By Julie Nixon
Being part of a tech start up or a spin out is challenging, and among the many issues entrepreneurs have to consider are meeting milestones, recruiting the right team and sourcing funding. A company also needs to manage its intellectual property, establishing what assets can be used to generate revenue through licensing or IP transfers, and boost the value of the company for the purposes of fund raising. Here I have flagged a few of the pitfalls that can arise in managing the IP of a company.
Thinking your business doesn’t own any IP. All businesses own IP, not just companies that have invented a product. Patents are not the only IP asset a company can have (although they are often seen as the most valuable). Your company name or product/service name, and branding are all valuable assets that need protection. We recommend that you seek trade mark protection for your company/product/service name in the markets that are key to the company’s business (trade mark protection is territorial). This can prevent a third party copying your name and benefitting from the “goodwill” in that name that your company has built up in the course of trading.
Not owning all the IP you thought you did. This is a very common pitfall. When an investor is thinking about investing in your company, they will want to know that the company owns its entire core IP. So it is worth considering who has generated IP for the company, for example, if you employed a consultant make sure they have assigned over all the IP they created as part of their services. Why is IP so important for investors? Investors see this as a competitive advantage, protection against competition, and an asset that can be sold or licensed regardless of the company’s success or failure. This means there is a lower risk in investing money into your company, and by mitigating risk the company is more attractive for investment.
Assuming that if you can register a company name you have freedom to use it. I have covered this in more detail in a previous blog, but never assume because you have managed to register your company name at Companies House there will be no trade mark issues. With your company name/products/services always check the online trade mark registry at the Intellectual Property Office for identical/similar names for identical/similar goods or services. And if you want to trade abroad consider engaging a trade mark agent to conduct a freedom to operate search in the country where you may sell products.
Not using NDAs properly to protect your IP. I had a recent conversation with a CEO of a start up on the subject of potential partners signing NDAs. He had been at several meetings with large corporations who refused to sign NDAs until the business partnership was more of a reality. Requesting to have an NDA signed when you’re sharing proprietary information is of course good practice, but you can’t force someone to sign one. Nonetheless, disclosing confidential information without an NDA in place is risky. Although the law allows you to imply an obligation of confidentiality in the absence of a written obligation, you need to be able to prove that is was reasonable in the circumstances to do so. Much safer therefore to use an NDA. If the other party objects and you feel you still want to disclose confidential information to them you should be very cautious about what and how much you disclose. You certainly shouldn’t disclose confidential information which relates to patentable technology you have developed as this could ruin your chances of patenting that technology.
Not having an appropriate written agreement in place to cover use of IP. With all the costs that developing a new product or service can incur, it is easy to overlook the importance of having a solicitor draft or review key contracts that a company may have in place. For example if you are collaborating with a partner to develop new IP, a contract should either allow your company to own the IP or have an exclusive licence to the IP. Equally you want to ensure that the key customer contracts you are using to commercialise and exploit your IP are robust and fit for purpose. Cutting corners by not having documents drafted or at least checked by qualified professionals could lead to costly disputes later on, and problems with investor due diligence.
If you think your company could benefit from an IP audit, or if you would like to chat to Andy or I regarding any of these matters please feel free to contact us through our MBM contact email addresses.