Intellectual property (IP) protection is a vital element that is often overlooked as founders place R&D, sales, and marketing efforts at the forefront of their startup’s development.
Prioritizing and allocating resources for more productive tasks is brilliant, especially, in the early stages. At the end of the day, you are the strategist and you decide on the moves you make in a game against time (to market) and money.
However, safeguarding your ideas, designs, and inventions is definitely not something you should put on the back burner. It may just be that ace up your sleeve.
A sound IP strategy could help grapple with the competition, score a better valuation with an investor, or even land an acquisition offer you can’t refuse. Read on to learn how to protect and get the most out of your intellectual property.
What is intellectual property for startups?
In Layman’s terms, intellectual property can be described as ownership of your ideas. For instance, the grand idea of your product and its innovative design that you pitch to investors. As your product evolves and acquires more features, so does your IP.
A safeguard for your business assets
Having your IP rights properly registered and protected denies others the opportunity to use or duplicate your ‘intangible creations’ and profit from them. It is a sure way to secure your competitive advantage and place in the market.
These protections allow you to use intellectual property law and pursue litigation in case anyone tries to steal your creations.
Seek legal help, but do your homework
When thinking about registering your IP assets, you should always consult and seek help from an attorney who is experienced in intellectual property law. However, being knowledgeable about the basics makes the collaboration more productive.
Registered IP grants more protection
Some types of IP, such as copyright, are automatically protected by law, while others require a special application or some form of disclosure restrictions. Either way, having officially registered your IP on a federal or state level creates a much sturdier shield with multiple legal benefits.
Types of intellectual property
Intellectual property for startups includes patents, copyrights, trademarks, and trade secrets. Let's take a closer look at each of them to find out how exactly they add value to a startup.
Use patents to protect innovative solutions and design
Patents are the strongest type of protection for the startup’s product. This type of IP rights prevents your competitors from using, reproducing, or selling your innovative solutions that solve your customers’ critical problems.
Where to use them
Patents should be used to guard a startup’s technical inventions: business assets and products like pharmaceutical drugs, mechanical processes, complex hardware, machinery, software solutions, and design concepts.
What about software patents?
There are two types of patents that protect software:
Design patents protect decorative, visual components of the software.
Utility patents protect the functionality or what the software does.
So, basically, having your software product protected with a patent means others can’t create another application that does exactly what your software does or has a similar design.
How to register
Being the strongest type of protection, patents are also the hardest to obtain.
To qualify for a patent, your product has to be:
Innovative: the technology behind it has never been conceived before
Useful: the product solves a customer’s problem and benefits society at large.
Not obvious: It can’t be an obvious next step in tech evolution.
To register a patent, a founder must apply with it to the United States Patent & Trademark Office (USPTO). It’s highly advisable to be done with assistance from an experienced patent attorney. The USPTO provides a detailed step-by-step guide for patent application.
Based on recent pendency data, registering a patent can take anything from 25 to 44 months. You can check the current average patent application timeline on USPTO's website.
The patent office also allows the filing of provisional applications. A provisional application is a quick and less expensive way of filing a patent. It gives you a 12-month time delay to prepare and temporary protection before you file with an official application.
Patent protection lasts 20 years after filing. You are obliged to pay maintenance fees at 3.5, 7.5, and 11.5 years from the date you were granted a patent. Make sure to check with USPTO fee schedules so as not to miss any deadlines.
Patent litigation
Without a doubt, IP protection is a vital part of a business's success. And patent infringement is no joke. Don't just take our word for it, learn from Google's experience, and see how a small company can protect its inventions first-hand:
Recently, Google’s YouTube got handed a $26 million verdict for infringing on a video-sharing patent. The patent was owned by VideoShare LLC and protected their streaming technology that converts a video to the best format suited for a user’s device.
The case isn't just a one-off, as multiple heavy hitters in the tech industry have suffered losses because of patent infringements. Many times, these cases lead to settlements and the acquisition of a startup by the tech giant.
Use copyright to protect the actual implementation of a product
As opposed to a patent, which guards ideas and concepts behind your creation, a copyright is a type of IP that protects the embodiment of an invention. Simply put, patents protect what your product does, while copyright protects exactly how a product is made.
Where to use them
Copyright should be used to protect original and creative ways of product development. It is intended to guard the building blocks of your product, such as authentic designs, manufacturing components, software code, databases, original content, etc.
What about software copyright?
While software patents protect the product’s functionality, copyright secures specific lines of code and implementation. The same goes for visual interface designs. Copyright grants you a license where you can use, reproduce, and sell your original works.
Using copyright, you can make your code proprietary, and distribute it as API under a license, creating an additional source of revenue. Otherwise, proprietary code cannot be used by others to recreate the functionality of your product or build other solutions.
How to register
Copyright is a type of IP protection that works automatically, once the work has been created and published. To enable protection, there must be clear notice of copyright via the © symbol, accompanied by the year of publication and the creator’s name.
Even though you are not obligated to apply for copyright protection, an official registration grants strong benefits, including a public record of your copyright claim which is clear evidence of your authorship.
Plus, you are also able to recover statutory damages and attorney fees from litigation. This may range to hundreds of thousands of dollars per violation.
To register your copyright, you have to apply with the U.S. Copyright Office. They provide a help section with a step-by-step video guide. Don’t forget to consult with your IP lawyer.
Copyright protection lasts 95 years from publication or 120 years from creation, whichever is shorter.
Copyright Litigation
Copyright violation is no joke either. In 2022, Oracle surrendered $30 million in damages to Hewlett Packard for copyright violation within software updates. And that is just the biggest among many other cases.
Use trademarks to protect brand names and logos
Startup founders should also think about registering their trademarks. If you plan on building a distinguished brand that is recognized on the market, then this is a must-have.
Where to use them
A trademark is a type of IP that prevents others from using the exact words, phrases, symbols, or designs that a brand-named company uses to distinguish its products.
How to register
Similarly to the copyright, a trademark can be protected solely by using it and giving notice with a ™ symbol. The ™ symbol, however, only grants you common-law rights that may be easily contested in court.
A registered federal trademark in the US gives you complete credibility in court and the privilege of recovering profits and damages in a trademark infringement suit. It also gives you the right and obligation to use the ® symbol for protection.
Founders can easily apply for a trademark online with the USPTO. The office provides clear instructions and everything you need to know on their web page. Registration takes 8 to 15 months on average. Look out for current trademark processing wait times.
A trademark lasts as long as it is used. However, you will have to pay regular maintenance fees to keep the trademark alive. Look for pricing and fee schedules on the USPTO website.
Use trade secrets to protect business processes, methods, data, and client information
Trade secrets are another form of IP rights used when you don’t want to share your inventions with the world yet. It protects any type of information connected with the inner workings of your startup and its products given you haven’t made it public yet, including by filing for patents and copyright.
How to protect yourself
Trade secrets can be protected with Confidentiality Agreements, Non-Disclosure Agreements (NDAs), and Non-Compete clauses. You can also ensure your trade secrets are safe by applying these additional methods:
Apply a strong data access policy, grant access to business assets only when necessary, and block access for former employees.
Conduct exit interviews with former employees and make sure they won’t be taking any IP with them (code, design, marketing efforts, client lists, etc.)
Cultivate a healthy IP rights culture within your startup and make sure everyone is up to speed with it.
When should a startup start thinking about IP protection?
A patent attorney is out to sell their services for patent and trademark applications, so don't ask them! This is something founders need to come to grips with on their own.
The general rule is: the timing of a startup’s IP protection and the steps taken should be in line with your business plan and targeted milestones.
For instance, sometimes it’s wise to keep your technical inventions as trade secrets before actually launching the product. Afterward, you can work on converting them into patents. Trademarks also become more relevant closer to product launch.
Timing is important when you have limited resources and tight deadlines. Identify your current business objectives and support them with IP milestones. This will help you create a roadmap that incorporates both strategic and protective measures on a timescale.
IP protection strategy: best practices
A comprehensive IP strategy creates a natural intersection of IP-related activities and the core business objectives of a startup.
Consider the following strategy tips as guidelines, but not actual rules:
Discover your high-impact intellectual property and prioritize it in your objectives.
Prioritize patents aimed at protecting the core innovative value of your product.
File a provisional patent application to give yourself time before investing in IP.
Consider a multi-layered approach to IP protection using trademarks, copyright, and patents in combination.
Evaluate the available patent-troll protection methods and guard yourself against litigation expenses.
Consider a global patent strategy before actually expanding into other markets.
Take care in using open-source code and third-party software to make sure you won’t end up with an ‘open-source product’ or IP violation.
Be knowledgeable about IP basics and come to a patent lawyer fully prepared.
Is intellectual property a key consideration for investors?
This goes both ways with some investors putting high value into the startup’s IP portfolio, while others look past this element and look into the nature of your product and its potential to become a household name or at least generate enough revenue.
That being said, IP rights protection can be a huge risk-reduction factor. So when it comes to due diligence and investor startup valuation, an impressive IP portfolio may just up your price a bit.
Fiona (Stevens) Law, a partner at the European IP law firm Potter Clarkson, recommends founders make room for an IP portfolio in their virtual data rooms.
Investors understand the potential of an acquisition offer from a tech giant with a strong desire to have your technology at their disposal. So from this perspective, intellectual property does play a role in an investor’s decision to make you a good deal.
Conclusion
While you should definitely not run after patents at the early stages of your startup’s evolution, preparing an IP protection strategy is a smart move.
In the long run, it will provide you with a competitive advantage of having a unique product that only you have the right to profit from. Another perk: having a tech that is heavily protected may force other tech giants to offer an early acquisition deal.
Hopefully, this guide helps you better understand the basics of intellectual property protection for startups. Use this knowledge and your crafted IP strategy when you approach a patent attorney for personal consultation and registration services.