Why Should Startups Care About Intellectual Property?

by Varnum LLP

Sales…marketing…revenue…getting more customers…growing my company – these are all at the top of the mind of startups and early stage companies and rightfully so, because without revenue, there will be no company. However, often times "intellectual property" is among the last things that an early stage company thinks about…and it shouldn't be.

What is Intellectual Property?

Intellectual property, or "IP", is often misunderstood and confused – to some, everything seems to be protected by a patent, when it may actually be a trademark that applies to the situation or vice versa. The four primary categories of IP – trademarks, copyrights, trade secrets, and patents – are often mistaken for one another.

A trademark or "brand" is anything that helps to identify and distinguish the products or services of one company from another company, such as a name, logo, slogan or tagline. Owning trademarks allows companies to prevent others such as competitors from using the same or a confusingly similar trademark – it can give a company a significant advantage over competitors in the marketplace. To best protect a trademark, companies can register their trademarks with the state and/or federal government.

Copyrights protect many different works of authorship, such as written works and artwork as well as computer software. A copyright generally gives the creator of the original work exclusive ownership rights to reproduce, distribute, and present the work publicly and control how the work is redistributed to the public. Federal copyright registration is not essential for protection, but it can provide many enhanced benefits and advantages.

Patents are exclusive rights granted for an invention or innovation, which grants the patent owner exclusive rights to use or license to another an invention or design. U.S. Patents issued by the U.S. Patent and Trademark Office are typically effective for 20 years and are only enforceable in the United States, but international protection can also be pursued. The two primary types of patents are utility and design patents. Many startups or early stage companies will begin with a provisional patent, which can provide limited protection for up to one year and be used to pursue a "regular patent" thereafter.

A trade secret is any highly confidential information that has great value to a company – it can provide a business with a great advantage over its competitors. Unlike patents, trade secrets can be protected for an unlimited time period provided reasonable precautions and safeguards are maintained. Trade secrets can include business plans, financial information, formulas, and customer lists. Trade secrets can be protected under both state and federal law.

Why Does Intellectual Property Matter to Early Stage Companies?

Intellectual property is among the most important and valuable business assets that a company owns. As innovation and technology is evolving at an accelerated pace, and competition among companies including tech startups is as fierce as ever, intellectual property (and the protection and enforcement of it) is becoming even more important. The filing of patent and trademark registration applications has experienced great growth over the past few years, and more and more early stage companies are awakening to the importance of pursuing intellectual property protection where it's no longer the last thing they think of.

Perhaps think of IP protection as you do about your insurance: For a relatively small amount of money, you can protect your company against a possible catastrophe – the loss of your name, logo, technology, and other valuable IP assets to a competitor in the marketplace. Just as it's not prudent to operate without some type insurance for you and your business, it's imprudent to not take reasonable measures to protect your intellectual property. Protecting your IP should be an essential component of your business plan and budget.

Yes, sales, revenue, marketing, getting more customers, and growing your company are extremely important and should be given great attention. But, without your name and other valuable "IP assets," it's nearly impossible to operate and sustain your company. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Varnum LLP | Attorney Advertising

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