Start-ups and innovative ideas usually go in pairs. And whoever says innovative ideas says intellectual property (IP). All start-up founders are racing to get their product on the market before someone else does.
This race is worthwhile only if you protect your idea, your intangible assets, and your IP. This is not only essential for preventing unfair competition but can also be critical when the time comes to obtain venture capital funding.
We invited Chad Dowle from IP consultancy firm Rouse to discuss IP strategies for start-ups and share his 6 top tips:
Tip #1. Identify your IP and how to protect it
First, list all your intangible assets. Second, determine if your IP rights:
- need to be formally registered (for example, trademarks for brand names and logos, patents for inventions), or
- can arise automatically (for example, copyright in artistic works, and in software) as a natural consequence of founders recording their work. Make a record of your ideas, marketing photos, drawings, designs, or code writing, etc. (and do not to lose them!).
Tip #2. Prioritize which IP to protect
When budget keeps you from protecting all your IP at once, that’s when planning is key.
If you thoroughly followed tip #1, you should have a clear list of the IP to protect. Now look at your business plan and check which IP on that list will help the business at which stage. This will help you come up with a plan to limit or delay spending the money until you can afford it.
Tip #3. Sign a founder agreement
IP asset ownership can be a real struggle for start-ups where there’s usually more than one founder. You must define and agree on the terms of your relationship in a founder agreement. That will give protection that your co-founder(s) can not simply walk away with the ideas, concepts, or other intangible assets.
Tip #4. Have an IP provision in your employment contract
It is common practice to include in the employment contract that ownership of anything created as part of the individual’s employment is transferred to the company. This applies to founders too – it is important to make sure there is a clear chain of title for any IP brought to the party at the time of establishing the start-up.
Tip #5. Include confidentiality provisions in your contracts
To protect against disclosure of confidential information or trade secrets, including confidentiality provisions in your employment and consulting contracts. Sometimes disclosure can mean you can no longer protect your IP.
Accidental disclosure of IP is quite common in the start-up world. There’s no bulletproof strategy to prevent it but there are steps that you can take. First, maintain secrecy until decisions are made. Second, keep sensitive and valuable information protected (know-how, data, test results, client lists, etc.)
Tip #6. Check the IP licensing agreement or IP transfer
If you want to allow third parties to use your IP, put it in a written license agreement. This agreement will at a minimum specify how long the license runs for, who can use the IP, where they can use it, what they can use it for, how it can be ended, and whether it can be forced to share it with others people.
On the other hand, if you’ve paid for something to be developed for your business, make sure you own or are appropriately licensed to use the IP. This is particularly true when it comes to software, make sure that the underlying copyrights of critical codes are transferred to your business.
Do not underestimate the role of IP protection in the growth of your company. When looking for funding, IPO, or sale, the investors will assess your IP strategy.
For more tips on doing business in Hong Kong, check our practical guide.