Developing IP Culture in Start-Ups

Picture this: you enter a meeting with a prominent VC fund to pitch your revolutionary idea, with your non-disclosure agreement (NDA) in hand… and they refuse to sign it! One of the worst fears many entrepreneurs have is that someone will steal their idea. However, a recent Kauffman Firm survey of close to 5,000 companies that started in 2004 shows that only about 2% of these companies have any form of patent protection! What most start-ups don’t realize is that it is relatively easy and inexpensive to establish some basic intellectual property (IP) best practices that would protect their innovation when dealing with investors, competitors, and employees.

IP can be a mystery to most people since they don’t think they have a direct hand in creating it. The first thing to realize is that virtually all employees within a company participate in creating, managing and maintaining IP. Even sales and marketing personnel are involved in tracking competitor’s products and may be the first to learn about possible infringement of the company’s patents. So, beginning on Day One, start-ups need to establish a strong IP Culture and develop a cradle to grave workflow process for establishing their IP position. Below are seven steps in getting the process started:

1. Don’t let your IP walk out the door. You need properly drafted contracts that assign IP rights to the company. Everyone needs to sign one, from company founders to employees. And don’t forget the contractors… If an agreement is not in place, an independent contractor typically owns the work product.

2. Manage your IP holistically – Competitor intelligence from the sales team, or method improvement from the manufacturing floor, are all forms of IP. Although most employees may think they do not have a hand in directly developing IP, it is a smart idea to take a “holistic” approach and teach employees across all functions about the importance of IP. In addition, create a centralized depository for ideas and innovation from all departments

3. Be like Coke – Protect your Trade Secrets. Since 1886 the formula for Coke has been protected by a trade secret. Identify your company’s information that constitutes trade secrets. Ensure that the information is recorded, filed away and secured against unauthorized access. Mark all documents with “classified” or “confidential”.

4. Codify your innovation. It is absolutely critical that researchers and engineers keep journals and documents to track their R&D work: research notes, product plans, etc. This establishes a paper-trail for the company which may be needed in case of defensive or offensive legal action in the future. This will also facilitate the invention disclosure process when it is time to file patent applications.

5. Know your IP landscape – It is recommended to run a patent landscape search to gain an accurate assessment of what patenting activity is going on in your industry. Information concerning competitors' IP should be updated on a regular basis and shared internally so that informed decisions concerning IP strategy and product development can be made. There are several patent landscaping tools available to conduct the search, and many service providers have special rates for start-ups.

6. Don’t jump the gun on provisional applications – Many start ups rush to file a provisional patent application that establishes a priority filing date for a year, without properly planning their IP filing strategy, or “roadmap”. However, if you file a provisional application prematurely, before the scope of your invention is clear, you may find that the provisional was a waste of time and money because it did not disclose the correct claims.

7. Plan for the long term– Even if your start-up venture fails, the venture’s IP is still a valuable asset. Investing in IP creates a long lasting asset that survives most intangible assets in case of bankruptcy. Today’s IP marketplace is very dynamic, with patents, trademarks and other types of IP being transacted regularly between companies, through brokers, in auctions, and in various other venues. Think carefully about your IP filing strategy with that long term asset in mind.

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