Startups and Intellectual Property (IP)
Author: Dariana Istrate
What are startups?
Startups are newly established companies usually founded by entrepreneurs who develop a product, service, or business model with the aim of solving a specific problem or addressing a gap in the market. These companies usually start with limited revenue, and they are looking after angel investors, venture capitalists or especially allocated funds for startups.
Often, the key asset which a startup may possess is its IP, which can range from software development, technology to be used in the industry or branding creative ideas. Understanding how to protect the IP rights resulting from their works can attract investors, and lead to business growth and an increased position on the market.
By safeguarding IP, startups retain control over their creations and ideas and can prevent competitors from copying or exploiting their know-how/ideas/brand ideas.
Intellectual property refers to creations of the mind, such as inventions, artistic works, designs, symbols, names, and images used in commerce. IP is categorized into several types, i.e., trademarks, patents, copyrights, trade secrets, design rights.
The benefits of implementing IP in startups
1. Attracting Investors
Investors look for startups with a good strategy for protecting their know-how/brands/trade secrets. A strong IP portfolio sends a strong message to investors that the startup has valuable, protected assets, which reduces the risk of legal challenges. Depending on the business scope of the startup, a strong IP portfolio may represent the main asset of the company, being often more valuable than its physical assets.
2. Licensing
Monetization of the IP rights through licensing allows other companies to use the startup’s patents, trademarks, or technology in exchange for royalties or other compensation. Thus, additional revenue may be generated.
3. Competitive Advantage
Securing the IP rights can create a barrier for competitors; a protected technology or any other IP owned by the startup company prevents others from copying/infringing it.
Protection of IP
1. Identification of the IP
Securing IP rights takes resources (money and time). For this reason, startups often put IP aside. However, owners/entrepreneurs should identify which aspects are worth protecting from an IP perspective in their company, from proprietary technology, inventions, and branding elements to business methods. With a solid IP plan, protection can be achieved. For example, a patent may be granted for any invention relating to a new product or process in the field of technology, while trademarks protect the brand identity. Unlike these rights, protection of software or trade secrets equally important for the business is achieved without registration (please see sections below).
The proper identification and registration/securing of IP can ensure protection.
2. Appointing a specialized representative & filing for IP protection
Once the IP is identified, startups should take steps to file for protection. This involves appointing an IP representative or creating a specialized department in the company that is able to properly apply in the territory of interest (e.g., national registration offices, European offices or international offices) for patents, trademarks, designs, utility models or to implement measures to protect its confidential information, know-how and trade secrets.
3. Implementation of IP Policies
Another important step to safeguard the IP is the implementation of IP policies in the company and IP assignment agreement clauses with collaborators / employees in favor of the company. Among others, this includes using non-disclosure agreements (NDAs) when sharing sensitive information with partners, employees, or investors and having patent policies implemented or, depending on the company’s needs, having other strategies that have an IP component properly stipulated.
4. Monitor and enforce IP Rights
Having an IP professional appointed is only the first step in ensuring and building the protection of IP rights, especially by actively monitoring the market regarding all new similar applications/registrations to ensure their IP is not being infringed. It is mandatory to take legal action in case of infringement to maintain the competitive advantages.
Things to take into consideration regarding IP
- delaying IP protection can lead to lost opportunities, especially if competitors move faster to secure rights to similar innovations;
- analyzing the possibility of extending the activity on international markets, especially the EU. Filing for EU IP protection from the beginning grants protection in the entire EU territory, regardless of the national territory of the registration;
- lack of proper protection of the trade secrets and know-how can result in their exposure to competitors.
Thus, for startups, IP may be the cornerstone for a fruitful development and an attraction for potential investors. Understanding the importance of IP and granting the necessary protection can create long-term value.
