How and Why Startups Must Protect Their Intellectual Property at All Costs While that's true that execution matters more, a great idea is always at the core of successful startups. Those ideas are worth protecting.
By Ademola Alex Adekunbi Edited by Heather Wilkerson
Opinions expressed by Entrepreneur contributors are their own.
Intellectual property (IP) is a term used to describe the creations of the intellect. Although intangible (in the sense of not being physical), intellectual property is immensely valuable because it gives the owner certain rights — including the exclusive exploitation of the IP for-profit and the right to exclude others from using the IP. These rights are generally known as IP rights. The purpose of IP law is to protect and govern all aspects of IP rights.
More often than not, when the protection of IP comes to mind, people tend to think it relates just to the media — artists, actors, and writers. IP is much more than that. There are various aspects of IP which also apply to large companies as well as startups.
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Why startups must protect their IP
Unfortunately, many startups have a laissez-faire mindset towards the protection of their IP rights. This often stems from their belief in the notion that "ideas are a dime a dozen; only execution matters." The problem with this mindset is that the delay in securing a startup's IP can do severe and sometimes irreversible harm to the startup, both from a legal and business standpoint. IP matters, which is why companies like Google, Apple, and other tech giants spend billions of dollars suing to secure their IP.
The IP of a tech startup is typically its most valuable asset. The products and services it brings to market will help it secure market share and earn revenue, but neither the market share nor revenue will be secure unless the company can prevent other companies from stealing its concepts, brands, and inventions. IP also constitutes a major consideration for investors because they'll want to know that your startup has control over all the ideas, code, and branding you'll need to develop and market your products and services. Clearly, without its IP, a tech startup would have little leverage in the market, thus making it essential to protect these rights as quickly as possible.
As startups scale and begin to share information with more partners, vendors, and other counterparties, the importance of securing their IP rises, especially in sectors such as fintech where API integrations — and the attendant access to each other's systems — are customary.
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How to protect your startup's IP rights
Most products and services can be protected by a combination of IP rights. For example, computer software can be protected by patents, copyrights, trademarks, and trade secrets. Apple protects certain features of its iPhones and other products with patents, and it uses copyright to protect the actual code of its macOS and iOS operating systems. It uses trademark law to protect the Apple name and logo trademarks that identify its products, and it uses trade secrets law to protect the design and components of its upcoming devices.
The particular steps needed to protect IP rights will be dependent in large part on the type of IP in question, as highlighted above. Generally, startups must use Non-Disclosure Agreements to ensure that they can restrict the appropriation of confidential information regarding their innovations by staff or third-parties. Also, it's important to commence the process of registering trademarks and patents quickly, to prevent others from registering them first and thus getting ownership.
Even after taking the foregoing steps to establish your IP rights, including registration, they may still be infringed upon by other companies. It'll be important, in such instances, to act swiftly to get them to stop and to recover damages for any losses their breach may have caused and for the very act of breaching your rights. This process is referred to as IP defense and can span from a simple demand letter from your lawyers to the infringing party to a lawsuit to enforce your rights, depending on the circumstances.
The importance of the protection of IP rights cannot be overemphasized. A startup is simply unlikely to survive unless its IP is securely under its control. Some of the more common errors startups make, such as failing to get IP assigned to the company, can be incredibly difficult to fix if not resolved early on. Registration is also often tied to timeliness as highlighted above, and failure to register in time might result in another company securing the rights in question. Clearly, the protection of IP must be an integral part of every startup's business strategy, to facilitate growth, prevent infringement, and increase revenue.
