Intellectual Property for Start-ups

-Aayushmaan Gauba,

Partner, Intellectual Property and Dispute Resolution

What should start-ups do to protect their Intellectual Property (IP)? Is it really important to protect IP for a start-up, especially with a limited or constrained budget? This is a short piece which I have penned down through my recent personal experiences.

YES! START-UPS NEED TO BE SERIOUS ABOUT INTELLECTUAL PROPERTY

First of all as a start-up at its initial stages you need to have a serious discussion as to how important is Intellectual Property to you. You ideally must meet with a lawyer and consider what kinds of IP Protection does your business need, if any. You should go in for a legal opinion to assess the needs of your business. This is important not just for future IP hurdles, but more so from the perspective of getting investments. If future investors ask questions about your IP strategy it can really hurt your chances if you’re going to be dumb-founded.

Whether or not you would want to protect your IP is a decision which is yours in end. But, it should hardly be an issue worth ignoring in the nascent stages of a start-up. It may be a final strategy of your start-up to grow to a particular size and sell-off the entire business to a larger corporation involved in the business. Then again, it might be a strategy to have an IP protected and that may help you to increase the start-up’s worth at the time of exit. But yes, please take these decisions and don’t leave them to the end.

A START-UP CAN’T AFFORD IP MISTAKES

There is one major difference between start-ups and established big players. Big players can afford to make mistakes and get away with it. Start-ups cannot afford to have any such problems, more so especially at the beginning. For a typical start-up an IP mistake is usually the end of your entrepreneurial venture.  I cannot emphasise enough, the importance of visiting a good IP attorney in time.

I am involved with several start-ups as well as established companies who get their patents or trademarks registered regularly. Recently, I was involved with a due-diligence project for a Company which was attempting to raise capital in India. They had been running their business quite successfully in Italy for a span of more than 20 years and were planning to come to India now. I quickly checked the database and found that the similar trade-mark was owned by an Indian Company. a Trade-mark infringement suit worth crores of Rupees was sure to ensue, had they not sought legal advice right at the beginning. The Italian company of course took remedial action quickly.

PRIORITIZE YOUR BUDGET

A Start-up cannot have IP in every class, in every range. So, as a start-up, it is important to  prioritise how much money and at what stage you need to spend on IP. Sometimes the only asset a start-up has is IP.

WHAT TYPE OF IP DO YOU NEED?

It’s important to know early on what sort of IP Protection you would need as per your particular brand of start-up. A Few forms of IP protection are in-expensive, yet vital. A few examples are below:-

  • Get a standard NDA vetted by your lawyer suitable to your business. This is a one time expense and the form can then be used for all further purposes.
  • You should know that Copyright is free! Just consult a lawyer to understand what steps you can take to better protect it.
  • IT system firewalls help protect your trade secrets.

Why are trade secrets so important? Well the past speaks for itself.

The Commission on the Theft of American Intellectual Property has estimated that China’s purported IP theft costs the U.S. between $225 billion and $600 billion each year. Fiat Chrysler Automobiles has also complained against Mahindra and Mahindra, alleging that it has infringed upon the intellectual property rights of its Jeep design. In response the U.S. International Trade Commission (ITC) said that it had launched a 45 days investigation into Mahindra and Mahindra’s affairs. Could you imagine the cost of such an investigation, and more importantly what happens if Chrysler wins? It could cost millions.

A LOOK INTO THE FUTURE

Another reason why it’s important to be first on protecting your IP is that if you’re late, you might lose out on the IP. This is because many forms of registered IP rights need to be in place before new initiatives are made public. Recently, I had a client who was planning on registering his patent on a new game. However, not giving much priority to IP, he thought of first giving the game a test run in a group survey of about 150 people. The moment he approached me I informed him not do so, as putting the IP in the public domain would risk opposition of prior disclosure. Had he not approached a lawyer, he would have very well lost his IP. Therefore a look into the future is more than necessary in taking steps for IP protection.

Another difficulty that start-ups have is their changing structure and needs. Start-ups, especially at their nascent stages keep undergoing a lot of change in their growth model, in their business model etc. I cannot emphasise this enough, but please consult with your lawyer to keep reviewing your IP strategy.

CONCLUDING REMARKS

At the risk of repetition, I would like to say, that dear start-ups, please allocate your resources wisely. Please do not overlook IP as an unimportant part of your business. Please do not leave it for later. Please plan and act in a timely manner and save lot of valuable resources before it’s too late.

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