Publish how exactly I'm doing this, make that a part of the public Record and then have 20 years of making hay before everybody can come and replicate, you know, duplicate my stuff or do I want to go down the trade secret route, just, you know, put together non disclosure information, put together, you know, agreements, that is, and put together a sort of a way to make sure that if somebody does on illegitimately get their hands on this information that I have recourse.
12:00
Speaker 2
Right.
12:02
Speaker 1
But I'm not going to go through the whole patent process and publishing and all that type of stuff. You have to make that decision which makes more sense for my business.
12:10
Speaker 2
Right, exactly. And people weigh it. Depending on how difficult it's going to be for somebody who has proper access to be able to reverse engineer. If it's going to be tough for them to reverse engineer, then trade secrets might be more appropriate. If it's really going to be easy for them to figure it out once they see it, patent route probably makes more sense.
12:30
Speaker 1
Excellent. All right, that's great. So, so trademarks and then copyrights real quick.
12:35
Speaker 2
Yep. Yeah. So trademarks protect branding that are associated with any product, any service. So that branding might be in the name of a company, it might be in a unique logo. You know, for lots of repair companies they have different logos that might have a building silhouette or a house silhouette. There's a gazillion different registrations for trademarks for logos that have those house emblems in them. But any unique design element that you use to identify as a source or identify as a brand of a product or service or any name that you associate with that product or service can serve as a trademark. And you can protect that by getting a federal trademark registration at the US Patent and Trademark.
13:26
Speaker 1
This is, this is easy. This is the big McDonald's M. This is the Nike Swoosh. This is the right, those different types of things. And I have to make sure that I'm not putting my Nike a Nike Swoosh on my product and trying to do business off of their good name.
13:43
Speaker 2
And the ones that you just gave examples of, Chad, are really great examples. The McDonald's M, the Golden arches. Right. When, when people see that, they immediately associate that with McDonald's burgers. The Nike Swoosh. When, when somebody sees the swoosh mark, they immediately associate it with shoes, with sneakers. Those are really fanciful original marks. Very strong brands.
14:07
Speaker 1
Yep.
14:07
Speaker 2
That versus Chad Prinky construction. Right, that's very, very descriptive. You can't get any trademark protection for the term construction. Your own name is a descriptive term. For you. So there's not much protection that attaches there. So when you're coming up with a name that you want to have distinction wrap around from a branding perspective, the more original you get. You know, again, that Nike Swoosh is really original. The, the golden arches are really original. So the more original or fanciful you can be in your branding, the stronger the trademark rights are going to be that attached to it.
14:47
Speaker 1
Excellent. Okay. And in construction, we would just see that associated with construction brands. Right. We would see that with the logos that we've come to know. You can probably picture some in your mind right away as you start to think of the construction brands that you're most familiar with. And then. And so now into copyright.
15:05
Speaker 2
And so copyrights are a really active field intellectual property field, particularly as it relates to construction. So you see lots and lots of disputes over what can different parties do with, for example, blueprints, architectural drawings, all the way from drawing phase up to a finished building, photographs of buildings, any technical design documents that get wrapped up in the. And ultimately in the finished blueprints or building information modeling models. Right. You know, any of this stuff can be protected by copyright. Copyright protects any original work of authorship that's fixed in a tangible form. So that's why I'm giving these examples of things like architectural drawings of photos of different types of software. All of these are protectable by way of copyright. And to get the strongest protection, you file an application to copyright office for copyright registration.
16:16
Speaker 2
But really important issue is that the copyright only protects the literal expression itself. So for instance, with a blueprint, a copyright in the blueprint protects you against somebody else making copies of the blueprint and then maybe going out and holding that copy that they've made and constructing a building from that copy. It does not protect against somebody rightfully using the blueprint, building and then somebody else going in and scanning through the building, figuring out exactly how it's put together, and then building their own exactly identical building. The copyright in a blueprint only protects against making a copy or substantially similar copy of the blueprint itself, not of the building that results.
17:11
Speaker 1
Yeah, so if I'm able to go in and sort of make my own drawings as I'm doing it, putting it into my own model, and, you know, replicate exactly what you built, that's no copyright protection there. But if I get my hands on your plans and then I build something substantially similar, now we got a problem.
17:33
Speaker 2
Well, yeah, particularly if you've gotten my plans now, you're making copies and you're giving it to your architect and you're giving it to your construction team and that kind of stuff. And the only exception there is where it's possible that you come up with a final building design that's so incredibly, amazingly unique. Like it's a building that's shaped like a queue, like the letter Q or something like that, you know, something that's so original that the building itself is essentially a sculpture, then you could have a copyright interest in the building itself. But just, you know, a rectangular office building now it's going to be really hard to assert a copyright interest in a traditional new tower.
18:14
Speaker 1
And what are the most common. You say this is a pretty active space. What are the most common disputes that are arising here? Well, let me pose one. You tell me if I'm off base. The picture I have in my mind is, you know, I, as the architect designed something, the, you know, who owns that design? Does the owner own it or is the architect owner?
18:37
Speaker 2
Yeah, and it really depends ultimately. And you know, what is the original document? What's the agreement between the architect and the, and the project owner. Right. You know, if the, you know, if that doesn't spell out that the owner is going to own the copyright interest in those plans and absolutely the architect is going to own those plans. So up front in the agreement, when you're bringing in the architect, those issues have to be fully vetted. Right. And documented in that agreement to spell out, okay, I'm going to own these plans. And presumably then an architect who's jumping into that type of venture is going to price in the fact that I'm doing this development work entirely for you and I'm going to assign over my interest in the copyright. I'm doing this work, creating this work for you to own.
19:32
Speaker 2
But absent that agreement spelled out up front, you know that with some exceptions, the architect is going to own it. And, and the owner is going to be, you know, out in the cold if he wants to go and take that to the, to his next development.
19:48
Speaker 1
Right. That's what I was just thinking is, you know, why can't I just use these plans to do 10 more developments just like it in different cities across the country and just hire you, the architect, to be my ca. You know, you can just be my. Right. You can just do the CA work on that stuff.
20:03
Speaker 2
But just quickly, I, I do want to do. Want to clarify that there are certain exceptions, you know, for outside Contractors like an architect, if they're specially commissioned, which is a term of art under the copyright laws to do this particular work, then there could be automatic assignment. If they're an employee of the company for copyright purposes. The, the ownership could automatically go from employee to owner. Just for copyrights doesn't relate to patents or inventions. But, but there are certain circumstances where you could have that automatic transfer. But fundamentally, because those are exceptions to the basic rule, it really dictates you deal with the issue upfront in the agreement spelling out who owns what in the end.
20:50
Speaker 1
I love this. Okay, so thank you very much. I think that was, so we've got these four different areas of intellectual property, how they relate specifically to construction, where we can see these things actively. And I hope that the audience is starting to process through, you know, probably some light bulbs, because again, you know, I've been working with construction companies for 15 years in a consulting capacity. I've never once ended up in an IP discussion. And so, you know what I mean? So I, I, this leads down this path of like, what's the biggest issues or the biggest mistake that you're seeing made in the construction industry regarding intellectual property?
21:30
Speaker 2
Yeah, well, I kind of alluded to it a bit so far. One of the biggest challenges, one of the biggest problems is just a lack of understanding of what I as an owner own by way of developments that are, that pop up, right? So if I have an employee, if I'm a company that's doing construction projects, but every now and then I'm coming up with a new novel improvement for, for forming patios on concrete buildings, right? Invention comes out of that process.
22:16
Speaker 1
Right?
22:16
Speaker 2
And the way our patent laws work and protect inventions, an employee owns that invention. With very rare exceptions, an employee owns that invention unless again, there's an agreement that assigns it over to the employer. So employer is thinking, I pay this person's salary. I have them, I've assigned them to this team to work on coming up with a solution for how we're installing a patio on an existing flat planar concrete building surface. And they come up with this great concept. So if I've paid for that effort, surely I must own it. And that's simply not the case. And so the problem is, you know, owner who thinks he owns it has gone through the patent process. If he's never gotten an assignment of the inventor's ownership interest over to the company, he simply doesn't own it.
23:11
Speaker 2
And so he's invested all this time, money and effort in trying to obtain patent protection. And because he never went through the process of getting an assignment, you know, he's now out in the cold. His former employees, a lot of the times now own that invention, and there's nothing that he can do unless he can go chase down and give him $1,000 to now assign the vention, or more likely, you know, $100,000.
23:41
Speaker 1
So it goes back to what I kind of alluded to now a couple of times during the. During the show, which is that, you know, the biggest issue is that they're not thinking about it. And then once they are thinking about it, they. It's too late. You know, there are. There are a series of issues that you really have to be proactive about. One of the issues in particular that you get just gave an example of is if you're an employer considering putting together some sort of, you know, statute that your employee doesn't own the invention, but the employer owns the inventions that the employee develops while there. So exactly this overall, you know, and you know me, I'm. I'm like, I just like a fight. I just like a fight. So I. I'll pick one with you here for a moment and just.
24:34
Speaker 1
And just say, you know, all of this. I'm having a hard time squaring all of this protecting of. Of our stuff and preventing other people from using our stuff and keeping employees from being able to own their own stuff. And like, I'm having a hard time squaring all of that with this idea of, like, actually making positive strides in the building industry. You know, Stacy and I built this platform of the morning huddle, really, to showcase people who are helping to push positive change in the construction industry. So, you know, when. When I come up with some fanciful invention that changes the game for the construction industry, man, it pisses me off to think about that, you know, being something that now only I can do, nobody else can do. Right. Help me to square that in my own mind or, you know.
25:28
Speaker 2
Yeah.
25:29
Speaker 1
How would you respond to that?
25:30
Speaker 2
Yeah. And so that, Chad, is a debate that is no way exclusive to the construction and really hear it a lot in the pharmaceutical industry. But look, fundamentally, our patent system is an incentive system. It incentivizes innovation. And in exchange for you going out and innovating and teaching the world about your innovation, by way of coming in and filing a patent application that becomes public, the government will give you a monopoly for a limited amount of time over that invention. But benefiting the public by giving them that knowledge, the knowledge of how to make and use your innovation once your patent expires.
26:15
Speaker 2
And if we didn't have that, that drive that driver for people to innovate in the first place, then why is any company going to go through the blood, sweat and tears that has to be invested in the innovative process, you know, if there's not gravy for you at the end by way of a patent. So if we're going, if we want to see new innovation coming up, really in any industry, we want to be able to reward that innovation. And that's the whole goal of the patent system, reward innovation so that people are going out and they're developing new things that are going to benefit the public. And the benefit that innovator gets is this monopoly by way of a patent for a limited amount of time.
27:06
Speaker 1
So what you're saying is that, you know, fundamentally the protections system has competition built in, but it has monopoly built in as the incentive for a period of time. And I would also, I will concede that, you know, if we aren't that every time somebody pushes the envelope and does something amazing and is changing the way that things work, while I might not be able to replicate it will inspire similar advancements elsewhere. And, and so overall, as long as somebody is innovating the innovations, even though they may be licensed, protected, will inspire, motivate and create market demand for additional motivate or for additional innovation. Yeah, absolutely.
28:06
Speaker 2
And that's one of the fundamental philosophies of the patent system. It's, you know, not only am I teaching the public about my great new thing, but I'm planting the seeds for everybody else to come after me and build onto it and further improve it.
28:22
Speaker 1
1, 1 comment. I wonder how you would respond to this. As I'm reflecting on everything that we've talked about is, you know, as we talk about incentivizing innovation, you know, if it's going to be the employees themselves that you're leaning into to create, to innovate, to do something special, wouldn't it be wise to have some sort of maybe mutual incentive that says, you know, an employee is entitled to 50% of any, you know, whatever rent of revenues generated as a result of monetizing said patent or said trade secret or fill in the blank?
29:03
Speaker 2
Absolutely. And many companies will do that. They'll actually have an internal incentive system and they vary in Structure and let's say reward level, you know, from company to company. I mean, you know, some might get a nice pen, others might get a 10% royalty, you know, ongoing for the life of the patent. I mean, it really varies, but I think generally it's a good business practice. It's smart business practice to incentivize your employees, to reward them for that innovation. It's just improving your product on the marketplace.
29:42
Speaker 1
Yeah, I feel the same. I think, you know, as we talk about incentivizing innovation, you know, you're. You can't. You can't say, hey, anything you do here belongs to me and not you, so go be creative.
29:55
Speaker 2
Right, right. Exactly.
29:57
Speaker 1
Exactly. Yeah, I think. I think. All right, awesome. I want to bring Stacy back. I think we have some questions, comments, and, you know, I want to make sure that we get an opportunity to hit on some of those. Stacy, what do we got?
30:13
Speaker 3
All right, we have two questions on copyright. So I can go through the. I can go through with a digital scanner and replicate the model and not violate a copyright question mark.
30:29
Speaker 2
And so again, it depends. It's going to depend on the specific building. And is there really something super original about the building? But, you know, a, you know, let's say a colonial house. Somebody could absolutely go in with a digital scanner, walk through the house, take very precise dimensions, and go and build an exact replica without. And again, this is assuming it's a standard colonial house. Right. But assuming that's the case, absolutely somebody would be able to go and create an exact duplicate of that house in another neighborhood. What they would not be able to do is go to the source plans, the source blueprints, or the prints that they got originally from the builder, make copies of those and hand them to an architect or a builder to go out. And because. And that's just the way the copyright interest works.
31:34
Speaker 3
Okay. And I think the next question probably answers it similarly, but. So school system hires architect to design an elementary school, pay for the design, decide that I want to now build six identical elementary schools with one set of drawings that I bought. Copyright.
31:55
Speaker 2
So a copyright interest absolutely exists in those plans. And who owns it depends on what that agreement said outright between the school system and the architect. And so if it was the school's plans, to be able to take that out and use it to build a bunch of other schools, it would be wise in that scenario to up front, say that, spell it out in the agreement. The architect then has the benefit of knowing that up front they can build that into the basket of rights that they're giving the school system and say, you know, you can go out and build seven more units. You can go out and build 10 more units, whatever cap they want to put on it. Because originally the architect presumably owns those rights in those plans.
32:43
Speaker 2
But really depend, again, it dictates dealing with this issue up front in the initial agreements between any third party and owner developer who's working a project. Awesome.
32:59
Speaker 1
Awesome. I have one question, Greg, which is how do I know when I should be taking steps to protect ip?
33:12
Speaker 2
Anytime that you're doing, anytime that you're being creative, you should be going. It doesn't necessarily mean you have to run out to an IP attorney, but anytime that you're doing something new, you have a new branding that you're associating with this process for installing X, right? You installed X and found that in doing it, I can improve my reinforcement by adding these elements to it. Anytime that you're doing something new, inherently there is intellectual property that's associated with that new thing. And so you need to go through, go through the mental process of, you know, does this really give me some type of economic advantage, some type of benefit that my competitors might want to use if they found out about it?
34:04
Speaker 2
And if that's the case, then you should be looking at, okay, well, if that's the case, what kind of protections can I wrap around it? Is it a new branding that my competitors are going to want to adopt? If so, I want to go seek trademark protection. Is it, is it some type of functional improvement? If so, I want to consider the possibility of patent protection or have a strategy where I'm going to maintain trade secrecy over that information. But fundamentally, anytime you're coming up with anything new, that's giving you some benefit out in the marketplace that your competitors are interested in, there's IP there and that should be vetted.
34:37
Speaker 1
Excellent. That's really useful. So, so, you know, you talk about financial value, it's the, the motivation to do it. What's, what's the financial incentive to do this? One of the biggest issues that I see with construction companies from my seed as a consultant, helping companies to figure out where they're trying to go over the next three years, five years, 10 years, those types of conversations, all the time I'm having lots of conversations about exits, right? About what are we planning to do when it comes to selling the business, when it comes to whether it's, you Know, creating an esop or whether it's, you know, trying to find a way to keep it in the family. But more often right now, a lot of the conversations that I'm having really do revolve around how do we get the most possible valuation for the business?
35:25
Speaker 1
Do you see intellectual property having these types of protections in place, mattering in any meaningful way to construction company valuation?
35:37
Speaker 2
Yeah, absolutely. And again, it's an issue that's not unique to the construction industry. It's, you know, anytime a company is looking at an exit, obviously you're looking to maximize the valuation. And so hopefully you're doing that early on, long before, five years before you're getting to a negotiation table for some type of exit, some type of MA transaction.
36:04
Speaker 1
Right.
36:04
Speaker 2
And so to the extent we talked about different examples of ips, they relate to construction industries. So it would really behoove somebody that's looking at an exit five years down the road to go through and say, okay, do I have some things that are sitting on a shelf that I've maybe not jumped through the hoops of seeking protection for the brands that I have out in the marketplace? Have I secured trademark registrations for them? If there are. Are issues that I've kept secret and that, you know, we've been working on and tinkering inside, can I wrap some patent protection around them? If, if you get the negotiation table and you.
36:49
Speaker 2
And there you find that you've got these things that have been sitting on the shelf that you haven't taken the steps to protect, now your valuation's down here, whereas five years before, you've secured all this protection, you know, for the stuff and have federal protections that now attached to it, boom, your valuations way up here. So it's really a useful exercise to go through, you know, an itemization, if you will. Well, before you get to that negotiation table to see what things are. Do we have in process, what things do we have sitting on the shelf that we just haven't really acted on that could just add value to our basket of intellectual property that we can wrap protections around just to boost our valuation. And we see that a lot. And the folks that are doing it early are benefiting.
37:40
Speaker 2
The folks that are waiting until they get to the negotiation table are realizing, oh, man, I wish I would have done that.
37:48
Speaker 1
When I think of some of the most pervasive challenges, you know, or, you know, yeah. Challenges the business owners face in the construction industry, this is one of them, is Just, you know, exiting from the business is oftentimes just so unappetizing. It's just, you know, yay. I get 2x profit, you know, or, you know, 3x profit. It depends on the world that you're operating in. But I think getting a comprehensive IP strategy in place and really taking a look at what protections you can bring to the table, that's going to make a huge difference, particularly to a strategic purchaser rate. Somebody who's going to buy your company and be strategic with that. I mean, imagine a private equity firm that owns 18 different mechanical contractors.
38:29
Speaker 1
You own protections on four different patentable techniques and processes that I now, not only am I going to be able to buy this company and get the value out of, but I'm actually going to be able to take this and apply it to the 18 other companies that all. Now all 19 of my companies are going to be enjoying federal protection for the next, whatever, 15 years on this very unique way of doing things. It's going to give a strategic advantage in the market.
38:54
Speaker 2
Exactly.
38:55
Speaker 1
Definitely worth doing. Last question. What's it cost? How do I protect all this stuff? Right. Like how much?
39:00
Speaker 2
How much?
39:01
Speaker 1
So, so all there might be some people who are listening and watching saying like, I gotta do this, but wait a minute, I don't want to get sucked down the rabbit hole with, you know, a bazillion dollars with attorney's fees.
39:14
Speaker 2
Yeah. And costs are really all over the place for the different types of protections that we talked about for trade secret protection. That's all, that's all client based. It's building the systems internally to literally keep information locked up. Right. And having data password protected. So that's just whatever your internal infrastructure costs are.
39:35
Speaker 1
So internally that's, in the scheme of things, the most affordable protections you can have are trade secret protections.
39:42
Speaker 2
Right? Right. Copyrights are pretty simple process. It's a registration fee that's under $100. And attorneys, if you work with an attorney to do a copyright application, probably under $500 to do a registration. It's really a pretty simple process. Trademarks are, I say, usually between $3,500 and $4,500 from start of the process through the, through to registration, assuming there are no tremendous headaches that come out in the process. And there are headaches that could come up during the process, but Generally in that $3,500, $4,500 range is appropriate. Budget patents are oftentimes very valuable. But likewise the most pricey type of protection that you can get. So for a very simplistic application going through the entire examination, you might spend $15,000 for something that's incredibly complex. You know, maybe a new piece of software or really complex electrical control systems.
40:59
Speaker 2
You know, that could be 25, 35, $40,000. It really depends on the specific technology. And there I'm talking about from the start of the process, through the multi year examination process, all the way to ultimately an issued patent.
41:16
Speaker 1
Wow, that's, I mean, go ahead, Stacey. Sorry, please.
41:19
Speaker 3
Oh, I just have a quick question. So is there a way to like, you think you have something unique and innovative and then you go through the process and pay for everything. What are the chances you're going to get denied for something? Like maybe you weren't aware that something like this is already out there.
41:39
Speaker 2
Yeah. And so that does happen where you're going through the process. You filed your application 99 times out of 100. We expect we're going to get an initial rejection from the patent office and then we get into argument with the examiner to explain why we're different from what the examiner cited against us. And so, I mean, but that's really where the game is. That's the back and forth, that's the negotiation that takes place during the patent examination process. And again, that's pricey. That's part of that 15 to $40,000 budget. You know, if it sails through, it's only a little bit of interaction that's back and forth with the examiner and you get to an issued patent. However, if there's lots of back and forth, lots of fight, sometimes the examiner digs his heels in.
42:34
Speaker 2
You feel that he's wrong in citing against you what he cited against you. You have to appeal. And the appellate process gets pricey. So it really varies. Sometimes the examiner is very well grounded in the rejection that, that he or she makes, and sometimes they're not. But if they're not, you have to keep fighting, you know, which just adds cost to the process.
43:01
Speaker 3
Thanks.
43:02
Speaker 1
Awesome. This has been a really useful conversation. It's got, it's definitely got my wheels turning and I have nothing to protect. But, but you know, I, I, I can picture having some different conversations with my clients as a result of this. So I appreciate your time just even personally and I know that our audience, you know, has probably got their creativity peaked and going to be having some interesting discussions this week and afterward as a result. So thank you so much for joining us and having the discussion, Greg.
43:35
Speaker 2
Absolutely. My Pleasure. Thanks for having me.
43:37
Speaker 1
Yeah, it's our pleasure. So anything that you want to say? Parting words?
43:45
Speaker 2
Just the one morsel that I'll leave everyone with is you hear horror stories about people leaving value on the table. The earlier you address these issues, the better. Do it internally. Just have a sit down and brainstorm about what do we have on the shelf that we think gives us that competitive edge and is there some protection that we can wrap around it? The earlier that you do that, the better. If you wait too long, your competitors could beat you to the process.
44:12
Speaker 1
Wonderful. Great advice. Thanks, Greg. Stacy, we got some housekeeping to do. Let's, let's walk people through some of the stuff that's coming up so you can see across the bottom here. Join us next week at the same time for episode 33. Amy Marks, the queen of free prefab. Freepab. Free prefab joins us to talk about all things prefab. I can't wait for that discussion. That'll be a lot of fun. She's extremely dynamic and I'm sure people will, you know, have a great time as well as learn a ton during that episode. Stacy, do we have the Steeltoe Communications marketing tip of the week?
44:49
Speaker 3
Yes. Just a quick reminder to protect your digital footprint. Just do a scan online of your company to make sure you're managing your reputation and not waiting for a crisis to happen. So that could be looking at your reviews, making sure you're active in the community, applying for awards. You want to make sure there's positive feedback about your company and you're keeping that up to date. Don't wait for something bad to happen. And that's all people see when it comes to your digital footprint online.
45:25
Speaker 1
Great advice. Love it. I want to just plug for a moment. I will be. I'm running a presentation tomorrow in conjunction sponsored by HMS Insurance down at the BWI Marriott. If that's something anybody would like to learn more about, please reach out the focus of the conversation. I'm going to be splitting time with an economist and we will be talking about economic conditions in the construction industry in 2023 and what you can be doing today to prepare your company to deal with whatever may come and capitalize on the opportunities that you show up. So if anybody again would like to hear more about that, just shoot me a message right here on LinkedIn. Stacy, I look forward to seeing you again next week. Anything you want to say before we wrap?
46:12
Speaker 3
Nope. I'm looking forward to next week, too.
46:14
Speaker 2
All right.
46:15
Speaker 1
See you guys.
