The seven deadly IP sins committed by startups

For many entrepreneurs, the business itself is a vice; but some business owners are also guilty of habitually overlooking intellectual property as a concern. Such behaviour can lead to an irrevocable loss of intellectual property rights or to a costly (and sometimes fatal) law suit. There are seven regularly-committed intellectual property sins of which you should become aware – and, if in any doubt, seek absolution from an intellectual property attorney before any fateful consequences ensue!


OK, so this is probably one of the cardinal sins that a startup should actually commit more often. Everyone has an appetite to excel in the pursuit of success and, although you shouldn’t have an inordinate intention to destroy your competition, it is certainly desirable to enforce a competitive advantage over other businesses. Being able to exclude competitors from the market is a great comfort to fledgling ventures that sometimes consider themselves ill-equipped to compete against larger and more established competitors. By ensuring that you have secured all rights in your intellectual property for yourself, you will be able to exploit a monopoly position in the market and to stop others from copying and benefiting from your ideas. Expel the negative connotation of greed, and see that you can outperform your competitors by securing your intellectual property rights.


Running a startup in a competitive market is challenging. Rivalry with competitors is often a major part of a startup’s functioning, and it can be easy to covet the spoils of a fortunate competitor. In fact, sometimes your competitors appear to have developed an edge over you and it can seem like an attractive option to adopt the products or practices of successful players in your market. But, beware – the commercial use of your competitors ideas could find you on the wrong end of a lawsuit. The unauthorised, commercial use/copying of your competitors’ solutions (such as their products, services, branding, documentation, or apps) could be deemed an infringement of their intellectual property rights. Many startups fail to assess potential barriers to market and to ensure that the necessary permission or licence has been secured to allow the businesses to operate without any hindrances. By conducting searches for competitors’ rights, you can determine whether you are in a position to use other’s ideas to improve your commercial standing without penalty.


So you want to have your cake and eat it? As a startup, you are faced with the dual tasks of establishing and maintaining your business. You need to simultaneously set up the concern and break into the market – you want to do it all. But doing it all at once can come at a price. Certain intellectual property rights (particularly patents and designs) are vulnerable to invalidation if the intellectual property right is not secured before you take the business to market. Public disclosure of your ideas could lead to your intellectual property rights being rendered null and void at a later date. To avoid a scenario where you open up the market to other competing businesses and, to allow you to market your ideas and also retain rights in the intellectual property, ensure you talk to an intellectual property attorney and assess your intellectual property rights before you discuss your ideas with anyone.


There’s a lot to think about when you’re setting up a business, which often manifests as a lot of documentation. It’s tempting to acquiesce when it comes to formalities like agreements and contracts, but absent a suitable written agreement you might be unwillingly forfeiting your intellectual property rights. You might think that you own the right to the ideas in your business, but this is not always the case. In consultative arrangements, or in the case of work commissioned to third parties (consultants, designers, copywriters), the law might vest ownership in that work with the person who created the work (even if you paid them to create it on your behalf). Ensuring that ownership of all intellectual property vests with your business can be achieved by having suitable written agreements in place before you approach any third parties to conduct work for you.


It can be easy to have an emotional response where your business is concerned, and particularly in a situation where other businesses are treading on your toes. Particularly galling is when a competitor uses your ideas to take advantage of the market. But take a breath before you react. Making allegations of copying and theft of your ideas can just as easily get you into hot water. In fact, if you allege a third party is infringing your intellectual property or you make a threat of retaliation (maybe you’ll threaten to see that person in Court!), you could be faced with a lawsuit against you for making a groundless threat. The best course of action is to collate evidence of the alleged infringement, and to discuss your options with an intellectual property attorney before you try to contact any alleged infringer.


Jumping into bed with an investor can seem like the perfect strategy for financing your business. Certainly, intellectual property will be one of the aspects of your business that any reputable investor will want to discuss, but it is also one of the most sought after parts of a business. All too often is the case that business owners offer (at least part of) their intellectual property rights to financiers as part of the financing deal but, before you do, you should understand the differences between assignment (total transfer of ownership) and licencing (retaining ownership but granting permission for commercial use of the rights). You should also consider who will be responsible for intellectual property costs and to what extent that responsibility provides any share or interest in the intellectual property. Finally, you need to know your exit strategy with financers before you become consumed by the desire to close the deal.


Sometimes it’s all about confidence. Having belief in your business is necessary requirement for success, and the marketing of a business often requires promotion of the status and accomplishments of your venture. In fact, putting your business in the best possible light is the basis of any pitch you make, particularly when trying to secure inward investment. It can seem beneficial to boast about the intellectual property underpinning your venture – just make sure you don’t overinflate the actual state of your situation. Know the extent of your intellectual property. Make sure you know the difference between your registered and unregistered rights. Not only could you end up at the uncomfortable end of a conversation with an investor who discovers you don’t own all you adduce to own, but it can actually be an offence to allege that you have intellectual property rights that you haven’t actually secured.

If you think you might commit one of the seven deadly IP sins and need more information on how to repent, contact Donal M Kelly PhD, European Patent Attorney.