Intellectual property for start-ups: How to identify and protect IP in your business

With tight budgets and time constraints, it is a challenge for many start-up owners to prioritise which areas of intellectual property to protect.

In this article, our intellectual property solicitors will help you identify what intellectual property is within your business, who owns it and how you should prioritise which rights to protect. 

How can a start-up ensure it owns any intellectual property created within the business? 

Intellectual property is a valuable business asset but its intangible nature can mean that it is less easy to identify and protect than other assets such as company vehicles or stock. The first step in securing ownership is to identify where the business’s intellectual property lies and whether the company has current ownership rights to it. This will include an analysis of the business know-how, branding, content, products, methods and data to understand what intellectual property rights exist and when and by whom they were created. If you purchased the business from a previous owner, you should check that the transfer included all the intellectual property rights that were owned or used by the business at the date of the transfer.  

Once this process is complete, you can then work out whether any existing intellectual property rights owned by third parties will need to be purchased and assigned, or licensed to your company to use.  

As well as existing intellectual property rights, you will want to ensure that any future rights that are created for the purposes of the business, are owned by the company, as far as possible. Intellectual property that is created by employees in the course of their business will normally be deemed to be owned by the business, unless there is an agreement that states otherwise. To avoid any doubt, this should be set out explicitly in the business’s employment contracts. Where work is to be commissioned from third parties, the legal position can vary, and you should always ensure that the contractor enters into an agreement that states that ownership of any intellectual property created is to be automatically assigned to the business.  

When should start-ups invest in intellectual property protection? 

It can be difficult to know exactly when to start investing in intellectual property protection, especially when you are not certain how the business will progress or what direction it will take. Is it a waste of resources to take action before the business is launched and should you wait until after the business is on a firm footing? The answer to this is in most cases is no; ideally, you will include intellectual property in your initial business plan and start to look into what intellectual property the business will need and utilise as early as possible. This is so that your legal advisor can conduct clearance checks and start the process of registering any registrable rights before you have already invested any significant time or money in branding and advertising. Otherwise, you could find yourself having to re-brand or worse still, having to pay damages for inadvertently infringing the intellectual property rights of a third party.  

How should I prioritise intellectual property protection? 

This will depend on the nature of the business and the industry in question. For example, a research organisation will want to invest heavily in protecting its trade secrets and patents. A fashion store may hold more value in its brands and trade marks and the unique designs of the clothing and accessories that it will offer.  

You will need to identify what the key assets of the business are and then budget for their protection accordingly.  

Even if the business has a limited amount of money to invest in intellectual property protection, (as most start-ups do), there are various ways of protecting certain intellectual property rights relatively cheaply and easily.  

For example, some measures such as documenting the creation and ownership of copyright in any new creative works requires little financial expenditure. Some intellectual property registrations such as registered UK designs can be obtained quickly and cheaply and can be applied for in bulk, with up to fifty designs being included in one application. This can be useful when the business is not yet sure which of its designs will take off and is testing the market before making further investments.  

How do I know if the intellectual property within the business is valuable? 

Valuation of intellectual property assets is complicated and depends on the nature of the intellectual property right in question as well as market conditions and technological and industrial factors. An accountant will be best placed to provide an intellectual property valuation for your company but you will need to provide them with sufficient information and records to be able to make an informed assessment.  

Some intellectual property rights may not have much financial value if they do not currently help to create, maintain or increase the business’s cash flow. Although they could still be important to your business in terms of potential for further development. An intellectual property lawyer can help your organisation uncover and exploit potential intellectual property assets that may not be obvious at first.  

How do I keep my intellectual property protected when I share my ideas with potential investors or partners? 

This is an extremely important point and careful steps taken now could make all the difference when trying to protect and exploit your business ideas and inventions later on. Making sensible decisions at the outset will reduce the risk of your hard work and ideas being stolen or copied or lost through inadvertent disclosure.  

For example, patent protection is only possible if your invention is novel and hasn’t been publicly disclosed at the time when protection is sought. Similarly, the value of trade secrets lies in it remaining confidential – as soon as they are made public, they are no longer commercially valuable.  

Non-disclosure/Confidentiality Agreements: The first step that you can take is to ensure that any potential investor or partners enter into a non-disclosure agreement before any confidential or business information is revealed to them. This should outline what information is to be regarded as confidential and for how long and what actions either party is obliged to take to ensure that such information is protected. The agreement should be as robust as possible, with details of whom in each organisation may access and use the confidential information and for what purposes and include adequate penalties for breach that will act as an adequate deterrent. The agreement must be properly drafted and executed in order to be valid. An intellectual property lawyer is recommended rather than using a generic template as the document should be tailored to the particular circumstances. Some investors may be reluctant to enter into an agreement, so it will need to be carefully drafted so as to be robust enough but not too onerous as to scare off the other party. 

Contractual Protection: More complex and involved arrangements with partners and collaborators will require additional documentation, such as collaboration agreements, joint venture agreement and/or partnership/shareholder agreements. These should contain comprehensive confidentiality clauses and intellectual property protection clauses which set out what is to happen to any intellectual property that is brought in by either party (“background IP”) and who will own any intellectual property created during the course of the collaboration. Usually, any background intellectual property will remain the property of the party that created it and any new intellectual property created could be jointly owned or owned by one party and licensed to the other to use for the duration of the project. Such agreements can be complex and should be drafted by an intellectual property lawyer to ensure adequate protection.  

Robust data security infrastructure and IT policies and controls: You should also ask your employees to sign confidentiality and non-compete agreements and to comply with internal policies and procedures concerning data protection and security. All online data and documents should be password protected and passwords only revealed to authorised personnel. Particularly sensitive data should be encrypted where possible, systems and software kept updated and staff regularly trained in cybersecurity measures.  

Limited disclosure: You should also ensure that you only disclose as much information as is essential to the project and ring-fence anything extraneous, when allowing third parties access to your systems and processes. Again, this can be documented by an agreement that specifies the scope of the project in question and exactly what information and data is to be disclosed along with restrictions as to how each party may use and share that information with its own employees or organisation.  

Registration: Trade secrets cannot provide any ‘defensive’ protection against use by third parties of similar information, since by their very nature, they are not public and so can only be enforced ‘internally’ by proving that someone acted in breach of contract or breach of confidence. If you want to stop others from using and exploiting a similar design, trade mark or invention, you should consider applying to register your IP rights as soon as possible. You are likely to need legal advice from an intellectual property professional in deciding when the best time is to apply for registration and to guide you through the registration process.  

Once you have applied for a patent, the information therein will be deemed to be publicly ‘disclosed’ and so will no longer be a ‘trade secret’. So timing is a particularly important consideration when applying for a patent. 

Documentary Records: It can save a lot of time and expense later on if you start documenting any intellectual property and ‘trade secrets’ that the business creates and uses, from the outset. For example, if your business or any employee produces any original creative works, these should be recorded along with the date of creation and author details. Trade secrets should be recorded in a register and details kept of exactly who they are disclosed to and when and for what purpose. Copies of all agreements and contracts should be kept centrally so that they can be referred to, as and when necessary. You can create an ‘intellectual property portfolio’ to document all intellectual property assets that are owned, used and registered by the company, along with important dates such as when any renewals are due. Your intellectual property advisor will be able to assist you with this recordal process and can hold any records safely for you, for access only by authorised personnel.  

Notices: Although some intellectual property protection, such as copyright, arises automatically upon creation, you will still need to take action to inform people that such rights are owned by your business and so are not available for use by third parties. Copyright notices should be placed on the business’s website and any marketing and publicity materials. If your trade mark is not yet registered, you can use the unregistered ‘tm’ symbol to show third parties that the mark is being used by your business as a trade mark and should not therefore be copied.  

Summary 

Starting a business is a complicated process and there are many different legal and practical considerations competing for the business owners’ attention and often limited, financial resources. Intellectual property is one thing that should definitely not be overlooked and its early identification and protection is an invaluable investment. There are many legal advisors who specialise in advising start-up businesses and offer cost-effective, commercially driven advice that can give start-up companies a head start over competitors and help the company obtain a secure foundation for its future growth and prosperity. Working with patent and trademark attorneys and other intellectual property professionals is the best way to ensure your intellectual property is protected.