Startup 2020: Step 7, Secure Intellectual Property

This is the seventh article in a series on how to start a company in 2020. See the previous article, Scrub Business Plan, Revenue Model and Projections.

“If you didn't have patents, no one would bother to spend money on research and development. But with patents, if someone has a good idea and a competitor can't copy it, then that competitor will have to think of their own way of doing it. So then, instead of just one innovator, you have two or three people trying to do something in a new way.” - James Dyson

It is never too soon to determine which protections you need and secure the necessary rights for your company.

Intellectual Property (IP) provides your startup with both an offense and a defense. It can create barriers to entry, increase the value of your company, attract investors, generate revenue through licensing and royalties, and reduce shareholder risk. There are many strategies for building a strong IP portfolio, from state and federal registrations, to assignment and confidentiality agreements.

Whether you should file patents or trademarks depends on the novelty of your idea, your branding strategy and your budget. Even if you do not formally file for these protections, you should take care to guard the IP of your startup. Many companies have prospered not by filing, but by guarding their trade secrets and having airtight agreements with contributors. A good rule of thumb is to ensure that everyone who is contributing anything to your company, including yourself, has assigned those contributions to the company in writing and has agreed to keep them confidential.

Things to Think About and Decide

First, considering buying or licensing the patents for product that were never commercialized. Tons of patents exist for products that were never built. Check the USPTO. You might be able to acquire one cheap!

Second, if you have a unique invention or technology, think about whether you should file a provisional patent application (they are quick and inexpensive relative to regular patent applications).

Third, if you plan to pursue a patent license from a university, think about whether you can demonstrate a thorough understanding of the product, the market, the developmental milestones, and the financial requirements to commercialize the technology with a reasonable probability of success.

Fourth, if you plan to pursue a patent license, think about whether you have the money, the legal counsel, and the patience to negotiate the license, which can often take 1-3 years.

Fifth, think about whether you should file a U.S. (and possibly international) trademark on your name, slogan, and/or logo.

Sixth, think about how you can protect your domain name from squatters.

Seventh, decide whether it might be more beneficial to protect your intellectual property with trade secrets and confidentiality agreements, instead of patent and copyright filings.

Eighth, think about recruiting an IP attorney for your board of advisors.

Things to Do (or not)

• Do not approach a university or federal agency that holds patent rights unless you have the necessary credentials to commercially develop the technology and attract financing.
• Before approaching a patent holder, find out if the inventor is available. (It is rare that a technology can be commercialized without further input of the inventor(s). A good working relationship with the inventor(s) is necessary if you expect to succeed.)
• If you decide to pursue a patent license, request a basic term sheet from the patent holder.
• Conduct a preliminary patent search on the technology you plan to develop as a business. https://patft.uspto.gov/.
• Conduct a preliminary trademark search on names and/or marks you are thinking about using. https://www.uspto.gov/trademarks/process/search/
• Research best of breed templates and download (1) a Mutual Non- Disclosure Agreement for partners, (2) an Intellectual Property Assignment Agreement for team members, (3) a Work for Hire Agreement for development resources that properly assigns the Intellectual Property and (4) an Advisor Agreement that grants equity in exchange for high-level guidance. (Many of these templates are available for free on StartupBiz.com).
• Mark all of your work products with a copyright notice and mark any sensitive information with the label "Confidential Information."
• Ensure that everyone that you have worked with to develop the product has signed or will sign an Agreement with Intellectual Property Assignment.
• Read every agreement you are asked to sign thoroughly. Have an attorney review and advise you on all key contracts.

Recommended Readings & Resources

Startup Company Intellectual Property Video by Jon Gibbons, Patent Attorney

Startup Legal Issues, Video by Brent Britton, GreyRobinson

Patent It Yourself, by David Pressman (available through Amazon.com)

Google Patent Search, Searches patent database for relevant patents.

USPTO, Patent and trademark research resource.

Patent Law Essentials, Patent law for business people.

Nolo, Forms and templates for trademarks, provisional patents, and other common tasks.

Trademarkia, Trademark search engine and filing service.

Tech Transfer Central, A one-stop source for information, news, products, and services for technology transfer and intellectual property professionals.

The Startup Company Lawyer by Yokum Taku

StartupBiz.com, Legal and business templates for startup companies.

Justia, Legal resources (Federal District Court Filings and Dockets).

FindLaw, A leading database of resources regarding legal issues from finding lawyers to researching rules and finding legal forms.

PACER, Access to online public court documents.

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Stay tuned for Step 8, Create Name and Brand Strategy

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This series of posts based on the book, Startup Resource Guide, by Mike O'Donnell.