How Much Should Startups Invest in Intellectual Property?
The Technical Expert Solution for IP Teams
Starting a new business can be intimidating, and there tends to be a lot of unanswered questions about intellectual property (IP). For instance, small business owners and startup founders may not fully appreciate how intellectual property is important to their business and its growth potential. They typically find IP at the bottom of their priority list. That’s understandable given the cash-restricted nature of typical startups. However, there are ways to make compromises and benefit from wise choices in IP protection.
Intellectual Property Basics
Before startups invest in intellectual property (IP), it is essential to familiarize yourself with the three main types of IP (aside from trade secrets): patents, trademarks, and copyrights.
PATENTS
Patents ensure that competitors cannot make, use, or sell a company’s existing innovations. Though this is one of the more expensive forms of IP, it provides the best protection for your business and guarantees that other corporations cannot copy your inventions.
Traditionally, patents have been used for tangible inventions. They are most common in engineering, biotech, technology, and manufacturing industries. Patents are not solely intended for physical products, however. Design patents are gaining popularity because they protect something that is visually unique to a product. For instance, the iPhone’s aesthetics are protected through design patents.
TRADEMARKS
Trademarks are important for branding a company as it protects words, logos, symbols, slogans, or other designs that indicate the source of a product or service. For example, the Google logo is protected by a trademark.
Possessing a trademark entails a less vigorous application process than owning a patent. Trademarks do not have to be registered and are indicated as such by a ‘TM’ or ‘SM’ symbol. However, if the brand is registered as a trademark, then businesses are permitted to use the circle ‘R’ symbol (®) next to the design.
Though it is easier to have a ‘TM’ or ‘SM’ symbol, it does not provide companies federal security. In other words, ‘TM’ and ‘SM’ markings only prevent local businesses from using your design, whereas the registered trademark forbids all organizations across the United States from its use.
COPYRIGHTS
Unlike patents and trademarks that guard tactile items, copyrights protect the expression of original ideas. The copyright symbol is a ‘C’ inside of a circle (©). This marking is often seen in the art industry, as well as technology corporations.
Similar to trademarks, one must be officially registered to have legal protection against copyright infringement.
Startups Need to Check Their Own Product for Infringement
Before investing, check if your product or idea is infringing on pre-existing intellectual property. One must avoid infringement on others’ IP to have the legal ability to operate.
As a startup, it is important to conduct a freedom-to-operate (FTO) patent search in the early stages to establish that the operations are authorized to proceed. An FTO Patent search is a relatively affordable option; the benefits of potential business opportunities outweigh the costs. Patent searches can be done individually, but it can be a tedious process that may require expert assistance.
If you discover that your startup’s invention violates an existing patent, trademark, or copyright, it is recommended to pause the project and adjust wherever necessary to avoid infringement. There are typically various resolutions that can be implemented. For instance, it might be as simple as changing the company name, or it could be a matter of finding a work-around solution that achieves the same objective but without using a patented methodology.
Pre-Grant and Post-Grant
Once you are sure that your startup is protected from any possible infringement, then it is appropriate to begin investing in your own intellectual property. Though there is not a straightforward answer on how much to spend, assessing the product’s liquidation, growth/pivot, monetization, and synergistic values will provide insight. To save your startup a time and money, seek advice from a reputable intellectual property firm that not only has the ability to perform pre-grant services (patent searches, patent drafting, patent filing, and patent prosecution), but is also highly experienced in post-grant matters (infringement analysis, licensing, sale, assertion, etc.).
Getting a patent granted is just the first step in the IP investment. An IP is an intangible asset that needs to be utilized or else the investment will be for naught. This utilization has traditionally been in the form of protection against copycats. However, the IP asset can also be monetized in a number of ways so as to produce revenue for the company. The level of utilization of the IP assets, especially patents, is highly dependent on the quality of work that went into them during the drafting and prosecution period (pre-grant). There are many pitfalls in drafting patent applications and their claims that can easily diminish or evaporate the potential value of a great invention. Knowing those pitfalls will prevent costly mistakes down the road (post-grant).
Consult with an Intellectual Property Firm
Startups invest in intellectual property all the time… but it’s got to be done right! As such, it is imperative to get advice and support from a firm that has deep experiences in both pre-grant and post-grant stages of IP assets. GHB Intellect has a wide assortment of consultation services designed to assist counsel throughout the intellectual property process. We assist the in-house counsel of many startups as well as large corporations in both pre-grant and post-grant services.
It is critical to launch your new business with a complete and legitimate business plan that features intellectual property support. GHB Intellect provides technology- and business-focused consultancy and does not offer accounting, tax, investment or legal advice, analysis, or representation.
For technology or business consulting related to intellectual property, contact GHB Intellect today.