As the Cape Fear area’s entrepreneurial environment strengthens, so does the need for fledgling companies to protect their ideas and products from competitors. As a result, Wilmington is beginning to see rising demand for what attorney Mark King calls a “white-hot” practice area: intellectual property law.

“Intellectual property is a big part of what we do,” said King, a partner in Wilmington’s Humphries & King law firm and a patent attorney. He explained that IP law is made up of four different areas: patent, trademark, copyright and trade secret.

“If you have a glut of copyright registrations coming out locally, it would be an indication of the strength of your arts community,” King said. “Patent applications
indicate there’s a lot of innovation going on. Trademark and trade secret activity means that businesses are establishing themselves; it’s an indicator of business activity.”

Jim Burns is working extensively with an IP law attorney as his Connecticut-based company expands and plans a new facility in Leland. Burns, CEO and chairman of CMS Food Technology, said his company has a patent on a food safety-related process but still has too much exposure.

“When you do a patent, you reveal a lot of information about your product that other companies can have access to. It’s a scary thing,” he said.

Burns said that securing trade secrets protection for his process might be the answer, but he added that he is investigating all possible IP protections to see which is best for the company.

Thomas Varnum, an attorney with Brooks, Pierce, McLendon, Humphrey & Leonard’s Wilmington office, says he spends a large portion of his time on IP matters. Having chosen Wilmington over San Francisco as a place to practice law, Varnum said he thought he would have to give up a focus on intellectual property when he moved to a much-smaller city. He was happy to learn there was demand here for IP law.

“I made the right decision,” he said. “The practice has grown year after year. One reason I am excited about being part of Brooks Pierce … is they do IP and do it at a high level. And businesses here see value in IP law.

“A lot of what I do is with tech companies that have some online presence,” he continued. “Where I have most success is with people who have relocated here from elsewhere and want to get back into business or people relocating their business here and want a local [attorney] or younger startups that want to do things right from the beginning.”

Varnum says he helps companies recognize what intellectual property they actually have and determine how best to protect it. He also does IP litigation.
“I’ve been involved with a couple of federal court copyright litigations and trademark issues,” he said.

King is also seeing an upward trend in IP law locally.

“Trademark and patent work is definitely up year over year in the past four years, and trademark is way up in the past 12 months,” he said. “That’s an indicator to me of increased business activity. Patents have been up across the board, particularly in the past 12 months. I attribute that to more innovation here in the area.”

King also noted that the U.S. Patent and Trademark Office has overhauled its operations to try and reduce the enormous bottleneck in reviewing patents.

Even with 8,000 patent examiners, the office had a backlog of more than 1 million patent applications. The recently implemented efficiencies have reduced the backlog to about 700,000 applications, King said. Although applicants can expect to wait 20-24 months for someone to review their application, the fact that the process is somewhat streamlined could encourage businesses to file for a patent.

Entitle, a Wilmington tech startup, is among the area companies playing the waiting game.

CEO Bryan Batten said the venture, an eBook subscription service, filed applications about six months ago and has been advised that the process will take two to three years.

But because it has filed patents related to its book-recommendation service, the company can tag its proprietary product “patent pending.”

“Patent pending does give you some protection, but it’s not ironclad,” Batten said.

To ensure that patents would protect Entitle’s intellectual property adequately, the company had to take a hard look at the system it invented for recommending books based on particular favorite reads a subscriber enters into the system, Batten said.

“Our attorney helped us map out what parts of our system were patentable and worth patenting,” Batten said. “Somebody else can come along and make a minor
tweak and patent that, so we had to be very strategic.

“Patenting is a really complicated process; that’s why there are patent attorneys. You have to find a good patent attorney. Talk to several,” he advised. “Don’t think you can do it yourself.”

Batten said that the patenting process has been further complicated by what are sometimes called patent trolls or non-practicing entities. These are entities that purchase or otherwise procure patents with no intent to produce the patented item but who try to make money by suing other companies for purported patent infringement.

This spring, some North Carolina legislators are drafting legislation to address the issue of non-practicing entities.

The bill, to be called An Act to Prevent the Abusive Use of Patents, would authorize the state attorney general to go after the shell entities and to collect judgments against the individuals behind the company, according to a legislative committee report.

Similar legislation is being considered in more than 20 other states.

“Patent trolling is a huge problem,” Batten said, adding that the specter of an infringement suit, bogus or not, can make it more difficult for a company to secure venture capital funding. “We had to look and see if there are any patents we would be infringing upon.”

There are rewards for pursuing intellectual property protection, especially patents, King said.

“For raising money, it’s a big deal. Investors want to see that you are taking these steps to exclude competition from the marketplace. The number of new patent applications from Wilmington shows how we are poised to become a center of innovation.”