Disclaimer: No part of this blog consists of legal advice.
Real assets are becoming intangible. A study shows just how dramatic this shift has become. In 1973, 83% of the S&P 500 market value came from tangible assets like real estate and equipment. Fast forward to 2020, and those numbers are flipped – with 90% of that value now driven by assets like intellectual property (IP), brands, and proprietary technology. A clear intellectual property strategy is one of the tailwinds that propel a high-flying startup.
What does it mean? For startups and investors, it signals a shift to innovation and protecting that innovation early. Investors recognize it.
Startups that own two types of IP – patents and trademarks – in the seed/ growth stage are up to 10.2 times more likely to secure funding!
Technology, designs, brands, and inventions can be a startup's most valuable assets. Turning this intellectual capital into protected intellectual property is what we're after. Here's how you can take your IP game to the next level as a startup!
Startup IP Strategy? It Begins With You!
A new company needs a strong IP portfolio to woo investors. But it gets tricky. Startups also need investor funding to build their IP portfolio. So what's the way forward? Well, before spending on expensive lawyer fees and patent filings, take basic steps to protect your foundational IP:
Vet potential trademarks thoroughly: Search trademark databases like the USPTO's Trademark Search to ensure your company and product names don't infringe on existing brands. Under common law, even unregistered trademarks in use before yours can supersede your rights.
Evaluate any patent conflicts: Check patent databases like Google Patents and the USPTO yourself to see if others have already claimed relevant technologies or if patent applications are pending.
Maintain confidentiality: Require non-disclosure agreements (NDAs) when engaging with potential partners so your trade secrets stay secret.
Lock in ownership: Ensure intellectual property assignments from employees and contractors so your company owns anything they create related to the business.
Spending time on self-guided searches can uncover major IP conflicts early when a pivot is easiest. It prevents issues down the road if you've already established branding, released products, or shared information.
Align IP and Business Strategy
Investors need to know that you take IP seriously. A robust IP portfolio is a startup’s best defence against infringement!
First off, your IP portfolio should map to your overall objectives. Weigh the costs and benefits of patent filings against your business strategy and budget. Broad portfolios don't make sense for every startup.
Draft an IP strategy identifying what types of IP to prioritize and where, to revisit this regularly as your business evolves. It is a way to execute on strategy. Lastly, file first in the countries where you have immediate plans to operate and generate revenue. Most IP rights are national.
Consider how quickly you plan to grow internationally. Prioritize trademark coverage in those expansion markets and build flexibility into trademark portfolio budgets to enter new geographic markets. With the right foundational IP moves, you construct a protective moat around your startup's assets and profit pathways. Having these in place are good signs for investor confidence.
Trademark Registration and More
Once your foundations check out and your intellectual property strategy is aligned with your business, prioritize registering in key categories. If you’re an investor, you could ask the target company if they have made progress in these indicators.
Secure Core Trademarks
Applying for trademarks on the company name, product names, slogans, and logos helps stake claims to these core brand assets. Seek registrations in the country/countries you primarily operate in first. In the US, apply for federal registration with the USPTO. Once registered, use TM (for applied marks) and ® (for registered marks) to put others on notice.
Strategically Patent Key Innovations
Consider 1-2 initial patents if you have proprietary technology, processes, and features that deliver a competitive advantage. But don't overextend your budget if you're tight on funds – single utility patents can cost upwards of $10,000+ in filing, legal, and other fees. Design patents are worth exploring to protect the unique form and appearance of physical products and industrial design. Focus on patenting features that align with your product roadmap and commercialization plans so they provide value.
Leverage Automatic Copyrights
Copyrights protect original creative works like software code, images, videos, music, and written content. If you're US-based, register important works with the US Copyright Office for stronger protection, easier enforcement, and eligibility for statutory damages. When trademarking and patenting, prioritize filings in the largest markets you intend to operate in first, like the US and EU. Their response times vary greatly, so file 6-12 months before sales or risk losing eligibility.
Startup IP Strategies: When It’s Time to Expand
As your business matures, startups need to reevaluate their IP portfolio at least annually. Investors must also recognize the potential of such an expansion. It’s about identifying new assets and filling gaps.
- Conduct audits to identify new IP assets arising from R&D and other operations.
- Interview department heads in R&D, engineering, product, and design to uncover new developments.
- Map patents to your core technologies and high-value product features.
- Make sure filings provide coverage for elements that matter.
- Fill portfolio gaps by filing for newly developed IP - don't just let it languish.
Keep innovating and use your R&D pipeline to expand the patent portfolio so you have coverage lasting beyond the 20-year patent terms.
Strong IP Game: Monitor, Monitor!
Observe your competitive landscape with a hawk’s eye and monitor your marketplace for potential trademark infringement. Watch for situations where a patent is being infringed so you can assert your rights when it has the greatest impact. In 2021, an immersive tech startup Meta sued Mark Zuckerberg’s Meta Platforms for infringing on its name. But it’s not just massive corporations that could trespass on your business territory. Research competitor products and the patent landscape around your offerings to anticipate areas of conflict. You could even consider buying patents from third parties to shore up defenses or gain leverage. Finally, partner with vendors providing competitive monitoring services tailored to IP issues. If you’re an investor, vet your target company using these parameters.
How to Enforce Your Startup’s Patent
Only enforce patents when you have a valid patent infringed upon by competitors covering a profitable product or technology. Weigh the potential upside of royalties against time and legal costs which quickly escalate into seven figures. Litigation is extremely expensive – pursue settlement first when possible. It’s important to build an internal war chest or secure litigation financing. Focus efforts only where enforcement aligns with business strategy and has material ROI potential. Be selective and consider monetization options like selling or licensing patents.
In summary, follow these essential tips to take your intellectual property strategy to the next level:
- Verify and clear trademarks, patents, open source obligations early when pivots are low cost.
- Align IP strategy with business objectives, budgets, growth roadmap and target markets.
- Require NDAs from employees and partners to maintain confidentiality over trade secrets.
- Expand IP portfolio over time as business grows and new R&D innovations emerge. Only file where absolutely needed.
Make IP a priority to impress investors and defend your turf, but don't go overboard too early. With the right focus and tactics, startups can construct an endurable IP fortress. Don't neglect the IP goldmine—your innovation’s soul depends on it.
Disclaimer: No part of this blog consists of legal advice.
Sources:
https://fastercapital.com/content/The-importance-of-intellectual-property-for-startups.html
https://www.wipo.int/sme/en/checklist.html
https://thenextweb.com/news/how-startups-can-protect-their-ip-according-to-patent-attorney
https://www.pillar.vc/playlist/article/how-much-should-startups-invest-in-intellectual-property/
https://www.epo.org/en/news-events/press-centre/press-release/2023/945253
