Why intellectual property matters for startups?

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Ian Tollett of intellectual property specialist Williams Powell helps navigate the maze, outlining how IP can help or hinder a startup.

So, you’ve had your killer idea and are frantically trying to get it to market ahead of your competitors. But how do you ensure that your ideas aren’t stolen, that you aren’t infringing other people’s rights, and that you are doing the right thing by investors, all within your startup-sized budget?

But first, back to basics. What exactly is intellectual property (IP)? It is an umbrella term covering intangible assets such as patents, trade marks, copyright and designs.

Patents protect the way that things work. They can cover products or processes and even in some cases computer software. The subject matter covered must be novel and inventive compared to what is already published. It is important to keep an invention secret until a patent application is filed, because otherwise it may not be possible to obtain a valid patent. Provisional protection for 12 months is available at low cost.

Trade marks protect signs that are used to distinguish products or services of traders. In other words, they inform the public of trade origin. These signs are most commonly words such as Google or Facebook but can also be logos such as the Apple logo, shapes such as the Coca-Cola bottle or even smells (such as beer-scented dart flights!). The best way of protecting a trade mark is to file an application at the trade marks office.

Registered designs protect the way that things look. For example, a registered design may cover the shape of a mobile phone or of a computer monitor, the pattern on a tablecloth, or the design of a pair of jeans. Although some protection may arise when a design is created, more extensive protection results from registering the design.

Copyright gives protection to prevent the copying of artistic works, including internet pages (the copy and the artwork). Copyright arises automatically on creation of the work; it does not need to be registered. It is advisable however to keep copies of versions of the work in order to provide evidence of when the work was created.

Now that it’s clearer what IP actually is, how can help or hinder a startup?

For a start, it can keep your competitors off your patch. You’ve spent a lot of time and energy developing your idea and warming up the market. Just as you are about to see some payback, another company moves into the same area and starts siphoning off your customers by offering a similar product at a lower price (after all, they haven’t incurred your startup costs). Fair? Nope. But not illegal, unless you’ve got some protection in place.

The flipside of this is that others might have IP protection in the area you are moving in to. In short, it can prevent you from selling your product. Consider carrying out some due diligence (e.g. patent and trade mark searches) ahead of launch to avoid egg-on-face and expensive legal bills. These searches can also help identify IP that you could protect.

IP can also keep your investors happy. As well as being reassured that you have thought about the issues outlined above, investors like IP because it is an asset that contributes to the value of the company. When considering an exit strategy, one of the key questions that will be asked is “what will be left of this company once the founders are no longer around?”. In many cases, all that is left (apart from market position) is the company’s IP: its brand and ideas.

Among the questions an investor is likely to ask are:

  • Have you carried out an IP audit?
  • Have you registered any IP?
  • Have you ensured that the IP that does exist is actually owned by your company? (Bear in mind for example that commissioned designs are owned by the designer not the commissioner)
  • Have you carried out due diligence to ensure you are free to launch?
  • Do you have an IP strategy in place?

Investors don’t expect you to have a fully-fledged IP portfolio from day one. They understand that a startup cannot possibly have the same approach to IP as a FTSE-100 company.

What they do expect, however, is for you to recognise the value of IP, to have asked the right questions, and to have in place an appropriate (and developing) IP strategy tailored to suit your company as it stands right now.

Do get in touch if you’d like to discuss on a no-strings basis.

Ian Tollett is a partner at Williams Powell and a member of the Home Grown Club. Williams Powell offer 30 minute IP consolations free of charge to Home Grown members.

© Home Grown

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