By Anton Blijlevens, AJ Park
The reality faced by entrepreneurs is that legal services can be expensive and intellectual property (IP) protection may not be an initial priority. IP can help convey a competitive advantage in the market, and is a valuable asset that can help grow your brand. Getting an IP strategy sorted from the get go, can help you get the most from your IP and help minimize common pitfalls and legal expenses.
IP by itself will not make a company succeed, no more than writing a song will make someone a rock star. The value of a startup lies primarily with the founding team, their know-how and IP assets.
Creating a strategy will help you make informed decisions, identify opportunities, and improve negotiation positions while avoiding long-term negative consequences. And the strategy will be highly valued by a future investor as IP is a core business asset.
While there are many types of IP protection available to businesses, four areas to consider as part of your IP strategy include trade marks, patents, copyright and ownership.
Trade marks serve as a badge of origin for a startup’s goods and services and may accumulate a significant amount of value over time through commercial use. It’s best to select a mark and use it consistently. Also make sure to use marks together with their appropriate symbols (™ for unregistered trade marks and ® for registered trade marks). Using the appropriate symbols serves as a notice to others that the brand names are being used as trade marks—as badges of origin; and over time common law rights will accrue.
There is nothing wrong with using unregistered trade marks to save costs during the early stages of a venture. However it is important to understand that registered trade marks are deemed valid and easier to enforce should a third party decide to use a similar or identical mark for similar or identical goods or services. On the other hand, unregistered trade mark rights will need to be proven first before they can be enforced. This in itself is an expensive legal step. Registering a trade mark also ensures freedom-to-use and the best way to prevent trade mark hijacking in civil law countries such as China. Further, registering trade marks worldwide has become much more affordable thanks to cost savings made possible with New Zealand joining the Madrid Protocol in 2012.
A major pitfall for startups is to have their brand slapped with a court injunction just as their goods or services are being launched. It’s wise to run a check to determine if the trade mark is available for use, not only for the New Zealand market, but for any major foreign markets that may be entered into in the future.
Patents can be a key asset, and their importance depends on a number of factors including the nature of the technology, the business model and the type of funding required. Many startups rely on patents for the defensive aspect of establishing and protecting a core technological competency, and as a valuable asset for valuation purposes. While others use patents more aggressively to seek out joint ventures and licensing opportunities.
The smartest strategy for a company with a limited IP budget is to ensure they do not prevent themselves from obtaining patent protection at a future date. Unless, for example, it is a deliberate tactic for the company to publish a specific technology into the public domain to ensure it cannot be patented by anyone else. Otherwise, a company should never publicly disclose their invention to anyone without a non-disclosure agreement (NDA).
Before entering a market, a ‘freedom to operate’ (FTO) check can be done to identify potential infringement of pre-existing patent rights. The cost of having a clearance search done by an attorney is minimal compared to being completely shut out of a market by a competitor. The data from the search can also be used to gather IP intelligence such as possible partners/competitors and patenting trends specific to a given technology.
Copyright is an incredibly useful form of IP protection for startups because it is free and covers a wide range of IP assets. Copyright arises automatically as it is created and applies to assets including software codes, design drawings, logo designs, packaging designs, web pages and various forms of marketing materials. Make sure to use the copyright symbol © along with the year of creation and name of the owner. It is also wise for a startup to keep a record of its copyright assets.
Finally, if there is one item that’s worth spending money on during the early stages of a venture, it is to clarify ownership issues for IP assets that belong to the company. The cost of resolving IP ownership issues becomes exponentially more expensive as the venture starts to enjoy commercial success, and could even prevent the company from obtaining registered IP protection for disputed IP assets. Therefore ownership of all IP should be clearly documented in writing for both employees and independent contractors. If in doubt, companies should check with their IP advisors before the ownership issue gets out of hand.