Five Intellectual Property Misconceptions That Can Make Or Break A New Business

In today’s ever-accelerating business world enhanced by technological change and globalisation, the power of a great idea is more important than ever. The enormous upheaval caused by the birth of the digital era has confirmed again and again that even an idea, which seems small, can give birth to a disruptor that changes the world as we know it Every time we think that all the great ideas have already been though of, along comes something new, like Tik Tok, which makes us realise that great ideas are just waiting around the corner.

Australian businesses and entrepreneurs have increasingly recognised the importance of ideas and have started looking to protect theirs. In fact, the most recent Australian Intellectual Property Report, from 2019, showed that there had been a 9% increase in applications for design rights and patents.

Yet it’s remarkable how many people still have misconceptions about the world of intellectual property law, misconceptions which can have a devastating – even business-destroying – impact later on.

In this article, I expose five misconceptions that can have huge repercussions on any business if not addressed at an early outset.

Misconception 1 – a business automatically owns all intellectual property created by its workforce.

While this sounds right, it’s simply not true that an employer will automatically own the rights to any work created by its employees or contractors.

In fact, the only way to ensure you own the IP created by your employees or contractors, is to enter into agreements that explicitly state that the business owns the rights to all work created for the business by the employee/contractor during the term of their engagement or employment.

As ever, businesses should make sure employment contracts, contractors agreements or services agreements are watertight. or be ready for a rather shocking wake up call later on.

Misconception 2 – only big businesses need an intellectual property strategy.

Business history is littered with crushed ex-CEOs who falsely believed that an intellectual property strategy could wait until their business was big enough to hire in-house counsel. Many believed that being first to invent or first to market was surely enough to succeed, only to find out that those claims might win a moral argument in the pub but don't hold any weight when it comes to battling it out in court. Every smart new business owner should seek out an adviser to assist them with their intellectual property protection from the moment they decide to take their brilliant idea out of their head and into the real world.

Misconception 3 – only creative or tech firms need to worry about intellectual property.

This is probably one of the most dangerous misconceptions of all. We constantly read in the papers about songwriters suing each other, or big tech firms locked in legal wrangling. So the more modest service-orientated businesses often feel it isn’t a problem the more that will affect them. This is a big mistake – every business owns Intellectual Property, or it couldn’t be in business, and it’s essential that it protects its IP, which will hopefully be of great value when discussing that all important ‘exit strategy’. Even launching a crowdfunding campaign before a business has officially launched, could potentially expose an intellectual property to risk, so learning how to protect your name, your product names and your fledgling brand should be at the very top of every new businesses’ “to do” list.

Misconception 4 – securing your IP in your home country protects you everywhere.

Unfortunately, many start-up founders believe that successfully securing their IP in their home country is the end of their intellectual property journey. That’s definitely not the case. We may live in an increasingly globalised world, but the reality when it comes to intellectual property law, is that it is still very localised, and a patent or trademark in Australia is unlikely to extend to other territories. If you have dreams of going global one day, you need to consult with experts in international intellectual property law, so that you have a solid long-term game plan.

Misconception 5 – a great idea can be protected by itself.

Too many business dreamers still think that a great idea is enough to warrant full intellectual property protection. Unfortunately, that’s not the case. You have to prove that the idea can actually work, and demonstrate how it will work. Elizabeth Holmes, the visionary behind the self-invented blood-test start-up Theranos, claimed to have invented dozens of new ways to take blood samples and use their findings to benefit individual and public health. The problem was that her lofty claims raced far ahead of the realities, leading to one of the more embarrassing moments in modern business history. Make sure your idea isn’t just registered but is realistically workable, or any protection you get may be worthless.

Developing an intellectual property strategy shouldn’t be treated as a luxury, no matter how new and wet behind the ears your business is. In fact, these early days are when it is most important to get to grips with the topic, and seek expert advice if you don’t have it in your start-up team already. It’s a truism that prevention is better than cure, and there are few legal areas where this more pertinent than when it comes to intellectual property. Setting up and protecting your IP initially is not an overly costly exercise, but protecting your IP when you are being sued for trade mark infringement, passing off, misleading and deceptive conduct or otherwise, now that’s a whole different ballgame!