When starting a business, entrepreneurs are often overwhelmed by a lot of things - developing the business, structuring the company, finding investors, securing funding, developing products and services, growing sales channels, designing marketing plans and more. This is particularly the case for startups given their relatively small beginnings. During the early stages, intellectual property (IP) protection is not likely to be a priority for many startups especially when most startups often assume that IP protection is expensive and is 'not important for now' during this stage of business development.
Securing IP rights indeed involves money, time and other resources. However, seeking IP protection is critical for startups and must not be delayed. It is undeniable that IP rights remain valuable assets to a business in the long run. This article seeks to provide some insights on the different types of IP, the importance of securing IP rights and common mistakes that startups should avoid.
Understanding the Different Types of IP
There are four basic types of IP – Patents, Trademarks, Copyright and Industrial Designs. It is important for startups to understand the basic yet significant differences between these most common forms of IP rights and how they apply to their businesses.
A patent is an exclusive right granted for a novel invention, which is a product or a process that provides a new way of doing something or offers a new technical solution to a problem. During the patent protection period, the owner is entitled to exclude anyone from commercially exploiting his invention.
A trademark is a sign consisting of any letter, word, name, signature, numeral, device, brand, heading, label, ticket, shape of goods or their packaging, colour, sound, scent, hologram, positioning, sequence of motion or any combination thereof, that is used to identify and distinguish the company, its products and/or services from those of others.
Copyright are proprietary rights subsisting in creative works such as artistic, literary, musical and dramatic works. Copyright also protects books, music, art, photographs, architecture and even computer software.
An industrial design protects the aesthetic features of shape, configuration, pattern or ornament applied to an article by an industrial process.
Why should Startups Protect their IP Rights?
IP protection gives startups the exclusive rights over the exploitation of their IP assets and helps to stop third parties from using and/or registering identical and/or similar inventions/ marks/ brands which these companies would have invested significant money, time and other resources in. Further, given that the products of many well-known brands are susceptible to being copied or counterfeited which could affect brand value and goodwill, IP protection enables brand owners to take action against such infringers which would help to maintain their brand differentiation in the market and protect their unique offerings.
would want to know that the startup has control over all its ideas, inventions, branding and marks it would need to develop and market the business. IP rights may also serve as collateral and signifies stability and security to investors who view IP protection as a company's commitment to preserve the value in its innovations.
IP Mistakes to Avoid
Skipping IP Clearance Searches
Before a startup begins using a trademark or business name, it is important to conduct thorough clearance searches to see if that mark or name is already in use to ensure that it does not infringe upon the rights of third parties. Apart from conducting a company name search at the Companies Commission of Malaysia and running a general internet search, a trademark availability search should be conducted at the Intellectual Property Corporation of Malaysia (MyIPO) to determine whether a conflicting mark has been registered. For new inventions, a patent search (also known as a 'freedom-to-operate' search) should be carried out to determine that such invention does not infringe upon existing patent rights. If this step is not taken at the early stage of the business, not only would a startup be unable to secure its IP registrations but it would also be public relations and financial disasters to deal with potential infringement lawsuits that are usually costly and protracted.
Lack of Agreements and Safeguards
Startups usually consists of a small group comprising of the founders and a handful of staff. It is therefore common for startups to adopt a casual and informal attitude towards their daily operations, especially when relationships are developed based on trust and passion instead of a solid legal framework. However, it is potentially disastrous if there is no proper legal foundation laid down from the beginning to determine the ownership of IP in the event disputes occur in the future.
If a startup is owned by several founders, it is important to sign a co-ownership agreement to clarify the ownership in the company's IP assets. Where employees are concerned, employment contracts are very important to ensure that any IP generated by employees is owned by the employer. This can be further strengthened by assignment agreements. If a third party developer is involved, similar agreements can be put in place to ensure that any IP developed is assigned to the company.
To further safeguard the company's interests, employees should be made to sign non-disclosure agreements (NDAs) or confidentiality agreements to prevent trade secrets from being leaked. This is especially important for new inventions which startups wish to seek patent protection for as novelty is one of the requirements for a patent to be granted, and disclosure may subsequently jeopardise registration.
No IP Protection and Registration
In the absence of IP protection and other safeguards, startups would not be able to prevent others from exploiting their IP rights. Startups should therefore seek IP protection at an early stage to give them the necessary tools to enforce their IP rights and maintain a competitive advantage in case of infringements. It must however be remembered that most IP rights are territorial in nature in that a registration in a particular country would not extend to protection elsewhere. If it is the intention to expand abroad, it is advisable to obtain advice from a professional as to how to protect their rights in the relevant target markets and to determine whether it would be possible to leverage on mechanisms such as the Madrid Protocol and the Patent Cooperation Treaty for cost saving and strategic purposes.
In conclusion, it is a grave mistake to assume that IP protection can wait, and startups cannot afford to make costly mistakes in this regard. Protection of brands and innovation translates into protecting the business, and this will position the startup for success amongst competitors in the long run.
Originally Published with Wong Jin Nee & Teo on July 2023, Intellectual Property For Startups
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
