Intellectual Property Rights Tips for Startups

Starting a new company is as hard a task as any.

But mostly harder because building an enterprise from scratch is like scaling a mountain from the base. Along such an ascent, one of the issues companies face is security and dominion over the work they produce. Profiting from a successful enterprise is the cardinal vision of a business undertaking, especially so for a new one that needs to capitalise on every output it endeavours to generate. For them, it is a question of sustenance.

It is however, impossible to do so without understanding the coverage and application of Intellectual Property Rights (IPR) in the sector and operations that they are engaging in.

Importance of IPR

Words like copyright, patent, trademark etc derive their importance from the right of commercial exploitation they assign upon their holders.

One of the first concerns startups need to be wary about is the assignment of IPR over the work of their employees. It is important to keep track of their performance without infringing upon their rights. In certain situations, it helps to make the employee a joint-holder of IPR so as to prevent them from taking their ideas elsewhere.

Startups need to monetise their assets and liabilities from an IPR frame-of-reference. It means evaluating the products and obligations arising out of the company’s ventures by determining:

• If it is a money-making venture due to the company’s existing IPR
• If it has the potential to make money in case the company acquires IPR
• If the company needs to dispense IPR-related liabilities stemming out of it in which case the venture is necessarily in the form of a disinvestment.

The employment contracts must be defined unambiguously so as to maintain the startup’s air-tight ownership over all IPRs borne in the course of the employment. Non-confidentiality and non-compete clauses in the contract must have sufficient restrain to prevent the loss of trade secrets but not endanger the terminated employee’s livelihood. Similar contractual obligation must be extended to the consultants engaged in their employ as well. Proper due-diligence needs to be done to avoid any overlap with existing IPR-holders or owners of related craft and/or names. Nomenclature must be done carefully do restrict against ambiguity as much as possible.

Patents

Registration of patents is a very crucial aspect of securing work-product. Startups must ensure accuracy in documentation, registration, appearances etc. Either through in-house counsel or by engaging experts and firms who specialise in patent law. Provisional filing for patents must be done by administering careful industry-wide research on specifications that have been achieved by competitors in the same field.

The seat of registration is of paramount importance. Irrespective of where the company headquarters are based, startups must ensure registration in the domestic jurisdiction where manufacturing and trading units are located. Global patent strategies are in vogue these days, owing to the rise of manufacturing hubs like China and Southeast Asia. Patent infringement insurances must be subscribed to and applied for as needed.

Dealing with Lawsuits

Since litigation is a cumbersome and delayed process, startups must adhere to alternate forums such as arbitration or mediation in resolving IPR-related disputes. Preserving liquidity is of paramount importance for startups as opposed to seasoned multinational corporations who have deep pockets to ensure financial preservation. Therefore, carefully calibrated negotiation, often entailing CEO-to-CEO exchange, must be ensured to avoid the path of litigation, which can potentially bankrupt the company even if the verdict favours them down the road.

Conclusion

The most important notion of IP policy is that “Getting there front and squarely is the only thing that matters!”

Applications for copyrights, trademarks and most importantly, patents, must be done swiftly and accurately because in the 21st century. The race to success is a race against time and in relay with information.

It is thus prudent for startups to invest sufficient resources and focus into keeping their ears to the ground. Being routinely updated about regulatory changes, policy shifts, industry-wide-campaigns, lobbying and most of all, legislative directions is crucial to attain all-round information with regard to IPRs.

(Originally published 23rd August 2020 in transfin.in)