Common IP Mistakes Startups Make*

Firms rarely realise that their intellectual property (IP) assets could actually be of more value than their tangible assets. Start-ups are naive about the IP requirements of their companies and also tend to overlook possible IP infringements they may be making over other companies. *They end up making mistakes that cost them not just money but reputation and even the loss of their own IP.

Most of the IP mistakes can avoided through proper due diligence before making investments and taking critical strategic decisions for the company. IP consulting firms offer Intellectual Property (IP) services with the aim of helping firms carry out proper due diligence before they make any major decisions regarding their brand. *

Some of the common mistakes made by start-ups are discussed in this article.*

One of the most common mistakes made by start-ups is that they miss patent protection opportunities. Due to lack of knowledge of patent law, patent filings, applications, etc., they tend to miss deadlines or do not implement patent protection strategies for their products, innovations or services. *

For instance, had XeroxPARC made the decision of patenting its computer mouse invention, it would have received payments from companies such as Apple and Logitech who have commercialised its inventions without paying a penny! *

A patent is filed after carrying out a patent search and before disclosing the invention publicly. Therefore, if a start-up wishes to patent a product or invention, it must desist from disclosing it publicly through trade-shows, social or news media, technical paper publications, etc. IP consulting firms can help out companies through patent applications because such applications are knowledge intensive and require expert help. *Start-ups should make sure they know the deadlines for patent applications and rules governing patents so as to ensure their efforts are not wasted.

A second major error made by start-ups with regards to their IP is that they do not secure the ownership of their intellectual property rights. They do not obtain licenses for their IPs developed by their founders before the start-up was registered or incorporated. *

Such a mistake could prove to be very expensive for the start-up to resolve. In fact, it can actually be fatal for the start-up. If the start-up does not have licenses for its IP, be it its brand name, trademark, product, etc., the startup runs the risk of being held hostage by a co-founder or employee until it revises its product to remove the contributions of the founder or the employee from the product or to transfer the IP rights to him. *

Start-ups should ensure that they obtain IP rights for developed products either before the startup is incorporated or before the founders become its employees. It is easy to find an intellectual property attorney in India who can help out start-ups avoid these loopholes. *Failure to obtain proper agreements from employees and contractors could also take an ugly turn for corporates. An example is that of a major golf company whose graphic artist (who had earlier created its logo) had sent it a demand letter stating that he had not assigned the logos copyright to the company.

He demanded payment and was later on paid more than 1 million USD by the company to obtain the logo copyrights. As the company had already invested millions of dollars in marketing ever since the logo was first used, it could not afford to forfeit the logo and thus chose to settle the matter privately by paying off the graphic designer. *The services of IP consulting firms are very popular among start-ups because start-ups often make licensing errors due to lack of expertise.

Start-ups should be aware of inbound licenses from third parties as well as the licenses of their IP to third parties. Another common intellectual property mistake made by start-ups is the poor selection of trademarks. Start-ups fail to carefully select their trademarks and end up choosing trademarks whose protection could be difficult. *

For instance, the Windows trademark by Microsoft for its operating system runs the risk of being non-protectable because the word windows is generic and descriptive. Intel learnt this the hard way when it adopted the 386 trademark for its microprocessors. *For Intel, this term could not be formally adopted as a trademark and the term began to be used as a general name for specific microprocessors. Intel lost its trademark battle against AMD microprocessor who started using the same term because the court decided that the trademark was not protectable anymore. Similar was the case with the term escalator.

Another major IP mistake made by start-ups is that their founders may use intellectual property from previous employers. The IP could be trade secrets, computer software or even customer lists. *

Such misconduct can actually cripple the start-up. The start-up may either win or lose the IP lawsuit and both ways, it runs the risk of losing its tracks. Thats because if the start-up loses, it will go bankrupt reconciling fines. It will also have to pay for damages, recommence product development from scratch or, in the worst case scenario, its founders could go behind bars! *

If it wins, it will experience delays in product development or launches, distraction of management and loss of finances due ensuing from legal litigations. Although there are many cost-effective options in the form of companies offer Intellectual Property (IP) services and through an intellectual property attorney in India, it is better for start-ups to avoid such mistakes in the first place. *

Another mistake made by start-ups is that they use too much of open source software. Uncontrolled use of open-source software for developing products could spell doom. A start-up could experience problems over its products during an asset sale or a merger-based exit. *

Acquiring companies and venture investors shy away from products that are based on open source software. In case of acquisition agreements, most demand representations that the start-up products do not include open source software. *

If the product does include open source software that the company is not aware of, the acquiring company may either terminate the acquisition or reduce its price. Alternately, it may ask the start-up to remove the open source software from the product.

In order to avoid such mistakes, start-ups can seek expert advice from firms offering Intellectual Property (IP) services.

Accuprosys is one such firm that helps start-ups make the right choices regarding their IP and helps them avoid liabilities that may result from IP infringement. Its cost-effective solutions are tailor-made for start-ups and small and medium size enterprises.

********************