Five Basic ways to Protect,Preserve and Enhance Your Startup's Intellectual property
By Martin Asingwire,
Partner LLB (Hons) Dip Lp (LDC)
Among the key indicators of a successful startup is always the need to provide a viable solution to a market need. The solution will usually involve a new or improved device or technique or simply providing a more efficient and less tedious way of performing a task. As a startup defines and develops its solution, intellectual property (IP) becomes a core asset of its business.
It is worth noting that startups derive immense value from intangible assets given that the business is usually so early in its growth that it may not have yet acquired or purchased any substantial tangible assets. Accordingly startup valuations will usually be based heavily on things you can’t touch such as; passion, brainpower, expertise, a business plan, and of course, intellectual property. Indeed after the management team, IP will usually be the startup’s most valuable asset.
Despite this inevitability, IP is a complicated creature, its definition and scope can be difficult to understand and can at times be contrary to the fast paced and agile nature of a start-up. This article will attempt to equip startups with a basic understanding on the concerns that can revolve around the startup’s IP rights and how to identify and protect the IP rights of the business.
1. Ownership of the IP rights Before the launch of the startup, individuals will usually cooperate informally to develop their ideas and a business plan. Indeed third-party contractors may be hired informally, friends may chip in and help code as a favour and founders may work non-stop with no formal documentation to have the business set up and get a product to market. It is also not a rare occurrence to find that some of the collaborators may be employed or are part of different entities that may obligate them to assign any innovations or IP creations to their current entities. Without any formal agreements or even a formal entity to own IP, any IP generated or derived from an informal collaboration may be owned by individuals personally or worse yet, depending on the circumstances, by another company. From the outset, every startup needs to consider these ownership issues which can cause barriers to funding, acquisition or otherwise limiting the tvaluation of the business.
Accordingly a startup can take the following steps to ensure that it owns its intellectual property;
a. Ensuring that all employees including founders have signed IP assignment agreements.
b. Meticulously evaluating the existing IP assignment obligations of new employees and management team to ensure no other entity has any legitimate interest in the IP developed for the business.
c. All contractor and consultant agreements should be read with care to ensure the business owns the IP generated under those agreements.
d. Documenting all innovations and IP protectable creations developed by the company before entering into any form of collaboration to avoid contentions of ownership.
2. Discussing the Startup’s IP with other Third-parties In the early stages of a startup, founders will often share information in an attempt to recruit other team members, investors, advisors or even attract customers to the new innovation. While it is unavoidable and necessary to have these discussions in order to achieve business objectives, founders should tread with caution when disclosing information attaching to the IP of the business. Indeed disclosure under wrong conditions may lead to unwanted competition or worse still another party stealing and adopting the technology for its own benefit. To mitigate this risk, every startup needs to have a plan on how to approach such discussions and what steps to take prior to disclosing confidential or IP related information. Ideally, a startup should have its IP rights already registered before entering such discussions, an application for registration or a signed NDA with the recipient of information before disclosing their technology. Of course, this is not always possible, therefore a startup may pursue other cost-effective and practical ways to protect their IP in such circumstances. These include;
a. Making sure that any written information shared with other parties be labelled ‘Confidential’ to put the recipient on notice of the nature of information received.
b. The Information to be disclosed should be vetted preferably with the assistance of an IP lawyer to limit disclosure of the most sensitive information
c. Taking down detailed minutes of meetings held between the startup and other third parties, for instance potential investors and partners.
d. If the disclosure is part of a larger event, such as a conference or events competition, it is advisable that at a minimum a provisional application including the subject matter should be filed.
3. Intellectual Property Strategy It is imperative for every startup to have a sound IP strategy. At the onset, the startup should develop a plan of evaluating at various stages if and when the startup should submit applications for patents, trademarks, and copyrights, as applicable. A startup should also have in place a system of protecting the startup’s trade secrets. An IP strategy should support the startup’s growth and exit strategy. An ideal IP strategy is one that creates value, reduces risk, and is realistically achievable. The glaring purpose of an IP strategy is to evaluate whether the costs for protecting a given innovation are necessary. Ideally the most important inventions to protect early are those that drive market demand and are easier to reverse-engineer, which usually have to be disclosed to investors, regulators or customers to move the business forward. For instance, physical mechanical structures and circuit designs are best protected under Patent law, while details of a complex software algorithm may better be protected as trade secrets. In addition startups should also look to register internet domain names, social media account names (including Facebook, Twitter and LinkedIn, among others) and corporate assumed names. These additional registrations support and strengthen a company’s brand, allow the company to control and monitor its brand more effectively, and facilitate the company’s use of the brand to reach a wider audience. Startups should also confirm that desired web URLs, social media account names and trade names are available before selecting a corporate name and/or launching commercially. If a desired domain name or corporate name is registered by another person but is available for purchase from that person, it is often advisable to seek to purchase that name as soon as possible however the startup may also consider moving to another name if the purchase becomes overly complicated or too expensive.
4. IT Systems Security In addition to securing ownership of IP through assignments and registration, startups should prevent unauthorized access by securing their IT systems. Often startups may neglect to put in place concrete IT protection systems believing that such systems would be cost intensive. However, there are a number of cost effective and even free methods which can be used by business owners to protect their content and only require a little vigilance on the part of the entrepreneurs. These include;
a. Use of secure and encrypted storage, email and file transfer applications (many free services do not provide much security)
b. Require and use appropriate passwords on computers and mobile devices
c. Encrypt flash drives and other portable media used by company personnel
d. Adopt and abide by a simple document retention and destruction policy.
5. Creating a culture of IP awareness This is essentially the most important element entrepreneurs must take in order to protect, preserve and enhance the IP of their businesses. Indeed the suggestions described above will be less effective if a startup’s management and employees are not working attentively to implement them. Therefore apart from adopting the above policies, steps must also be taken to publicise them internally, enforce them consistently and train personnel to ensure that they are implemented. For instance, a start-up will benefit from having management and personnel in charge of recruitment who are vigilant with having new employees sign appropriate employment agreements, training new employees and management team members regarding the company’s IP strategy and IT security policies, and training personnel who interact with third parties such as commercial partners of routine NDAs and what information need or need not be disclosed during such interactions. Conducting such training repeatedly and regularly will help ensure that new personnel are trained quickly and will continually help remind existing personnel of the importance of such matters.
A startup’s IP is a distinctive and integral asset to its business and is therefore worth taking all vigilant measures to have it protected. The steps enumerated above are not in any way meant to be exhaustive. Therefore, while there are many other basic, and often inexpensive steps a startup can take to preserve, protect and enhance its IP, following the steps mentioned above can at the bare minimum provide a framework for startups strengthen and secure their IP and use it as a vital tool for the growth and success of the startup.