Intellectual property is vital to eventual or long-term success of businesses on the Internet. Without the an intellectual property bulkwork, an Internet company is prey to the vultures of free-market competition. The Internet is a commercial leveler: because of generally low entry costs.

The Internet is still in a growth phase. There are still plenty of niche markets and new ideas to be introduced. But competition will become intense, as seen from historical precedent, when any particular kind of business proves successful. Without a barrier to entry, such as that provided by intellectual property, anybody can establish an Internet company. Costs are minimal in starting an Internet business.

Without proprietary positions, e-commerce businesses are bound to collapse.Internet companies will be subject to shrinking profit margins as competitors enter the market and undercut whatever slim margins the e-commerce companies might have achieved.

The first Internet companies will generally enjoy one IP property not easily attained by the later comers: name recognition, i.e., a trademark. Amazon, Priceline, E-Trade, E-Bay are well known companies. Their names (and their websites) spring easily to mind. Later comers are struggling mightily to establish name recognition. Hundreds of millions of dollars are being spent now on advertising to establish a mere toehold in the mind of the Internet consumer.

To generate trademark rights, it is necessary to use a mark in connection with the marketing of the respective goods or services. However, steps can be taken at a company’s inception to claim trademark rights.

The Internet will remain a powerful marketing milieu for those start-ups which can exclude competitors. The only form of exclusion will be intellectual property. To the extent that the business models of start-up companies are new, novel and nonobvious, it may be possible to obtain patent protection for the respective business methods. Patents for Internet businesses will generally involve software and computer methods, as well as pure business or non-software methods.

Generally, the methods of an Internet business are transparent to the public once the business is on line, for example, once a Website is accessible to the public (launched). However, in some cases, part of the overall business may be hidden from public apprehension. To the extent that such back-office methods, information, hardware, etc., can be maintained under a cloak of secrecy, trade secret protection may be invoked to maintain a competitive advantage. Steps must be taken early on to ensure that the trade secrets are not compromised.