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7 common intellectual property mistakes made by startups (and how to avoid them)

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For many companies, particularly technology companies, intellectual property (IP) is their most valuable asset.

However, many companies, especially start-ups, fail to adequately identify or protect their IP from the outset. This can often require more costly and cumbersome steps being taken at a later stage to adequately protect the company’s IP.

As we’ll see, identifying and protecting your IP is a straightforward process — provided you know what you’re getting into. Let’s explore seven common mistakes that new companies (and individuals) should avoid.

Remember: none of this information should be construed as legal advice. Always seek out a qualified professional in relation to your own circumstances.

1. Failing to do the research

XYZ is a famous brand of cars that does not produce perfumes.

Your company, however, wants to produce a new perfume under the brand name ‘XYZ’, but you fail to undertake the research, even over the internet, that would reveal the existence of the XYZ car brand.

The mere fact that they are a well known brand is likely to confuse consumers into thinking that your company’s perfume product is produced by, sponsored by or associated with XYZ.

You may find yourself the subject of legal action for passing off on its goodwill – even if you had no intention of doing so.

A little detective work at the beginning may save you a lot of headache later on.

2. Leaving ownership unresolved

Determining the rightful owner of any IP is absolutely critical. If another party infringes your IP and you want to take action against them, or you want to file a trademark or patent application, you must be able to show that you have a legal right to do so.

The issue of ownership can be more complex than it seems.

If you’ve founded a company that is in the same field as your previous employer, it is possible that some IP may belong to that employer – especially if you have used information, materials or documents that came into your possession during your previous employment.

Or if you or your company hired a third party to create a logo, IP may belong to that party instead of you – even though you paid for the logo.

Once the rightful owner of the IP is determined, it is usually a fairly straightforward exercise to assign ownership by executing the correct documentation. This can prove to be a far more difficult and costly exercise if not correctly taken care of at the outset.

3. Not beginning with the end in mind

As one example of an ‘end’, think about your brand or trading name.

Factors such as what your business does and how far you intend to expand are relevant in choosing a name for your business.

If you are starting a small suburban or country town bakery which you intend to run as a small, single outfit then a business name specific to that location (e.g. ‘Small Australian country town bakery’) may be appropriate and a website and domain name registration won’t be necessary.

However, if you intend to operate a national or international chain, then choosing a name that relates to a locality may not be appropriate and the choice of your name may be influenced by what domain name is available for registration.

Of course, everyone starts out small but planning ahead with your IP will pay dividends in the long run.

4. Not sticking to ‘what you know’

Take a patent application as an example. What do you do if a competitor infringes on your invention?

You turn to the patent application that you prepared, of course. This could have been a mistake.

A qualified patent attorney has spent years of study and practice developing the skills necessary to draft a patent application. These are skills that the average startup doesn’t possess. Drafting an application uses these skills, industry experience, understanding of the invention and technology and vision into the marketplace.

The consequences of drafting and filing an application that has been prepared by a person who does not possess this technical background can prove fatal to the ability to commercialise the invention.

Stick to what you know and seek help when out of your depth.

5. Disclosing your invention at the wrong time or to the wrong people

A qualified IP professional will not be able to assist you properly if you refuse to tell them what your invention is.

Although this sounds somewhat farcical, it does happen.

On the other hand, disclosing your invention to the public before you have taken the proper steps to protect it may leave you with no recourse against copyists and a floodgate of competitors.

Some countries provide a ‘grace period’ for those who have disclosed their invention to the public before filing for patent protection. In other countries, your right for patent protection will be completely forfeited.

IP professionals do not enjoy telling their clients that they have forfeited their rights to patent an invention due to premature disclosure.

6. Failing to disclose everything to your adviser at the beginning

It shouldn’t have to be said, but unfortunately it does. You should fully disclose all relevant information to your lawyer or attorney.

If you realise that you have prematurely disclosed an invention before filing for a patent, copied a picture from elsewhere in creating a logo for your company or had access to documents from your employer before you started your own business, then you need to tell this information to your advisor. They will work out the best option(s) for you.

Failing to give this information now may result in difficulties later on. It may be a lot harder for your adviser (and a lot more expensive for you!) to fix a situation that arises where they have proceeded to advise you on the basis of information given to them which was incomplete or incorrect.

7. Get help (before it’s too late)

Seeking the advice of a qualified professional early on can save a lot of time and money later down the track.

A trademark attorney will work out the most cost-effective and expedient manner to obtain registration for your trademark both in Australia and internationally.

A patent attorney will be able to advise you on the patentability of your invention before you spend thousands of dollars attempting to commercialise it.

A lawyer will be able to draft the most appropriate assignment document to transfer ownership of any IP to you.

Devita Pathi is an intellectual property lawyer and trade mark attorney.  She has over 7 years experience in the legal profession. She is the author of numerous articles including an award winning article on copyright and design laws. Devita has a particular interest in assisting small and start-up businesses to identify, protect and commercialise their intellectual property.

Image by Horia Varlan

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