Intellectual Property for Startups

Intellectual Property

Intellectual Property for Startups encompasses patents, trademarks, copyrights and more. A large portion of your competitive advantage and your potential value to investors is the size and clarity of your intellectual property (IP) startup portfolio.  Be sure to address these eight IP portfolio items before you start looking for funding.

  1. Company name. The company name becomes your intellectual property at the moment you incorporate your startup as a LLC or a Corporation.  Sole proprietorships need to trademark the name to protect it. Select it well – marketers will tell you that you will be selling your name, more than your products. Actual incorporation fees in many states are below $100, if you do it yourself.
  2. Internet domain name. This name (www.domainname.com) is just as critical as the company name, and the two should match as nearly as possible.
  3. Social media accounts. Immediately go to relevant social media sites (Facebook, Twitter, Instagram) and grab the same name, even if you never plan to use the accounts.  These days, every business needs a blog, so sign up your domain names accounts on TypePad, WordPress, and Blogger, or all of the above, before someone starts blogging in your name.
  4. Patents. Remember that ideas cannot be patented, only novel implementations. But the application or provisional application has to be registered before you disclose the details to investors or consumers, or the implementation will be deemed un-patentable. Patent attorney fees start at around $5K.
  5. Copyrights. Written materials, photographs, illustrations, computer software, music, film/video, and website content.
  6. Trademark. A trademark is a name, phrase or logo that tells the consumer the origin of the goods and distinguishes your goods from those of your competitor. Trademarks require a federal trademark registration from the United States Patent and Trademark Office. The cost for a single trademark is around $300.
  7. Trade secrets-Customer or consumer profiles, pricing data, business plans, financial data and forecasts, manufacturing techniques, design manuals, survey and research data, employee knowledge, and source code.
  8. Business Plan. Your business plan holds the keys to your kingdom, so you don’t want it in the hands of competitors. If you need early reviews or assistance by people you don’t know well, get them to sign a Non-Disclosure Agreement first.  From , CEO of Startup Professionals

Why Should I Care?  In cost, all of these elements of intellectual property may be acquired for a few hundred dollars (or a few thousand with an attorney), if you act early and quickly. Later, good intellectual property can be worth millions when your company valuation is set for investment purposes, or when the company is acquired or sold. In between, you need it to survive.

Mistakes To Avoid

  • Entrepreneurs don’t invest sufficient time, money and thought in their IP-Some specifics to avoid: waiting too long, weak initial filling, no clearance search to be sure that your company does not infringe on another company and no focus on global patent standards and strategy.
  • Never consulting a qualified trademark lawyer.  Although it never hurts to consult the U.S. Patent and Trademark Office TESS online database, that kind of search alone is notoriously inadequate. There’s no substitute for consulting with a qualified trademark lawyer before investing heavily (financially or emotionally) in a brand.
  • Not using confidentiality agreements to protect your IP-All parties should sign a mutual non-disclosure agreement before any discussion on the IP occurs. If IP has already been disclosed, then the startup should make a detailed list of what was disclosed, so an IP attorney can determine if there are any limits on patent or trade secret protection.
  • Contamination of your idea and theirs-“If a former or “day job” employer can lay any claim to the IP upon which a new start-up is built, that claim, however tenuous, injects risk into the venture. And that risk grows in magnitude over time proportionate to the success of the business.  A classic example is the so-called “Winklevoss Twins problem” made notorious by the movie The Social Network.”From Antone Johnson of Wall Street Journal Post

Good Advice to Consider

  • Due Diligence-The American intellectual property offices make their trade-mark database available to the public for free online and anyone can easily check if a particular trademark has been registered.  A startup company should, at a minimum, check these trade-mark databases first before using a trade name or a brand name for business, promotional or other purposes.
  • When Filing for your Patents-Startups, in particular, are in a special position to jump ahead of the FIFO(First In,First Out) queue at the U.S. Patent & Trademark Office. Many startups qualify for the 50 percent discount afforded to small entities (or better yet, for the new 75 percent discount afforded to the newly created micro-entity status). With such steep discounts, for as little as about $1,000 to $2,000, a qualifying startup can request the USPTO’s Track One prioritized examination program.
  • Agreements with former employees-Steve Charkoudian, chair of Goodwin Procter’s Technology Transactions practice:Founders or founding teams often neglect to review their employee agreements with former employers. These agreements may give former employers a claim to intellectual property that the founder or founding team is planning to use as a centerpiece of their startup. The fix for those and other great advice is found in the article, 7 Intellectual Property Mistakes Startup Entrepreneurs Often Make.
  • If someone tries to Infringe on your copyright-The federal courts have exclusive jurisdiction over suits for patent and copyright infringement. Both state and federal courts have jurisdiction over trademark-related claims. Depending on the facts of your particular situation, state and/or federal courts may have jurisdiction over trade secret misappropriation and related claims. Depending on how quickly you move and the nature of the infringement involved, you may be able to get a judge to make the other party stop using your IP, as well as money damages, among other things. From What Startups Need to Know About Intellectual Property.

Trying to summarize the issues of intellectual property cannot begin to touch on the multitude of specifics.  Be sure to check out Intellectual Property Presentation  to find a through explanation on the finer details and browse the links below for a good baseline.

Online Resources for Intellectual Property for Startups