Among the essentials of starting a new business, like honing your product, acquiring customers, hiring and managing a team, it’s easy for entrepreneurs to overlook protecting their Intellectual Property (IP) rights. That includes patents (new or unique technology), trademarks (logos and brands), and copyrights (often artistic works). Many successful startup founders believe it can be a big waste of time and money to protect something that may have no value. At the same, ignoring IPcan have serious repercussions. Ultimately, it’s a balance between making IP concerns secondary to creating your business, while at the same time not being naïve. New York-based lawyers and asked them to weigh in on some questions.
When is it ideally appropriate for a startup founder to involve an IP lawyer, and why?
Platz: As soon as possible. Simply put, timing is everything and can make all the difference when it comes to ownership and protection of intellectual property. Sooner is better, and sooner is most often less expensive.
Trademarks: Consult with an attorney before you decide on a brand. Clearing a trademark or brand for use is one of the most important services an IP lawyer can provide or give guidance on.
Copyright: Understanding how to protect and own content (software and code, text, music, photographs, films, etc.) and establishing the right framework for such protections and ownership can be crucial for your company’s success. Here, too, an IP lawyer can provide guidance. Ownership of any content a non-employee third party creates for you is only yours if you have your ownership in writing.
Patents: To the extent a business model relies on an innovation or invention, the help of a patent lawyer can be crucial to ensure adequate protections are in place. Here, too, it is important to timely file, not just because the US has become a first to file jurisdiction.
What are some of the biggest legal oversight a new company can make when it comes to IP?
Platz: Not having written agreements in place with freelancers, contributors [and] employees to ensure your company’s ownership.
Gennuso: With regard to inventions, a new company should file a provisional patent application; this application provides a priority date with regard to the invention so if someone were to file for protection regarding a similar invention subsequent to the provisional filing date, that person would not have priority with the PTO [U.S. Patent and Trademark Office].
Most early stage startups have very small budgets. Given that reality, what do you think are the essential protections to have?
Platz: Most importantly, having the business structured and set-up is crucial. Not setting up structures and contracts between co-founders is one of the biggest and costliest mistakes start-ups make. (“We’re all on the same page and have been friends forever, we don’t need contracts” counts as famous last words for most lawyers.)
With regard to IP, it is essential that you clear a brand before you start using it, if your brand is the core of your offering. If content or third party work (like code) is the core of your offerings, it is crucial that you have written agreements in place with any third parties who create content, including software, code, text, drawings, photographs, etc. for your business to ensure your ownership or right to use the content.
Gennuso: Confidentiality agreements and a provisional patent application are essential protections – both of which can be done in a cost-effective manner: confidentiality agreements are relatively standard and can be stand-alone agreements or included as a provision within an employment agreement. Also, a provisional patent application can be filed by the inventor in a few relatively simple steps. Note, however, that a non-provisional patent will need to be filed within one year to continue the priority of the invention or else the priority is lost.
Miller: It’s really a balance. Everyone’s got a limited budget. Even a Fortune 100 company has a budget. And we’ve seen those companies slashed on patents. It’s all about setting priorities…
Should the founder of a new nonprofit have any concern about IP issues?
Miller: Yes. [Even if the nonprofit] is not technology driven, say advisory services or fundraising services where you’re not developing technology, [there are still] trademarks and logos that are all part of the intangible assets of your IP portfolio.
If the nonprofit is technology driven, there are no exceptions for nonprofits. [Nonprofits may need to protect their IP assets] even more so because they’re not generating revenues. So you’d want to show value in your intangible portfolio.
Tech startup culture often discourages founders from being overly protective of ideas. After all, few companies succeed whose founder(s) keep their idea all to themselves. That said, is there a time for founders to be discreet about an idea, product, or service?
Platz: The best initial protection is limited disclosure. A good rule of thumb is that if you’re uncomfortable disclosing something to somebody, don’t disclose it. Certain parts of your business may benefit most from being kept secret. That may apply to code, recipes, etc. Coca Cola has kept their recipe a secret for a long time. Certain software or functionalities can be kept a secret even with a successful business…[Discretion may mean] keeping certain things secret. It may require non-disclosure agreements (NDAs) with third parties. You may not be able to get potential investors to sign an NDA. In fact, it’s exceedingly rare that serious investors will sign an NDA. In this case, protect yourself by not disclosing what’s under the hood. In most cases, what matters to investors and partners is the result, not how you get there.
Gennuso: Founders should be discreet about an idea/product/service prior to having in place – at least – confidentiality protections. Confidentiality provisions or agreements will give the founder protection/recourse in the event that anyone tries to steal his or her IP. As an example, early-stage team meetings on an invention should be with employees that have agreed to confidentiality on all matters regarding their employment, including the invention. In the absence of such protection, founders should be discreet about the invention.
By Todd Stone