How to Protect Intellectual Property - Strategy for Startups

>Introduction

Intellectual property protection should be one of the foremost concerns of a nascently set up entity, particularly a startup.

Intellectual property refers to innovative creations arising out of one’s or a team’s intellectual exercise. It includes not only innovative products and processes but also logos and images. Some key intellectual property rights are:

a) Patents: Inventions involving both innovative products and processes which contribute to technological development and simplify everyday lives are called patents. A patent-holder has the exclusive right to use or license his patented product or process.

b) Copyright: Ideas cannot be copyrighted, but if these ideas are articulated in a permanent form then the creator may be entitled to a copyright over his/her work. Copyright generally exists over books, films, music etc.

c) Trademark: A trademark is a distinctive sign or symbol used by companies to enable the consumers to identify their goods. Logos of companies are trademarks.

IP rights and their protection is essential for companies. Especially, a startup which is just starting out requires its reputation to be built over years and its ideas to be protected in order to gain competitive advantage over its rivals.

In this article, we discuss and lay down an ideal IP protection strategy that may be adopted by startups.

What needs to be protected??

An entity ideally needs to protect the following components of its IP:

a) Trade secrets/confidential information: Trade secrets are information essential and valuable to the business being run. It may include documents such as sales charts, product specifications or any other information which may give the company a competitive edge over its rivals. The first step towards efficient protection of trade secrets is to have a strong contractual clause built in all the contracts being / to be executed by the entity, including employment contracts which impose strong confidentiality obligations. A separate confidentiality and non-disclosure agreement may also be entered into with business partners, customers and employees.

b) Patent protection: Being new in the industry, startup enterprises need to devise a strategy which gives them an edge over the extant market players.

The following steps may be kept in mind while devising a strategy for the protection of patents:

 Filing an application for patents needs to be done immediately after the product or process is ready.

 The product or process for which the patent is being filed should not be published or disclosed.

 The application may be filed with a provisional specification as well. However, complete specification needs to be filed within 12 months of the filing.

 Patents are territorial in nature. Hence, filing for patents in multiple jurisdictions simultaneously may help the startup in gaining competitive advantage.

c) Trademarks: Trademarks create a company’s brand. For instance, google is known and identified by its logo. It is important for companies to protect their logos and trademarks. The first step towards an efficient trademark protection should be to register the trademarks. A registered trademark enjoys a higher protection than an unregistered trademark. An infringement suit can be filed only for the violation of a registered trademark.

What should an ideal IP Strategy encompass

While strategy of each start-up may differ according to the services rendered or the products marketed by them, certain issues run central to all efficient IP strategies.

While formulating an IP strategy, the following things need to be kept in mind:

 An IP strategy must include a training policy wherein the employees, customers and partners of the company are made aware of the various kinds of IP the company owns and the importance of maintaining confidentiality and protection of these rights.

 Commitment towards respecting and protecting other companies’ IP rights should also form part of an IP strategy.

 As part of the IP strategy, standard contractual templates of agreements such as non-disclosure and confidentiality agreements/software licensing agreements etc. should be formulated.

 It would not serve the company’s purpose to patent all products/processes they come up with. There may be certain products which do not require to be subjected to the lengthy process of being patented. Clear guidelines as to what would be required to be patented and the requisites for a patent should be clearly laid down in the IP strategy.

 Assignment of intellectual property by the employees is an essential ingredient of framing an IP strategy. As part of this, all employee contracts should have a clause wherein they assign irrevocably and perpetually all the intellectual property they create in the course of their employment to the company.

 Budget allocations for the protection and development of IP should also be outlined in the IP strategy.

 It is preferable to have a dedicated team consisting of legal and business strategists to handle any issues arising out of IP protection.

 Before devising an IP strategy and protection mechanism for all the IP the company owns, one must think which of these IP is essential for the growth of the company. Time and resources should be selectively expended on only such intellectual property.

 It is crucial to mine one’s IP correctly in order to monetize it. One way may be to license out IPs which the company does not use in exchange for a fee. For instance, developing software and licensing it out to different companies may be a good way to mine and monetize your IP.

 The IP strategy should also include mechanism to protect against cyber threats. A strong cyber security practice should be in place.

 Exit strategies should be pre-determined. If the product being marketed goes out of use, then it is better to surrender the IP and exit the market. Typically, for short-lived products, it is advisable not to invest in obtaining the IP.

Conclusion

Intellectual property is the backbone of a startup. Most startups are founded on some innovative product or service. If such products or processes are not protected, then the entire business plan of a startup may fail.

It is, thus, imperative that a proper IP strategy be drawn up in order to systematically protect the IP. It is a more arduous task for nascent companies as they generally do not have huge resources. Yet, with the right strategy and implementation, a sound IP protection framework may be achieved.



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