The launch of a startup is an exciting time for any tech entrepreneur. As you embark on this adventure, it is critical to establish a strong legal foundation that protect your intellectual property (IP) and tech innovation. Unfortunately, many tech startups underestimate just how integral a strong IP strategy is to commercial success and revenue generation. In order to safeguard its IP, a tech startup should consider the following dos and don’ts.
Do Avoid Public Disclosure of Your Innovation
Public disclosure of your innovation can be dangerous for a tech startup. Even if unintentional, any public disclosure can delay or even end the patent process, especially when you seek to pursue patent protection outside the U.S. To avoid inadvertently disclosing your innovation to the public, tech startups should be careful not to do the following:
- Don’t Conduct Research & Development in the Open: With the growth of co-working spaces, conducting research and development (R&D) in the open should be avoided. Many developers are unaware that conducting R&D in the open is technically considered a public disclosure and can foreclose patent protection in most countries. While the United States does allow a one-year grace period for filing for patent protection, it is still a best practice to avoid any type of public R&D.
- Don’t Discuss Plans for Future Innovations: Even after a tech startup has filed a patent application, it is critical to limit any presentations or discussions to only the subject matter that exists in the filed patent application. Discussing future innovations – even in the context of a brainstorming session – can be construed as a public disclosure, which may preclude patent protection. Tech startups can avoid this undesired outcome by simply choosing not to partake in discussions about future innovations. If pressed, you can simply state that a patent application is in process to protect the innovation, and once filed, you will be happy to discuss.
- Don’t Unveil Your Innovation Too Early: All too often, tech entrepreneurs inadvertently place themselves at risk of unveiling their innovation too early, such as at fundraising meetings with potential investors who typically do not to sign an NDA. In order to best protect its IP, a tech startup should make certain that its innovation is filed with the USPTO as soon as possible – and preferably before investor meetings.
Do Know Which Type of IP Offers the Right Protection
Before pursuing any kind of IP strategy, a tech startup should become familiar with the different protections offered by different IP options. In general, IP can be categorized as one of the following:
- Patent protects the idea.
- Copyright protects the expression of the idea and requires memorialization on a tangible medium.
- Trademark protects the logo or the name and acts as an identifier of the source of the product or services associated with the logo or name.
- Trade Secret protects anything confidential or proprietary.
When considering intangible assets, tech startups need to understand what it is they are looking to protect, and then decide which IP regime to implement. If the goal is to protect an inventive concept, a decision to either pursue a patent strategy or pursue trade secret protection must be considered. Every type of IP is different, and incorrectly pursuing the wrong IP to protect your asset can place your product at risk. It is a best practice to seek the advice of an IP attorney.
Do Have Proper IP Agreements in Place
Following are IP agreements that every tech start-up should consider putting in place.
- IP Assignment: For tech startups, it is often the value of the company’s IP portfolio that helps attract investments from venture capitalists and other capital sources. To help ensure the company has complete ownership of all IP assets, as soon as the company is incorporated or formed, all relevant IP should be assigned to the company. This will ensure that the IP asset is with the company and help avoid the IP from being licensed or transferred to a competitor by a disgruntled founder or employee.
- Employment Agreement with Invention Assignment Clause, which makes it clear that as a condition of employment, all work done by the employee within the scope of his/her employment is assigned to the company. Should the employee leave before executing the assignment agreement, the employment agreement with the assignment clause acts as a safeguard to allow the company to retain the IP.
- Vendor Agreements: When using vendors or contractors, it is important to have a provision in the agreement that assigns any IP developed during their engagement to the company as well as any IP that is related to the engagement. The IP may include software code, graphics, logos, marketing materials, or simply ideas. The agreement should be signed as soon as the vendor or contractor is hired. Whenever possible, start-ups should use agreements with third parties that can ensure consistent agreement terms with all third parties.
- Customer Agreements: All written agreements that impact the ownership and confidentiality of your IP are of great significance – including agreements that document the sales of your products or services to customers. The same IP ownership issues as vendor agreements generally apply to customer agreements. In addition, it would be wise and to the extent possible, get the customers to assign any modification, improvement or changes to your IP that they are using.
Having these IP agreements in place will go a long way to helping the tech start-up avoid many of the most common legal pitfalls that start-ups encounter, and will help position the business for future investment, growth and long-term success.
Do Make Sure Domain Name and Trademark Are Available
To ensure the best use of time, effort, and marketing dollars in branding the product, tech startups should immediately ensure that the domain name is available before considering a trademark. Domain name and trademark are two separate entities, so it is important for tech startups to consider both. Without a domain name, having a trademark that users cannot easily associate with your product can act as a detriment.
It is also integral to perform a clearance study to ensure that your trademark is available before spending resources in a branding campaign. It would be unfortunate – and, more importantly, costly – if you were to find out late in the process that a competitor had the same trademark for a similar app.
Leave a Reply