By: Oral Caglar
Venture funding has continued its decline since starting to fall in 2022. If you’re building a start-up, you need to channel your cash and effort for greatest impact. Where should you spend early to protect your critical technology and intellectual property (IP), and where can you defer? Here are some suggestions.
1. Develop Your Strategy
Think about what IP is most important to the business you want to grow into. What technology and data do you expect to use? What forms your “moat” to differentiate you, and what IP rights widen that moat? Is technology itself your product or service, or does technology enable you to better provide your products and services? Developing an IP strategy requires you to understand the types of IP and data protection, and then identify which types best align with your business’s priorities.
2. Secure Your Perimeter
Execute agreements with your founders, employees, contractors, and collaborators to secure rights to technology that your company will create or use. Each founder should sign a Founder’s Assignment Agreement granting your company rights to technology each develops or controls. Your employees and independent contractors should sign agreements ensuring that your company owns any technology and data they develop within the scope of their employment or contract work. This should be in Proprietary Information and Inventions Agreements (PIIAs) for employees, and Services Agreements or Consulting Agreements for contractors. If you will be using technology controlled by another company or person, enter into an Assignment of Rights or License Agreement to secure the rights you need. If you’ll be collaborating in technology development, be sure that your Collaboration Agreement or other controlling document secures rights you need consistent with your strategy.
3. Protect Your Secrets
Confidential information (also known as proprietary information) has economic value because of its nonpublic status. Confidential information that comprises a trade secret receives additional protections, even within your company. Have your employees, advisors, and contractors agree to terms to protect confidential information they receive from you or on your behalf. For employees, these terms should be in the PIAA or Founder’s Agreement. With potential business partners or contractors, you’ll need a Nondisclosure Agreement (NDA) or confidentiality terms in your business agreement with them. Whichever agreement you use, you need to restrict use of confidential information to be solely for the benefit of your business, and restrict disclosure of confidential information unless authorized by you. Also, establish policies and procedures to mark all confidential information, secure it physically and electronically, and limit access to persons having a legitimate business need. Use common sense; for example, for videoconferences, control attendance and keep sensitive information out of view. Finally, keep your people informed of confidentiality obligations for information they receive from their work for the company.
4. Register Your Trademarks
Protecting trademarks should be an early priority. Trademarks can protect company names, logos, slogans – almost anything that can identify the source of products or services. Even smell (Play-Doh), sound (Intel) and color (Pepto-Bismol) can be protectable. If you are developing a brand identity based on the name of your company, product or service, have a trademark search firm or legal professional perform a preliminary trademark (or “knockout”) search to determine whether using your name could lead to confusion with marks used by others. Identify marks that minimize confusion, and file trademark applications for them covering your intended goods and services. If you aren’t using the trademark yet, file an “intent to use” application, which gives you at least six months to demonstrate use of your mark in commerce – on packaging, marketing materials, or otherwise. The Trademark Office then examines your application and determines whether you meet the legal requirements to register your mark.
5. Consider Copyrights
Copyrights protect original works of authorship that are in a fixed, tangible format. They can include software, written and graphic works, and even designs and sound or video recordings. Copyright gives you exclusive rights to use, copy, distribute, and make derivatives of your work. You have these rights whether or not you register your copyright, but registration provides advantages in a dispute over ownership. Though it’s low cost, registering copyrights may not fit your IP strategy. For example, copyrighting your software may not be appropriate if you are using open-source software, or if you produce content that has high turnover. The registration process is straightforward: you file an application online with the Copyright Office and include a copy of the work; for example, text, at least part of source code, or a design image.
6. Consider Patents
Patents are exclusive rights to your invention for twenty years from the date you file your application. An invention can be any discovery, process, machine, or composition, or an improvement of these. To be patentable, your invention must be not only new, but also “nonobvious.” You’ll need a patent agent or attorney knowledgeable in the relevant technology to prepare and file an application disclosing enough about your invention to enable someone to make or use it. Patent applications are complex, not cheap, and can take years to issue. The role of patents in your IP strategy depends on your business model. Some businesses leverage patents to resist potential competitors or demonstrate value to investors. Others focus on marketing and first-mover advantage, or prefer to keep inventions as trade secrets. Even if you aren’t sure of your patent strategy, have your personnel maintain lab or development notes (especially when meeting with business partners) and complete invention disclosure forms with details and dates of creation. Also consider filing provisional patent applications, less expensive “placeholder” applications that include the details of an invention, without the formal requirements for a regular application. A provisional application gives you a year to have a regular application prepared from the provisional application’s contents.
Everything discussed above matters, but the biggest bang for your start-up buck doesn’t come from agreements or government documents. It comes from a company culture of IP awareness and protection. Communicate your IP strategy to your people so they understand that protecting your IP assets is key to your business’s success. Keep them informed about their role in developing and protecting IP, so that each of them helps drive your business’s IP strategy.