Building Company Innovation and Protecting Intellectual Property

How do young tech companies create enterprise value? It happens in many ways; from winning marquee customers, to creating a repeatable growing revenue stream. Sure, those are both very important, but it seems like every company can do that. What not everyone can accomplish, is building value through innovation. 

Innovation within a company is often referred to, or quantified as, intellectual property. A simple definition being; a work or invention that is the result of creativity, such as a manuscript or a design, to which one has rights and for which one may apply for a patent, copyright, trademark, etc. 

Managing innovation is a good habit young star-ups should form early on in their existence. So, how can you manage innovation and protect the intellectual property built within your tech company? This post is intended to outline some basic principles around managing innovation and protecting your Intellectual Property.  

I am not writing about filing patents in this post. Certainly, the act of filing patents is an important element of any IP strategy. But there has been plenty written about patent strategy that I do not need to repeat. This post highlights the other components of managing innovation and an IP strategy that, together, will drive material value in any tech company.  

Actively Control the Innovation Process 

Whether you manage it or not, innovation is happening within your young tech company. Putting processes in place early is a whole lot easier than scrambling to capture key innovations from the past as you approach a pending event such as a capital raise or a negotiation with a tough IP-centric enterprise client. 

Understand What Tools Your Employees Are Using to Collaborate and Innovate 

Again, being active on this is key. It is essential that as new and free apps find their way into your company the process be controlled. One issue BioConnect recently dealt with was the influx of free cloud-based apps that were making their way into our company without really any formal vetting process.  

Two issues occur if you let this go unchecked: Your IP is not stored centrally - rendering it unmanageable, and a number of free apps have terms buried in their T & C's claiming to have rights to the content. This is not where you want to store your IP. So, be forward thinking, do research, and target a handful of key apps that will be used to manage your innovation content, and allow employees to come to you with suggestions on new apps, but don’t allow them to be used until approved.  

The objective here is to create a confidential central repository that you can demonstrate to outside parties that you have been actively curating your confidential information. This information could take the form of more formal documents such as PRD’s, project plans, release notes, etc. But, could also take form of simple texting back and forth on a particular topic. Regardless, that content needs to be actively tracked so you can demonstrate to outside partners that you have an IP strategy that is being executed. 

Actively Manage an IP Process Through a Controlled List of Applications  

In choosing those apps, make sure you understand the application's data management policies, that you can extract data if you choose to leave the service and ensure you have redundancies in place. 

For example, here's a selection of apps BioConnect uses to manage our Innovation: 

Email: 

• Although email traffic is steadily decreasing over time as more efficient collaboration tools become available, you must be able to track historical interactions both between your employees and with external parties. Keep in mind you need to actively manage and archive email accounts through employee turnover. For example: you have 30 days access to content of a deleted outlook account before it is completely deleted so you better make sure you have a designated employee to extract that account content and archive it  

Slack: 

• We made the decision recently to make the investment in a paid slack account. Why? Because it is a better communication tool for our company than any other tool I have experienced: public, and private channels, DM’s, file sharing, chat, mobile, its benefits go on. We experience an immense amount of collaboration occurring on Slack that we needed to ensure our content was confidentially maintained and properly archived. 

It is also important to choose a single app to centrally capture PRD's, project plans, sprint updates, release notes, etc. Use this app to create an IP Ledger where your software innovations are being documented and tracked.  

Build and Create an Innovation-Aware Culture 

Hold weekly IP Innovation meetings and have exec, in-house legal counsel, and product leaders attend. Create an action register that covers all of the following topics that a company needs to manage: 

• Tech descriptions of their products / innovations 
• IP agreements for employees and partners and ensure IP protection is built into employee contracts 
• IP clauses in customer agreements 
• Develop a policy of whether open source software will be incorporated into your products and services  
• Make conscious decisions, terms need to be understood and trade-off needs to be made as it could impact value of your technology if heavily reliant on open source code that has very restrictive terms  

It is equally important that employees be educated on actively managing innovation and taking the necessary steps to protect those innovations that are created. Its not a bad idea to invite your in-house counsel for a dedicated session with the whole company to build awareness across our team.  

What Else? Seek an External Expert  

Finally, once you feel you have a good handle on how your innovations are being documented and protected, there will be a time when you will need to engage an external IP expert to support the process. Don’t be afraid of this task -- A good time to do this is well in advance of an actual event where a third party (investor, strategic customer/investor, acquirer) wishes to commence any form of due diligence. Having a well organized process around managing innovation that you can demonstrate to a third party is critical.  

I have heard examples of external investors completing due diligence on a potential portfolio company candidate simply based on the evidence of a well organized process. BioConnect is very fortunate to have partnered with Anthony De Fazekas, Partner at Norton Rose Fulbright for our external support. Anthony was introduced to us through our continued collaboration with the great people at MaRs @kjsays & @salim. Having an external expert who can support more strategic activities has been a very valuable addition to our team.   

In summary, an IP-centric culture doesn’t happen by itself. It needs executive visibility, sponsorship, and be continuously reinforced just like any other cultural attribute within your company. Innovation milestones within a company need to recognized and celebrated just like a big client win or a major software release. Creating these good habits early, and maintaining good discipline around them, will pay off big time in the long run - either in terms of a valuation on an investment or ultimately in the event of an acquisition.