Founders! What should you do about your IP?

Welcome Founders!

Something that is a very hot topic for many Founders - Intellectual Property (or IP for short). Many startups are born from really great ideas, whether it’s for a new app, the next AI lawnmower, working time machine or a cure for procrastination (we’d like those last two when they’re ready, please?).

Today we’re going to highlight some of the key commercial considerations and practicalities about your IP that you need to consider. You’ve probably ticked off most of these, we just want to make sure that all these items have been considered.

Now, as IP is a very tricky subject (you should not rely on AI advice for IP issues!), it’s important that expert advice is obtained. So, we’re pleased to say that our friends (and definite experts) at IntegratedIP (IIP) have helped us prepare this article!

For a startup, the intangible assets (ie, your knowledge, your idea etc) are often overlooked by Founders, but these will commonly represent the bulk of the value of your startup. So, looking to protect that advantage while you get to market is hugely important.

So, let’s start with the key things that IP protection offers :

1. Protection of your idea!
   Yep, this is a key one. Depending on what your idea is you may be able to get patent, design and/or a trade mark protection, or alternatively you could keep it a trade secret. Generally, protecting your IP will make it harder and provide some disincentive for competitors to copy you..

2. Confirmation of Freedom to Operate (FTO)
   Yes, we know that it’s your idea. However, while your idea may be unique, the invention or elements of it may in fact already be patented. FTO is critical - especially if you’re raising funds from investors..

3. Investor confidence and funding
   Details of how you’re protecting your IP and how secure it is will be a key focus of any investor due diligence. Generally, the more secure you can make your IP the more comfortable investors will be.

4. Attraction of interest from industry peers/giants/competitors

   This one is often overlooked. It’s particularly relevant for registered IP, like a patent. Essentially, when you lodge your patent application, the title acts like a huge red flag to interested parties, be they competitors, potential customers etc. Let’s be clear here, the parties who monitor new patents are typically larger companies (we’re aware of one startup which lodged a patent application and an energy supermajor was reaching out to find out more within 24 hours of the lodgement!).

   This may be good, or bad, news depending on the interests of the company that flagged your application. Focussing on the good side for a minute, having an interested party reach out to you is, commercially speaking, hugely valuable. It saves you an enormous effort in trying to get to the right people and, played properly, gives you the commercial credibility to attract other companies and, importantly, investors.

So that’s what’s on offer and all those benefits are valuable. There are a couple of caveats though, and these need careful thought and a couple of contingency plans to deal with effectively, from a commercial perspective.

The Caveats:

1. You need cash
   IP protection is not cheap. In addition to the costs of actually filing a patent or trademark, it’s often necessary to put in place processes and procedures to ensure that information is correctly captured and managed within the business. Security, especially cyber-security, can often be a costly process.

   There’s an additional cost, which you hopefully won’t have to incur. That’s the potential cost of having to defend your patent by lodging infringement claims, or legal costs of defending objections. This is a potential downside of attracting the attention of interested parties - some of these parties may be patent litigators, or global companies looking to acquire your IP on the cheap. However, this can be mitigated by obtaining IP insurance.

2. Some countries and companies don’t care about IP

   Depending on where your target market is (or where you’re having your product manufactured, if that’s relevant), having patent protection may not give as much protection as you would hope. This definitely isn’t a reason not to protect your IP, just a caution that you may not have as much time as you think.

3. You’re telling the competitors your “secret sauce”

   From the time that the patent application is lodged, you have at most18 (eighteen!) months before the details of your invention are made public. Lodging the patent application starts the countdown clock ticking - so ensuring you have a plan to get into market (or maintain your headstart) is important. If you don’t want to tell everyone the details of your invention, trade secrets may be a better option.

As with all business matters, there’s upside and downside considerations. So, what should you do?

1. Get expert advice as early as possible!

   It is well worth getting expert advice about IP protection sooner rather than later. This is because public disclosure of an innovation which could potentially be covered by a patent or design registration may result in loss of those rights. In some cases, you can find out sufficient information about whether you need to proceed with formal IP protection over a coffee, and get advice on how to proceed from there.

2. Understand what your “IP” really is

   This is a key point. Your innovation is absolutely one of your key IP elements. However, even if your IP can’t be protected with a registered right such as a patent, it’s important to understand what IP is generating your competitive advantage. You can then ensure that you’ve got commercially sensible processes to protect, maintain and enforce your IP.

   For most businesses, it’s important not to overlook the IP in your head and the heads of your team. Operational knowledge is the most obvious, however, the relationships with customers, suppliers and investors are often enormously valuable as well. It’s important to ensure that you capture and protect that knowledge as well.

3. Understand what advantages you need your IP to give you.

   The success of your business is dependent on many factors. Innovation, protected or not, underpins many startups and SMEs. So, for the IP you have identified, ensure that you’re clear on what competitive advantage it’s providing. Where protection of your IP is time sensitive, ensure your business plan takes that into account.

Intellectual property is something that all startups need to consider. We hope that you found this useful - if you have questions please don’t hesitate to reach out to us, our friends at IIP or your own IP expert!

About IntegratedIP

Integrated IP (https://iip.com.au/) is a specialist IP firm built around the ethos of understanding your industry, business and intangible assets and taking the time to make sure we fully understand our client’s needs. We take a holistic view of each of our client’s intangible assets, rather than focusing in on just IP.

What sets us apart is that we work at the coalface of design and industry – ‘integrating’ intangible assets with innovation and business management. We are a senior multidisciplinary team of IP attorneys, lawyers and advisors, who have commercialised our own innovation and look to pass on our decades of experience to drive our clients further.

With distinguished qualifications across a range of markets, including resources, defence, construction, manufacturing, education, life sciences, consumer goods, professional services, and energy and cleantech, we know your industry. We work with clients ranging from large multinational corporations to SMEs and start-ups.