Your product is gaining early traction in the marketplace, investors are interested, and you have a solid and capable team. It’s an exciting time, and you are focused on getting the business off the ground and taking your share of the market. Aside from the inherent lack of time to get everything done that comes with starting a business, what else could you be missing? Probably the most important thing: your intellectual property protection.
Intellectual property refers to an invention resulting from creativity, such as new technology, brand, design, or literary and artistic works, to which exclusive rights are recognized. Because there are so many things involved in starting a business, most startup entrepreneurs will neglect to protect their intellectual property as it does not seem so important at the time.
If you don’t protect your intellectual property, you risk difficulty and losses in future, especially when you want to expand your company, or sell some shares to investors.
Fortunately, you can avoid impending intellectual property issues by knowing what to look out for. Here is a list of intellectual property mistakes common with most startups.
1. Failure to Exercise Due Diligence during Registration
Registering your business with one agency does not mean it is protected from infringement in other locations. You must check other databases or other registration firms to make sure your business name does not have similarities with other companies outside your area to avoid breaching their rights.
Also, a business registration does not automatically entitle you to get the domain name that matches your company name. It’s best to make sure that the URL you want for your business does not impinge on another to avoid legal issues.
2. Using Materials from Previous Employees
You build your skills and expertise from your job while performing your daily tasks. These become the building blocks of your career.
They form your basic working strategies and concepts, and will influence how you carry out your future responsibilities—even when you start your own business.
It’s easy to use these concepts and strategies without even meaning to, yet it could be bad for business when your previous employer accuses you of plagiarism.
Most companies require that all their employees sign a non-disclosure agreement that prohibits anyone from using any information or output of the company aside for the company’s benefit. Breaking this agreement is detrimental to your business because it carries serious lawsuits that will cost you a lot of time and money, and probably ruin your business name if it gets out in the media.
Before you launch your business idea, you should make sure it’s not exactly the same with an existing company. Also, make sure that that nobody has already patented that idea because a company might not be operational yet, but still have a business model and concept under their name.
3. Not Imposing a Moral Rights Waiver
Even though you own the rights to your employees’ work, they still retain moral rights. Moral rights are legal obligations to attribute creators and treat their work with respect. This means that you have to give your employees due credit for their work even after they leave, and you cannot change or add to it in a way that will give the creator a negative impact.
It is always best to get employees to sign a moral rights waiver at the beginning of the employment so you can have the freedom to use their work legally. Failure to waive moral rights could result in legal issues if your employees misinterpret your usage of their work as infringing their moral rights.
4. Not Researching Your Competitors
It is essential that you carry out a thorough market research in the initial stages of your business for many reasons. One of the most important reasons is not to outsmart your competitors, but to avoid violating their rights.
You need to find out your competitors’ intellectual property, such as products, services, goods and concepts they have already patented or have under copyright, and how yours could affect all of it. Using any of your competitor’s intellectual property is seen as willful infringement, a criminal offense that will have a lot of negative impact on your business.
5. Filing Patents Too Late
Be careful of disclosing too much about your business idea before you patent it. If your idea is not patented, anyone privy to your information can use and exploit the idea, even beat you to its patent because, essentially, the idea is still available. Patent your ideas before you share it with friends or pitch it to investors to protect your intellectual property and prohibit others from using your ideas.
Filing for patents is relatively easy and requires just an online application to start the process. You can file for a patent with the Unites States Patent and Trademark Office (USPTO) through their website, where they also have tutorials on how to search for existing patents before you file yours.
6. Crowdfunding without Protection
Funding projects by raising money from the internet has become very popular in today’s Internet era. Many startups have raised hundreds of thousands of dollars without investors and loans, by just asking for small donations online.
Many entrepreneurs are embracing this movement and taking away their pitch from a closed boardroom to a very public audience. They present their ideas in forums to attract donations and pre-sales from the public, which can help fund their startups.
When an entrepreneur pitches their ideas on public web forums, they automatically have a one year period where their ideas are legally protected and have to file a patent before it lapses. If they do not file a patent within that time, their idea is no longer safe, meaning someone else can take it and use it as their own.
Entrepreneurs should learn to discuss their business ideas without going into details about their production process. If ever a major investor requires information about your processes, insist on having them sign a non-disclosure agreement.
Owning intellectual property to your inventions is essential in protecting your assets. Be thorough in describing your inventions when filing for a patent. Otherwise, your competitors might find a way to go around it. Forgo this and you might find yourself losing out on billions of dollars when someone steals your business idea, and it takes off.
Case in point: the ongoing Apple versus Samsung saga. The mobile phone giants found themselves embroiled in a bloody war spanning over 40 lawsuits against each other; all started when Apple sued Samsung for copying their designs.
Although Apple had patented some of these designs, which actually won the first ruling, the USPTO eventually claimed that Apple had not sufficiently described some of its designs, especially for their intellectual property claims on the iPhone 3G, which reduced Apple’s awarded damages of almost a $1 billion to $548 million. After further examinations, the USPTO has made a decision that Apple’s features are not patentable and, therefore, patents should not have been awarded.
Samsung counter-sued and won against Apple for an infringement of their mobile communication technologies. Samsung doesn’t have to pay Apple anything in damages, yet the latter now owes Samsung $158,000 as per the latest ruling.
Both companies lost substantial amounts of money through the back and forth lawsuits, all of which could have been avoided by properly protecting their intellectual properties.