4 Intellectual Property Mistakes Entrepreneurs Often Make

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There are many legal issues that startup founders have to deal with. Ensuring that a company’s intellectual property (IP) is protected is one of the highest priorities. If there is a product, then there is intellectual property. But the crucial question is: who owns it?

Just because a start working on a product doesn’t necessarily mean they own the intellectual property — and even if they do, the intellectual property is protected. A founder may also overlook the full breadth and scope of intellectual property, which often includes a combination of patents, trademarks, copyrights and trade secrets.

Many startups fail, or at least struggle unnecessarily because they don’t properly recognize and protect their potential IP assets from the start. This can create considerable challenges when raising capital or bringing a product to market. In short, errors related to IP can be fatal to a startup.

Here are four of the most common IP mistakes startups make, in no particular order, and some steps to avoid them.

Related: The Basics of Protecting Your Intellectual Property, Explained

1. Make false assumptions about intellectual property ownership

Consider the question posed above in the context of the following scenario. Two friends, one a developer and the other a product manager at two separate companies, get together for a beer after work. The developer talks about some exciting software he’s written that could potentially solve a problem the product manager noticed in the B2B market.

They sketch out a few ideas on the back of a napkin and decide to start a SaaS business to bring the product to market. They form a corporate entity and get to work on the product.

So, who owns the intellectual property?

Without knowing more, it’s impossible to say – and therein lies the problem. It’s a bad idea to assume that just because co-founders start a company, the company owns any intellectual property that a founder worked on before the company was founded (or even after).

In general, the shorthand rule for intellectual property ownership is that the creator of a thing, whether co-founder or freelancer, owns the thing. Ownership rights can be assigned proactively or retroactively to the business by contract (for example through operating, employment, or independent contractor agreements). Where startups run into trouble is making the wrong assumptions about intellectual property rights, forcing them to scramble and expend resources to correct oversights.

Related: Why Intellectual Property is Critical for Startups

2. Adopt a do-it-yourself approach

There are ways for founders to cut corners and avoid legal fees without creating existential threats to the underlying business, but taking a do-it-yourself approach to IP doesn’t actually not part. The simple rule to follow is this: do not use a form you find online for any agreement that may have an impact on intellectual property. As the old saying goes, “a wise penny, a foolish pound”.

Intellectual property is too important to leave things to chance. And when founders use online forms to create employee and vendor agreements, they’re taking a big risk that could lead to the company losing control (or never securing in the first place) critical intellectual property. .

3. Skipping Simple Steps That Could Help Fix IP Problems

It happens more often than you might think: a founder incorporates and starts operating using a name for the company already taken. This mistake can easily be avoided, and in this case, there are a few DIY steps a founder can and should take.

Before choosing a name, do a trademark search on the United States Patent and Trademark Office. Trademark Electronic Search System (TESS). Just because a name doesn’t appear on TESS doesn’t guarantee that someone else doesn’t own the brand, but it’s a good place to start.

Other simple searches can be done on Google, relevant Secretary of State websites, and a domain registrar, such as GoDaddy.com.

4. Not developing an overall IP strategy

As we have discussed, intellectual property is one of a startup’s most valuable assets. Therefore, a startup must invest in developing an overall strategy so that its intellectual property can be protected and monetized as the company races to raise capital and bring its product to market.

Working with an experienced IP advisor, a startup should formulate a strategy that, at a minimum:

  • Identifies all intellectual property and the steps needed to protect it.
  • Assesses whether the company should acquire intellectual property rights from third parties through licensing agreements.
  • Creates appropriate agreements between the founders and between the company and employees and contractors to ensure that the company has the intellectual property rights it needs and that confidential information is protected.

Growing a startup is hard enough. Don’t make it harder for yourself as a founder by overlooking some of the critical steps needed to protect your company’s intellectual property. Don’t try to do it yourself. Work with an expert who’s seen all the common IP mistakes startups make – so you don’t have to.

Related: How to: Protect Your Intellectual Property as a Small Business

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