Creating a smart intellectual property strategy can be a significant success factor for a startup as it is to many more established organizations.
Many real-life examples of our startup and growth company clientele have demonstrated that commercialization and protection of Intellectual Property Rights (IPR) are critical success factors.
In addition to freedom to operate and defend the company’s service offering (enforcement) against competitors, the IPR’s in the company’s portfolio often constitute an essential part of the company’s valuation.
There are several factors that we look into when helping our clients to establish their IPR strategy.
1. Analysis of Current Status of IP Management
As a starting point we need to ensure that all the relevant agreements are in order, i.e. we need to verify that all IPR’s have been properly assigned to the company. This means that the shareholder(s) / founder(s), employee(s) and independent contractor(s) whom have contributed to the assets of the company have assigned their respective IPR’s to the company.
For example the employee who has created the computer program as part of his/her work duties is expected to assign the development work and deliverable to the employer under an employment contract, but in numerous cases the founders who have created the code do not have employment contracts in place nor have they assigned the copyrighted works properly to the company. The reason for this is that there are usually no employment agreements in the very early phases of the company and the work is, more often than not, carried out on a sweat equity basis. In the worst case scenario even the shareholders’ agreement does not contain clauses on the assignment of intellectual property rights.
Moreover, in many cases founders have acquired domain names, registered the trademarks or have made other arrangements relating to elemental IPR’s for the operation of the company, i.e. assets, which have not been assigned to the company.
Another example, typical of the early phase operations, is that the work has been carried out on a project basis, and there are no IPR assignment documents. It also may be that all the original team members do not continue in the company, whether still to be established or already incorporated.
Fundamental IPR’s can sometimes also be subject to third party software licenses. It is important to analyze that the company has broad enough rights to fully develop and commercialize them, including subcontracted parts of the products and/or services. This includes the right to commercially utilize, modify, further develop and make derivative works of the software.
2. Measures Used in Assessing the IPR Infringement Risks
We also check if the company has carried out any protective measures, when it created its IPR assets, for example conducted patent landscape searches or trademark searches prior to starting to use a trademark.
Competitor analysis is also a practical way to understand the risks of potential IPR infringement claims. Terms and conditions relating to IPR infringement in the agreements, limitation of liability clauses and IPR warranties are significant in cases when for example subcontractor work is used or the service offering is partially subject to third party products or services.
Protection of confidential information is also a focal point of the protection of IPR and we will investigate the management of it as part of the IPR strategy planning. It is especially important in case the client has created something that may be patentable.
3. Establishing an IPR Strategy
An IPR strategy usually goes hand in hand with the business plan of the company. Therefore it is important that your legal advisor(s) have a solid grasp of the company’s business and strategy.
This is important as there are several options available for creating the best IPR strategy for companies. A rollout plan to different countries is important as trademark(s), 2D/3D utility protection, patent(s) and domain name registration(s) are protected on a territory basis and it makes sense to execute them in the countries that will generate the company’s sales income.
As you can imagine, there are more than a few options that can be used in selecting the “best” IPR protection and monetization strategy.
It is quite evident that the most suitable IPR strategy is also subject to the resources that the company has at its disposal or can spend. As such it is worthwhile to consider that there are options to fund the protection of IPR. One important source of funding are commercial agreements with strategic partners and a startup can also finance its IPR activities by granting technology and know-how licenses to specific fields of operations, which are not within its own area of interest.
We have learned that companies that have a strong IPR strategy are likely to thrive and on a path to securing additional investment capital more effortlessly to support their growth.
Picture source: Mobile World Congress 2017