Intellectual property (IP) for a technology startup represents the most valuable assets that an organization or an individual has. Many startups rely on their IP to give them a competitive edge and to keep the goodwill they generate in the market. As a patent attorney with 20+ years of experience in AI, software and medical device technology, I provide this guide to help startup founders secure your IP rights and protect your companies while increasing company valuation with the IP system.
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What Is Startup Intellectual Property?
Intellectual property for startups is the rights given to persons or organization over the creations of their minds. Examples of intellectual property for startup include designs, concepts, software, inventions, trade secrets, formulas, brand names, and works of art.
The four basic types of intellectual property that startups should understand are:
- Trade secret
It is easier to protect intellectual property in the early stages of your business than it is after you have developed successful ideas. This is because IP protects and prevents others from copying or profiting from it. In addition, a sound intellectual property strategy from the start can help you attract investors, suppliers, and partners.
Intellectual Property Evaluation For Technology Startup
Every tech startup must first assess its core assets. This will help you decide the type of IP protection that you require.
You may choose to delay protecting your IP because you believe it is too complicated and costly. Some may instead choose to focus on raising capital or hiring employees. But as an inventor, this could lead you to lose your IP rights, which could be detrimental for your startup in the long term.
However, it is possible to simplify the process. First, assess the startup’s value proposition. Your startup’s value proposition defines your business model, how your company will generate profits and revenues, and how customers will experience your product’s value. It will also help determine your IP assets. It would be best if you also prepared disclosure plans for potential acquirers. This list usually includes all IP, important contracts, and employee information. This will be useful in identifying assets that need additional IP protection.
Why is Intellectual Property for a Technology startup Important?
A novel idea is a driving force behind any startup. However, the ability to put that idea into action transforms small startups into large-scale companies. Intellectual Property Law protects the ideas and concepts that are at the foundation of your startup.
A clear definition of your IP is key to protecting your and plays a major role in its competitive edge and appeal to investors. In addition, IP can be an asset for your startup, increasing your commercial value.
On the other hand, exploring IP options can help startups protect themselves from infringement claims. Searching for other companies with rights to certain inventions and trademarks is part of the IP process. If you have already used money and time developing your idea, it is important to find out about these companies. Failure to do this may subject your startup to costly infringement lawsuits that gain up to 70 years from the creator’s death.
What can happen to your startup if you don’t have IP protection?
Your startup can have legal rights to the IP you have registered. You have the right of action if another company uses your own IP. Any company that infringes on your IP is prohibited from using it further. In a successful lawsuit, the company may also pay you monetary damages.
You put your IP and your entire business at risk by not having IP protection. Startups are often dependent on their IP to gain a competitive advantage. Unprotected intellectual property could prove fatal for a startup. Here are some of the risks that startups face by not protecting intellectual property for startups:
Risk #1: Someone Else may Patent Your inventions
If you don’t patent your invention, anyone can file for a patent to exploit it exclusively for 20 years. Imagine putting effort into your invention only for it to be a waste because someone else files your patent? The invention may be yours, but the first person to file for a patent profit from it for decades.
Risk #2: Your ability to make money from your IP Has Limits
You can make money licensing, selling, and transferring IP rights. These revenue streams can make or break a startup. For example, if you own a patent but don’t have the funds to commercialize it, you can license the invention or sell it as an income stream. You can also copy other people’s work without having to pay anything if they don’t have a copyright.
Risk #3: Your startup could be sued in costly Litigation
If you use the trademark or patent without proper registration, you are likely to be unaware of other people using the same intellectual property for your technology startup. Registering your IP includes a search for similar inventions and trademarks so that you can ensure your IP doesn’t infringe on another’s ideas. A company could sue you if your IP isn’t properly registered.
Risk #4: Legal consultation for patent protection
Patent protection is a ground covered by the law, where corporate law firms like Patent PC, located in Santa Clara, California, have a broad range of legal services regarding patents, trademarks, trade secrets, and copyright cases.
Patent PC deploys top-tier technological assistance to carry out their fundamental operation. A great example is the ‘artificial intelligence assisted briefing’ system. It takes a client on board and assists each client with the most accurate and personalized input possible. This workflow technology created last year by the firm remains a futuristic attempt to change legal practice and bring it more into the realm of digital transformation.
Intellectual Property Strategies for a Technology Startup
Intellectual property problems are often one of the most pressing concerns a technology startup faces. A startup will face a slew of challenges, including product development, recruiting skilled staff, raising money, and so on. With all of these concerns, intellectual property can sound disruptive, costly, or even counter-productive to the objectives of simply bringing a product to market before someone else does. Several strategies applies to safeguard the IP rights of a technology startup.
Strategy #1: State Clear Relationships with Co-founders
Some business ideas emerge from daily discussions with friends in the dormitories, hostels, and coffee drinks. It is essential to establish relationships regarding responsibilities, percentage of ownership, participation, etc. Clarity will reduce IP rights conflicts with Co-founders.
Strategy #2: Separating Personal Business Ideas from Employment
Sometimes, it is risky to invest in a startup you are unsure about. At times, obligations could conflict, risking the new idea’s intellectual property rights. A startup owner should keep track of the activities done in business and employment contracts. They should separate the activities and safeguard any critical information regarding their new business.
Strategy #3: Asset Evaluation
Since IP represents the most valuable assets that an organization can use to increase earnings, it is imperative to conduct the evaluation. The owner will identify the most critical intellectual property during the evaluation according to their undertaking. They will also be aware of the necessary IP protection for their assets. For example, for works of authorship, they will copyright them, while new goods will require trademarks to differentiate them from others.
Strategy #4: Strong Brand Name
It is essential to select a distinctive brand name that offers uniqueness for commercial use. You can select a name not trademarked to ensure it is clear and memorable. Before selecting a name for a startup, it is essential to check on Google or the U.S. patents and Trademarks Office to ascertain that no other company uses the name. Then, tailor-make the name to suit brand specifications to make it stand out.
Strategy #5: Effective Patent Strategy
Patents can be extremely valuable to a company. Patent portfolios are often thought to offer offensive advantages, such as boxing out rivals in technology areas. Patents, on the other hand, have several defensive advantages. For example, if a startup is threatened with patent infringement by a competitor, a defensive patent portfolio may be a valuable bargaining chip. Therefore, a company should check out cost-effective patenting strategies for its business name.
Strategy #6: Thinking Global
Even in the early stages, having a global strategy in mind can be critical for startups. Startups also neglect international safety standards to protect their technologies quickly and cheaply. As a result, when a startup expands into foreign markets, it can find itself without legal security in critical countries. The startup owner should consider engaging their patent attorney in a global patent strategy.
Strategy #7: Taking Caution When Using Open Source Software
Startups can choose to integrate open source software of open source code in a customized startup product can inadvertently turn a startup’s proprietary code into open-source software under some open source licenses. As a result, not only is IP lost but a startup’s proprietary and confidential code can also be made public. As a result, every software development company should be aware of the risks and implement a strict open source code policy.
A customized startup product can inadvertently turn a startup’s proprietary code into open-source software under some open source licenses; not only is IP lost, but a startup’s proprietary and confidential code can also be made public. As a result, every software development company should be aware of the risks and implement a strict policy.
Dos and Don’ts of IP Protection for Tech Startups
As you begin this journey, it is important to have a strong legal foundation to protect your IP rights on the technology innovations Many tech startups don’t realize the importance of an effective IP strategy in generating revenue. These are the top tips and tricks for tech startups looking to protect their IP.
#1: Prevent Public Disclosure of Your Invention
Tech startups should be careful about revealing their innovations to the public before filing for an IP protection.
Avoid Research and Development In the Open: With the growth of co-working spaces it is important not to conduct research and develop in the open. Many developers do not realize that patent protection can be lost in many countries if R&D is done in the open. The United States gives a grace period of one year for filing patent protection applications, but it is best to avoid public R&D.
Discuss future innovations plans only: Any discussions or presentations in relation to the patent application should be confidential. Though future innovations can be discussed during brainstorming sessions, this could be considered public disclosure, resulting in patent protection being denied. Tech startups can avoid this undesirable outcome by refusing to participate in future innovation discussions. Instead, you can tell the questioner that a patent application was filed to protect your invention if asked. You will be happy to discuss the application once it has been filed.
Don’t announce your Innovation Too Soon: Entrepreneurs in tech often run the risk of revealing their innovations too quickly, especially when meeting potential investors. A tech startup must immediately file its invention with the USPTO to protect their IP.
#2: Which IP Type Offers the Best Protection?
Before launching any type of IP strategy, a tech startup should be aware of the protections offered by different IP options. These are the most common categories of IP.
- Patent protection for your invention
- Copyright is a protection for expressions of ideas. It requires that the copy be memorialized in a tangible medium.
- Trademark protects the logo/name and acts as an identifier to the source of any products and services that are related to the logo/name.
- Trade Secret protects confidential or proprietary information.
Startups in tech must first identify the intangible assets that they wish to protect, and then decide which IP regime to use. If the goal is to protect an original concept, it is crucial to determine whether you want to pursue a trade secret or a patent strategy. Every type of IP is different, so it can be risky to pursue the wrong IP. Consult an IP attorney.
#3: Make sure you have proper IP agreements
Every tech startup should consider these IP agreements.
IP Assignment Venture capitalists often consider the value of a company’s IP portfolio to be a way to attract capital. To ensure the company has all relevant IP, it is important to assign all relevant IP immediately after incorporation. This will ensure that all IP assets remain with the company and prevent IP being transferred to a competitor or licensed by unhappy employees.
Invention Assignment Clause in Employment Agreement: This clause stipulates that employees must be allowed to assign all work within their employment’s scope and responsibility. If the employee leaves the company before the agreement is signed, the assignment clause protects the company against losing IP.
Vendor agreements: Any agreement involving vendors or contractors must include a clause that assigns IP created during engagement to the company and IP related thereto. All IP is possible, including software code, graphics and logos. The agreement should be signed as soon as you hire the vendor or contractor. To ensure the same terms in all contracts, startups should use agreements with third parties.
Customer Agreements: It is important to have written agreements that protect your IP’s ownership and confidentiality. These agreements also include documents that you sell to customers. Customers’ agreements have the same IP ownership rights as vendor agreements. Customers should also agree to any modification, enhancement, or change of IP that they use. These IP agreements will help startups avoid common legal pitfalls, position them for long-term growth, investment and success.
#4: Make sure domain names and trademarks are available
Before trademarking a product, tech startups must ensure domain names are immediately available. This will allow you to make the most of your marketing efforts, time and money. Startups in tech should look at both the domain name and trademark. Problems can arise when a trademark isn’t easily associated with your product/domain name.
Before you invest resources in a branding campaign, it is important to conduct a clearance study. For example, it would be expensive and regrettable to find out that your competitor uses the same trademark in an app similar as yours.
Next we discuss to reduce costs while building a valuable IP portfolio for your startup.
Although building an excellent IP portfolio can be costly, there are ways to reduce costs and still build a strong portfolio. These are some tips to help you control your costs and build a strong IP portfolio.
- Prioritize your patents. Prioritize the patents that are most important for your business. Then, focus on them first. You can reduce costs by only seeking the patents that are essential to your business.
- Do a thorough search before you file a new application. This will help you avoid expensive legal disputes and ensure your patents aren’t already taken.
- Provisional patents: You can use provisional patents to protect inventions that are still in development. This will allow you to control costs and still provide legal protection for your inventions.
- Use the computer-aided software tools to help your inventors do some of the patent preparation work. This enables patent lawyers to focus their training on strategizing the best coverage for your patent applications and also provide cost-effective solutions to preparing, filing and prosecuting patent applications.
- To control costs, choose cost-effective countries to file patents such as the US, Canada, among others.
- Self-filing: This is where the company files its patent application and hires a patent attorney. While this can reduce costs, it is important to be familiar with the law and the process.
Computer-aided software tools for patent management can help to control costs and improve patent quality while building an IP portfolio. These are just a few of the ways computer-aided software tools can be helpful:
- Patent searching: Patent search software allows you to conduct thorough searches of patents and trademarks in order to file a new application. This will help you avoid expensive legal disputes and ensure your patents aren’t already taken.
- Prior art analysis: Computer-aided software patent tools can also be used to assist with prior art assessment. This can help you identify prior art and evaluate it in relation to your patent application.
- Claim drafting: There are some computer-aided patent software programs that can assist you with claim drafting. These tools can help you create clear and concise claims, which will be more likely to get granted by the Patent Office.
- Portfolio management: Computer-aided software tools for patent management can also be used to assist you with portfolio management. They can help you track, organize, and monitor your patent portfolio.
- It is cost-effective: Using computer-aided software tools for patent protection can save you time and money. They are usually less expensive than hiring an attorney and can help you accomplish tasks more efficiently.
- Quality: Computer-aided software tools for patent administration can help improve the quality of patent applications and increase the likelihood of patent office grant.
Computer-assisted patent software tools such as those from PowerPatent can help to control costs and improve patent quality while building an IP portfolio. They are cost-effective, efficient, and can assist with patent searching, prior artwork analysis, claim drafting and portfolio management.