A Startup Business Guide to Intellectual Property

Every day, somewhere in the world, someone brainstorms an idea they believe will become the next big thing. However, the harsh reality is that most startups crash in their infancy. From Adidas to Airbnb, Canva to Spotify, some of the world's leading companies started off as basic ideas. They separated from their peers through many things, including a simple factor - the intellectual property (IP) behind their creation.

Basically, IP refers to creations of the mind. These can be innovations, inventions, creative works, logos, names, images, and symbols used in commerce. Take, for example, Nike - the Swoosh symbol and the phrase "Just Do It," which are intellectual property.

For startups, IP protection is a key step in taking control of the destiny of their creations. It helps startups stay competitive, attract investors, and establish market credibility.

Types of intellectual property protection

Be aware of the types of intellectual property protection for your startup. This knowledge is important before you seek funding or make any other moves. These include copyrights, trademarks, patents, trade secrets, and industrial designs.

Trademarks are words, symbols, phrases, designs, or a combination of these things that are used to identify goods or services. This is how customers recognize and distinguish your products from competitors.
Patents are exclusive rights granted by a government for technical inventions. These include mechanical processes, chemical compositions, and new, unique, or usable machine designs.
Copyrights protect original artistic, literary, or intellectually created works. These include novels, music, movies, software code, photographs, and paintings. They can exist in tangible mediums, e.g., canvas film, paper, or even digital format.
Trade secrets are pieces of information that are commercially beneficial to companies and must be kept secret. This includes research information, recipes, formulas, manufacturing processes, software algorithms, and technical data. Think Coca-Cola or KFC; their value lies in the secrecy of their recipes. Non-disclosure agreements (NDAs) also play a key role in safeguarding these secrets.
Industrial designs, such as the ornamental or aesthetic aspects of products, can also be protected. You can achieve this if you meet certain conditions.

These types of IP protection lay the foundation for startups to thrive in a cut-throat business environment.

Why should you protect your IP?

Kirstin Marquet, Owner of Marquet Media, quotes for Trademarkia

“Protecting our intellectual property has been a game-changer for Marquet Media, allowing us to maintain a competitive edge while reinforcing the exclusivity of our proprietary PR frameworks, PRISM Ascend™ and Dual Catalyst Branding™. By trademarking our methodologies and securing copyrights for original content, we’ve built a stronger brand identity and positioned ourselves as industry leaders. However, the process wasn’t without challenges - navigating legal complexities and proactively monitoring potential infringements required vigilance.
One lesson? Early protection is crucial; hiring the right attorney can make all the difference. Investing in legal safeguards upfront has prevented copycats from diluting our brand and ensured that our strategies remain valuable assets, helping us deliver high-impact results for our clients.” - Kirstin Marquet, Owner of Marquet Media.

IP protection prevents others from copying your innovations. This helps you maintain a competitive advantage in the market. It also breeds trust and loyalty from your customers, resulting in repeat business.

Protecting your IP strengthens your brand and reputation. This makes your startup more appealing to investors. It also provides a sense of security, thus increasing investor trust in the brand's ability to safeguard its innovations and ensure profits.

The IP system also levels the playing field, giving startups a legal shield from larger, moneyed corporations. This encourages their growth. You can license your IP to bigger corporations and earn revenue while also expanding your market reach.

Startups that protect their IPs in the initial stages are 10 times more successful in securing funding. This is according to a 2023 study by the European Patent Office (EPO).

Fundamental steps for startups in intellectual property protection

Now that you understand the types of IP and the benefits of intellectual property for startups. Here's a step-by-step guide towards effective protection.

1. Identify your IP

The first step to protect your intellectual property is to find which assets in your startup can be safeguarded. This includes software, names, logos, phrases, and customer lists. It also covers packaging, designs, applications, code sources, art, music, and concepts, among others.

Make sure you document the details of each asset useful for the purposes of registration and enforcement.

Intellectual property law defines specific categories that can be registered, such as patents, trademarks, and copyrights. However, legal frameworks often evolve to accommodate new technologies that meet the established criteria.

2. Conduct a search

It's critical that you conduct an IP search to ascertain whether your asset is original or has already been registered by another startup. Before launching your startup, do patent or trademark searches. This helps you see the competition and decide the best next steps.

Conflict checks are key for identifying rights held by current and future competitors.

3. Lock in ownership of your innovations

Imagine waking up one day only to find out that your asset isn't actually yours. Avoid this by ensuring you take control of your creations from the onset. Verify who owns your assets. This includes interns, marketing agencies, developers, graphic designers, and freelancers.

Startups should use contracts, transfer clauses, or IP assignments. These tools help formalize ownership transfer.

4. Protect your assets

Based on the nature of your assets, select the appropriate type of IP protection for your startup. The value of your assets lies in their protection.

Intellectual property protection for startups involves trademarks, patents, copyrights, trade secrets, domain names, and blockchains.

In protecting your assets, timing is key. Register early to prevent your competitors from claiming the IP first. This helps you avoid costly legal battles.

5. Monitor and defend your IP rights

Monitoring IP rights is critical. It ensures the protection of your brand from third parties that may dilute its value and damage its uniqueness in the market.

It's solely up to startups to monitor their IP rights for potential infringements. The main IP offices, such as USPTO, don't monitor assets once they have been registered. It's a good idea to use third parties. They can help find and respond to possible infringements, whether intentional or accidental.

6. Ensure confidentiality

When it comes to intellectual property protection for startups, keeping trade secrets secure from employees, contractors, and even partners - signing non-disclosure agreements (NDAs) should be a no-brainer.

Ensure that critical information can and will only be accessed by authorized personnel.

7. Adhere to legal notices

Startups must follow the designated rules and regulations when it comes to establishing their presence online. Information such as the following must be included on their official websites:

General conditions of use.
Legal/privacy notice.
General conditions of sale for B2B/e-commerce websites.
Data compliance: If your startup qualifies as a data controller, the website must indicate why and how personal information is used.

Developing an effective IP strategy

Startups must align their IP protection strategy with the available budget, development, business goals, and any other future objectives. Your strategy should allow for adaptation to the ever-changing business environment.

To disrupt and navigate a new market, your strategy should remain flexible and adaptable.

How IP can be used to secure funding

IP is a critical and valuable business asset. And for startups, it can be by far the most valuable asset. If you lack the finances to grow your business, you can use IP as collateral to secure loans or investment capital.

Types of intellectual property that can be used for IP-backed finance

All types of IP can be used to secure financing for a startup. Registered IPs are easier to work with since their existence and distinguishing features are clear.

What do investors consider when evaluating intellectual property for IP-backed finance?

Securing financial backing comes with a number of factors. First, you must be able to prove to investors the return on investment (ROI). Through data and storytelling, you can give funders an idea of the IP's commercial viability. Investors will also want to know the people they'll work with to ensure the general success of the portfolio.

You should have an asset register listing all IPs your startup owns and uses. This reassures funders that you have everything under control. Show them which assets are contributing to company revenue. You must be able to demonstrate revenue or an exit.

Most importantly, you should make the investors share in your vision. Demonstrate that you have confidence in your IP and its market share. Explain your customer needs and how you intend to use the untapped potential. Funders will buy into your IP if they can establish an emotional connection with your vision.

Debt funding is perfect for startups looking to scale their operations or those in search of a clear exit. It's commercially viable to source partnerships through collaborations or mergers and acquisitions. These can help increase the value of your startup.

Common IP mistakes startups must avoid

Here are some of the most common mistakes startups make when it comes to intellectual property protection:

Underestimating the significance of IP protection. This can lead to missed growth, expansion, and revenue generation opportunities.
Delaying IP protection. In this business, timing is critical. Delaying your registration for intellectual property can make you an easy target for competitors in the same market.
Neglecting NDAs. This could leave you exposed to the threat of potential theft and eventual competition or the misuse of ideas.
Ignoring international protection. Global protection for your IP will ensure smooth entry of your business into target markets in other countries.

Intellectual property protection is essential for startups seeking long-term success. Identify the right IP protection. Register it on time and enforce your IP rights. This way, your startup will build a strong foundation for growth and innovation.

Investing in IP protection gives your startup a market edge. It creates a strong reputation with both investors and customers, proving you're a stable player in your field.

Looking to secure your startup's assets?

By following these tips, your startup can navigate the murky waters of intellectual property protection and become successful in the marketplace. Take charge of your investment journey and future success by ensuring a strong foundation for your startup through the security of its IP rights.

Additional resources

Glossary of legal terms

IP assignment - a legal transfer of intellectual property (IP) rights from one party (the assignor) to another (the assignee). The assignee now becomes the new owner of the IP and has the exclusive right to use, sell, or license it.
Transfer clause - an outline of conditions under which certain rights can be transferred from one party to another.
Non-disclosure agreement (NDA) - a legally binding agreement that creates confidentiality between two or more parties. This obligates them to keep secret information exchanged during a business transaction or project.
Return on investment (ROI) - a financial metric used to evaluate the efficiency of a business. Simply put, it's how much profit or loss a startup can generate compared to the cost of investment.
IP finance - the use of intellectual property assets, such as patents, trademarks, and copyrights, as collateral for financing.
Data controller - an entity that decides why and how personal information is used.