If “intellectual property” only conjures up images of trade wars and monkeys taking selfies, it’s time to think again. Intellectual property or “IP” is relevant to all of us and should be a concern to your nonprofit.
The website you launch, the software you develop, the logo you design, and the photos you download all involve IP. When using them or permitting them to be used by others, the stakes may be higher than you think.
Intellectual property refers to the original creations of authors, designers, artists and scientists that are protected in the United States by copyright, trademark and patent law.
Copyright law gives the creator of a work such as a software program the exclusive right to control its copying and distribution. Trademark law gives a company that develops a catchy new logo the right to control copying and use of the logo. Patent law gives the inventor of technology such as solar panels the exclusive right to control their manufacture and sale.
IP laws are intended to encourage development and dissemination of new works for the good of society by granting, for a designated period of time, exclusive rights to the creator. To assure that the exclusive rights are protected, IP laws impose penalties for others using the works without authorization.
IP laws apply equally to for-profits and nonprofits. Both can protect their own IP and permit others to use it, and both need to obtain authorization to use IP owned by others.
So why should your nonprofit be especially careful about use of intellectual property?
- To avoid “private benefit”— As a tax-exempt organization, your resources must be used to advance your mission. If you use them to benefit anyone or anything other than your mission (more than just incidentally), this may be considered “private benefit” and may jeopardize your exempt status. Your IP may be among your most valuable assets. If you decide to permit others to use your IP, be certain you are getting full value for that use, taking into account the amount of time and resources you expended to develop it when assessing its value. Avoiding private benefit makes good financial sense and will keep you in legal compliance.
- To comply with funder restrictions or requirements – If you created IP using grant funding, don’t assume that you can do whatever you like with it. You will need to review the terms of your grant to determine what your funder permits and, if additional uses are permitted, whether any acknowledgments or disclaimers are required. If you hire subcontractors for grant-funded projects, be sure their subcontracts reflect funders’ requirements on ownership and use of IP developed for the projects.
- To maintain good relations with volunteers and others with whom you work on an informal basis — Informality is essential to the operations of many nonprofits, but when it comes to intellectual property, formalities such as written agreements are generally required. Nonprofits often feel that they need to keep things “loose” and “friendly,” but losing rights to IP you’ve paid for, or getting into a dispute over the use of IP can damage relationships.
- Because your reputation is valuable – Whether you permit someone to use your IP or you use IP owned by someone else, make sure the intended use is authorized in writing. Your use of others’ IP without permission can risk the loss of trust or an infringement lawsuit, and misuse of your IP by others can put your reputation at risk.
Importantly, before you allow for-profit companies to use your organization’s name–your trademark–for a charitable sales promotion or co-venture, you should consider the risks carefully. Your name embodies the reputation you’ve spent years cultivating, which is why companies may wish to use it. Consider how costly it would be if your name were to become embroiled in a controversy over which you have no control, for example involving the companies’ products or financial improprieties.
Nonprofits should be knowledgeable when it comes to business issues, including protection and use of intellectual property. Stay informed on the rules, check out our Intellectual Property Resources page, and seek legal advice if you’re unsure.
Ellen Lubell provides guidance to nonprofit leaders on protecting and licensing intellectual property, as well as regulatory compliance, risk management, governance, fundraising, and best practices for preserving tax-exempt status.