Common IP

Mistakes Startups
Make
1
Firms rarely realise that their intellectual
property (IP) assets could actually be of more
value than their tangible assets. Start-ups are
naive about the IP requirements of their
companies and also tend to overlook possible IP
infringements they may be making over other
companies.
2
They end up making mistakes that cost
them not just money but reputation and
even the loss of their own IP.
Most of the IP mistakes can avoided
through proper due diligence before
making investments and taking critical
strategic decisions for the company. IP
consulting firms offer Intellectual
Property (IP) services with the aim of
helping firms carry out proper due
diligence before they make any major
decisions regarding their brand.
3
Some of the common mistakes made
by start-ups are discussed in this
article.
4
One of the most common mistakes made by
start-ups is that they miss patent protection
opportunities. Due to lack of knowledge of
patent law, patent filings, applications, etc.,
they tend to miss deadlines or do not
implement patent protection strategies for
their products, innovations or services.
5
For instance, had XeroxPARC made
the decision of patenting its computer
mouse invention, it would have
received payments from companies
such as Apple and Logitech who have
commercialised its inventions without
paying a penny!
6
A patent is filed after
carrying out a patent
search and before
disclosing the invention
publicly. Therefore, if a start-
up wishes to patent a
product or invention, it must
desist from disclosing it
publicly through trade-
shows, social or news
media, technical paper
publications, etc. IP
consulting firms can help
out companies through
patent applications because
such applications are
knowledge intensive and
require expert help.
7
Start-ups
should make
sure they know
the deadlines
for patent
applications
and rules
governing
patents so as to
ensure their
efforts are not
wasted.
A second major error made by start-
ups with regards to their IP is that they
do not secure the ownership of their
intellectual property rights. They do
not obtain licenses for their IPs
developed by their founders before
the start-up was registered or
incorporated.
8
Such a mistake could prove to be very
expensive for the start-up to resolve. In fact,
it can actually be fatal for the start-up. If the
start-up does not have licenses for its IP, be
it its brand name, trademark, product, etc.,
the startup runs the risk of being held
hostage by a co-founder or employee until it
revises its product to remove the
contributions of the founder or the employee
from the product or to transfer the IP rights
to him.
9
Start-ups should
ensure that they
obtain IP rights for
developed products
either before the
startup is incorporated
or before the founders
become its
employees. It is easy
to find an intellectual
property attorney in
India who can help
out start-ups avoid
these loopholes.
10
Failure to obtain proper
agreements from
employees and
contractors could also
take an ugly turn for
corporates. An example
is that of a major golf
company whose graphic
artist (who had earlier
created its logo) had
sent it a demand letter
stating that he had not
assigned the logos
copyright to the
company.
He demanded payment
and was later on paid
more than 1 million USD
by the company to obtain
the logo copyrights. As the
company had already
invested millions of dollars
in marketing ever since
the logo was first used, it
could not afford to forfeit
the logo and thus chose to
settle the matter privately
by paying off the graphic
designer.
11
The services of IP
consulting firms are
very popular among
start-ups because start-
ups often make
licensing errors due to
lack of expertise.
Start-ups should be aware of inbound
licenses from third parties as well as
the licenses of their IP to third parties.
Another common intellectual
property mistake made by start-ups
is the poor selection of trademarks.
Start-ups fail to carefully select their
trademarks and end up choosing
trademarks whose protection could be
difficult.
12
For instance, the
Windows trademark by
Microsoft for its
operating system runs
the risk of being non-
protectable because
the word windows is
generic and descriptive.
Intel learnt this the hard
way when it adopted
the 386 trademark for
its microprocessors.
13
For Intel, this term
could not be formally
adopted as a
trademark and the
term began to be used
as a general name for
specific
microprocessors. Intel
lost its trademark
battle against AMD
microprocessor who
started using the
same term because
the court decided that
the trademark was not
protectable anymore.
Similar was the case
with the term
escalator.
Another major IP mistake made by
start-ups is that their founders may
use intellectual property from
previous employers. The IP could be
trade secrets, computer software or
even customer lists.
14
Such misconduct can actually cripple the
start-up. The start-up may either win or lose
the IP lawsuit and both ways, it runs the risk
of losing its tracks. Thats because if the
start-up loses, it will go bankrupt reconciling
fines. It will also have to pay for damages,
recommence product development from
scratch or, in the worst case scenario, its
founders could go behind bars!
15
If it wins, it will experience delays in
product development or launches,
distraction of management and loss of
finances due ensuing from legal
litigations. Although there are many
cost-effective options in the form of
companies offer Intellectual Property
(IP) services and through an
intellectual property attorney in
India, it is better for start-ups to avoid
such mistakes in the first place.
16
Another mistake made by start-ups is
that they use too much of open source
software. Uncontrolled use of open-
source software for developing
products could spell doom. A start-up
could experience problems over its
products during an asset sale or a
merger-based exit.
17
Acquiring companies and venture
investors shy away from products that
are based on open source software. In
case of acquisition agreements, most
demand representations that the start-up
products do not include open source
software.
18
If the product does include open source
software that the company is not aware of, the
acquiring company may either terminate the
acquisition or reduce its price. Alternately, it
may ask the start-up to remove the open source
software from the product.
In order to avoid such mistakes, start-ups can
seek expert advice from firms offering
Intellectual Property (IP) services.
Accuprosys is one such firm that helps start-ups
make the right choices regarding their IP and
helps them avoid liabilities that may result from
IP infringement. Its cost-effective solutions are
tailor-made for start-ups and small and medium
size enterprises.