Intellectual property (IP) is a huge talking point among investors, lawyers, and startups, and for good reason, too. In today's market, a new business venture generally consists of the people starting it, their IP, and not much else. That's why it's so crucial to protect those assets and avoid these startup mistakes.
- Not properly defining ownership.
IP ownership rights usually go to the person who first created the work. But those rights can become muddled when a startup hires an outside person to create the IP. Does the work, then, belong to the company or the creator? To avoid this common mistake, outline the ownership details in the initial legal documents. By assigning the rights to the company, the hired contractor will waive all ability to claim the work as their own.
- So-called "contamination" of IP.
Another risk for startups is the potential for a former employer to claim any amount of your original IP. These cases are not usually taken to court unless the startup becomes wildly successful and the original company takes notice. Regardless, it's a good idea to factor the possibility of this risk into your business plans.
- Creating a clever brand name that cannot be used.
Just because a startup registers a brand name with the state and creates a domain name, it does not mean they will be allowed to use that name in commerce. There are hundreds of cases where a company's name is too close to one that already exists and the startup receives a cease and desist letter from the original company. To keep this from happening, check the US Patent Office for trademarked names and consult a qualified trademark lawyer to protect your IP.
- Mixing up types of IP and the protection they offer.
It can be easy to confuse a trademark with copyrights or trade secrets with patents without the proper research. Talking to the right lawyer and doing extensive background research will keep you from making this common mistake.
- Putting too much stock in patents.
In order for something to receive a patent, it must be "a new, useful, and non-obvious method or process, described in enough detail that it can be reduced to practice by a person with the relevant technical expertise." Ideally this prevents competitors from copying your idea and (hopefully) keeps them from doing business at all. But it's a slow and very expensive process and may not pay off in the long run depending on what you're trying to accomplish.
- Not registering IP at all.
It seems like a lot of work to obtain legal protection of your startup's IP, but it is absolutely necessary to register it to keep others from stealing your work, and your customers. Talk to a qualified lawyer and do the research to properly register your IP.
- The "right-click conundrum."
Unfortunately, it isn't just your own IP that you have to be careful with. The marketing team has to be sure to look out for other people's IP as well. No matter how carefully you register and protect your own assets, you could still end up falling prey to this mistake and have a legal battle on your hands. When possible, use your own materials for marketing. If you can't, purchase the rights to use photos or materials and keep documentation of it. Or, use any of these free creative resources.
- Not reading the fine print.
Simply skimming over license agreements could end up taking down a promising early venture before it even gets started. To avoid this, just read over absolutely every single detail and talk to a professional about your options.
- Forgetting the DMCA.
The Digital Millenium Copyright Act, or DMCA, Basically it "criminalizes production and dissemination of technology, devices, or services intended to circumvent measures (commonly known as digital rights management or DRM) that control access to copyrighted works. It also criminalizes the act of circumventing an access control, whether or not there is actual infringement of copyright itself." Talk to a professional about what this means for your new business and keep detailed documentation of all registrations and of creation/ownership.
- Not having confidential information and invention assignment agreements.
Once the actual company has been formed, it's important to have each member and employee sign these agreements to avoid problems with IP ownership later on. Many companies don't do this and end up with issues when they are unable to provide a chain of title for the IP. Just having these agreements worked out early on in the creation of the company will keep this from becoming a problem.