knowledge | 22 May 2020 |
How Start-Ups Can Protect their Intellectual Property
The most valuable assets of many start-ups are their innovative, creative and intellectual works and ideas. Often these can be protected by intellectual property rights (IPR). IPR encompass a range of rights including patents, copyright, trade marks, designs, database rights and various related rights. Some of these rights such as copyright and database rights arise automatically on creation and do not need to be registered. While others such as trade marks and patents require registration in order to be protected.
Given the importance of IP to a business, it is recommended that start-ups consider the protection of intellectual property from the outset.
IP protection can be useful for protecting against theft or replication by third parties and protecting against competition. In addition, IP protection will enhance the commercial value of the business and will make it a more attractive investment for external investors.
In this overview, we have set out some important steps that start-ups should consider when protecting their IP.
Step 1: Identify valuable IP within the start-up
Given that IP is often very important for the business of start-ups, it is key that start-ups identify their assets and understand how they can be protected by IPR. As part of this exercise, it is important to understand the business’ products, technology used in the business, its branding and other assets. Consideration should be given as to what IPR may already exist and what IP could be registered. For example, copyright may already subsist in the software, online platforms and apps developed by a technology business. However, it may want to consider protecting its branding by applying for trade mark protection.
Step 2: Assignment of IP to the enterprise vehicle
Once IP has been identified, it is important to identify who owns the IP and whether the business is entitled to use that IP. In the earlier stages of a start-up, founders often develop the business without having a formal business structure in place. As a result of this, they often personally own the IP. To avoid future issues, for example when a founder leaves, the ownership of such IP should be assigned to the start-up vehicle. This can be done by way of a written assignment agreement between the founders and the start-up. It is important to note that an assignment must be in writing.
Under Irish law, an independent contractor or consultant is the owner of any IP it creates and not the party that commissioned the work or engaged the contractor, unless agreed otherwise. As such, this should be dealt with at the outset of their engagement by putting in place a consultancy agreement which contains an appropriate IP assignment clause. This will ensure that any IP created by the contractor during the course of their engagement is assigned to the start-up.
Step 3: Consider if registered IP protection needed
Start-ups should also consider whether they require registered IP protection. As mentioned above, some business may want to protect their brand by obtaining trade mark protection. Other businesses may want to protect their inventions through patent protection. Many forms of IP registration come at a cost and it is therefore important to identify the most valuable assets and decide the most suitable jurisdictions in which to register the IP.
The most common forms of IP protection are:
Copyright can be particularly important for technology businesses as many works they create such as software, content, databases and various types of technology can be protected by copyright. Copyright arises automatically upon the creation of an original work. Unlike patent and trade mark protection, it doesn’t require registration. Copyright gives those who invest the skill and effort in creating an original work, the right to prevent others from copying, using or exploiting it without their permission. Copyright protection lasts for a specific period depending upon the type of work created. In most cases, the protection lasts for the life of the author plus 70 years.
For start-ups creating innovative products and technologies, patents can be useful for protecting new inventions. A patent gives the patent owner the right to prevent others, for a limited period, from exploiting (i.e. making, using, selling and importing) the invention without its permission As such, if a third party wanted to use the invention, it would need to obtain a licence from the patent owner. Patents are generally more expensive to secure, however, than any other types of IPR.
In order to qualify for patent protection, the invention must be novel, involve an inventive step and be capable of industrial application. Irish patents last for up to 20 years. There is, however, the option to obtain a short term patent which lasts for 10 years. An Irish patent is obtained by applying to the Intellectual Property Office of Ireland. Patents are territorial in nature and only provide protection in the country in which the patent has been granted. If protection beyond Ireland is required, there is also the option of obtaining a European patent or an international patent by applying to the World Intellectual Property Office.
- Trade Marks
A business’s brand is often one of its most valuable assets and it can be useful to protect this by obtaining trade mark protection. Registration of a trade mark gives the owner the exclusive right to use that mark in relation to certain goods and services and to prevent others from doing so without its consent.
In Ireland, any sign which is capable being represented graphically and capable of distinguishing the goods or services of one undertaking from those of other undertakings is capable of being protected as a trade mark. Irish trade mark law contains a non-exhaustive list of the types of signs which can be protected as trade marks. These include words (including personal names), designs, letters, numerals, the shape of products or of their packaging.
Trade marks can be registered with the Intellectual Property Office of Ireland. Trade marks last for an initial period of 10 years but they can be renewed for further 10 year periods on the payment of renewal fees and can potentially last forever. Protection in countries outside of Ireland can also be obtained.
- Database Rights
The main type of IP right that is used to protect databases is the independent ‘sui generis’ database right. This database right is given to those who make a substantial investment in obtaining, verifying the data or presenting the contents of the database. In order for the database to qualify for protection, the data must be compiled in a systematic or methodical way so as to be individually accessed (e.g. arranged in chronological or numerical order). A database right can be infringed by a personal extracting or re-using all or a substantial part of the contents of a database. It is also an infringement to re-use or extract a small amount of data on a regular basis.
A database right arises automatically upon the creation of a qualifying database and lasts for 15 years from the end of the calendar year in which the database was completed. As such, if a database is updated regularly it could potentially benefit from protection indefinitely.
Step 4: Protection through non-disclosure agreements
Another valuable tool for protecting IP and business information is confidentiality. However, in certain circumstances, for example, when negotiating with external investors or collaborating with third parties, it might be necessary to share certain confidential information. Before sharing such information, it is essential to enter into a non-disclosure agreement (NDA) with that third party. Often, venture capitalists and angel investors will refuse to sign a NDA as this might restrict their ability to seek out other potential investments.
When drafting a NDA, it is essential to ensure that the agreement is suitable for the specific business of the start-up and that the definition of confidential information is sufficiently detailed.
How can we help?
McCann FitzGerald is ready and willing to assist clients in addressing all of their concerns in respect of legal issues their business may face. Please contact any member of the McCann FitzGerald Start Strong team to assist.
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.