When should a startup protect its intellectual property?

Running a startup, particularly when you’re bootstrapping, involves making regular judgement calls on when to spend precious cash, and when to save it. Everyone knows getting legal issues sorted can be expensive, but if you’re a startup your IP is likely to be your most valuable asset. Working out how, and when, to protect it can be difficult.

 

The Australian Bureau of Statistics estimates 74.6% of businesses with zero to four employees don’t bother protecting their intellectual property. Of course a lot of those businesses are small businesses not looking to scale, but there are probably a few bootstrapped startups in the pile too!

 

This article will run through the various types of IP you should consider protecting. I’ll then provide a few tips on when you should proceed with protection.

 

Trademarks


One of the first things most founders do once they’ve decided to launch a business is to come up with a name for their startup and get a logo designed. If you’ve got the cash then you might as well trademark your business name and logo straight away, but you really don’t need to. It’s pretty unlikely that someone’s going to steal your business name or logo before you’ve got some traction, especially if you’ve got the URL locked down.

 

You might as well wait to see if you get a little bit of traction before bothering with trademark protection.

 

Patents


The reality is most startups don’t develop IP that is patentable. A business idea isn’t something you can patent. If you’re running an online marketplace or e-commerce business you’ll probably be using a tech platform that someone else has developed. It’s therefore unlikely that you’ll be able to patent the tech that you’re developing. Don’t get too worried about this; the value of most startups isn’t necessarily in the IP they’ve developed, but in the way they’ve deployed the technology in a systematised manner which either currently or in the future will allow for monetisation.

 

If you have actually developed some type of unique IP, then you should immediately get in touch with a patent attorney. Although applying for a patent can cost a few thousand dollars, if your invention is actually patentable the protection is generally worth it.

 

Confidential information and trade secrets


Founders often think their business idea, plan and numbers should be kept secret from all comers. The reality is not many people would even bother reading your business plan if you posted it on Facebook. No one cares about your business as much as you do!

 

In particular, it’s generally never a good idea to ask a venture capitalist to sign a confidentiality agreement. They hear thousands of pitches a year, and never sign confidentiality agreements. This sort of request doesn’t come across well.

 

Confidentiality obligations do have an important place; in your business’s employment contracts. The individuals most likely to breach confidentiality obligations are unfortunately your employees.

 

When you start hiring it’s definitely worth spending a bit of money to have an employment lawyer put together a solid employment contract.

 

Plant breeders’ rights


Did you know there’s a type of IP known as plant breeders’ rights? Unless your startup’s involved in plant breeding I don’t think you need to bother with this.

 

To conclude


Get your business up and running and get some traction before you bother with IP protection, but don’t wait too long! Your business IP is important and it’s worth protecting it once you’ve got a bit of spare cash.

 

Lachlan McKnight is the CEO of LegalVision, an online law firm which provides legal advice and documentation to Australian businesses.


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