For early stage businesses, acquiring customers and testing your business proposition is always going to be your immediate priority. However, it’s important not to neglect protecting your intellectual property (IP). IP protection is strategically important for your brand; it implements defences against copycat competitors. Your portfolio of IP is one of your business’ most valuable assets and understanding how to protect it early on can save you a lot of heartache down the line. This article addresses four common IP mistakes you should avoid.
1.Not Properly Defining Who Owns the IP
Too often, businesses are caught out by a founder, business partner or employee leaving the business and claiming they can take the IP with them. You also want to avoid a potential investment deal getting delayed or falling apart because investors have found out during their due diligence that your company doesn’t actually own or control its IP.
If you and your business partners set up a business entity, such as a company, ensure any IP created up until that point is assigned to the company. You can do this through a deed of assignment.
Written Agreements With Your Business Partners
You need to implement written agreements that any IP created by you or your business partners, for the purpose of the business, is owned by the business entity. For example, if you are a company, make sure you have a shareholders agreement in place to this effect. If you are a partnership, make sure you have a partnership agreement that makes this clear.
Too often, businesses neglect to implement these written agreements when things are going well, leading to bitter disputes down the line when someone wants to leave and take the IP with them.
Employment and Contractor Agreements
Additionally, you need to protect your IP in agreements with employees and contractors. Employment agreements and contractor agreements should contain clauses which set out:
- any IP created for your business is owned by your business; and
- they cannot disclose or make use of any trade secrets to which they have access.
You also need written agreements in place with any third parties your business engages with. These should set out who owns the IP, who can use it and in what circumstances. For instance, you will need a software development agreement for your developer and terms and conditions for your customers.
2. Leaving a Business With Someone Else’s IP
The related mistake is to leave a business with IP you hope to develop and commercialise, only to realise your former business may be able to claim ownership of it.
If you’re working for a business but have a side project, and IP attached to it, ensure you understand who owns that IP and how you’re able to use it. Are you creating the IP on the business’ premises, or using their resources? These are important questions to ask in order to be sure that the work you’re creating is work you own.
Part of this is understanding your relevant contract, whether it be your employment agreement or contractor’s agreement. It’s best to disclose what you’re working on with your employer and get their consent for you to retain IP ownership. Ensure that their knowledge and consent of your project and IP ownership is evidenced in writing.
3. Failing to Protect Your Brand
Many people mistakenly believe that registering a business name, a company name or a domain name (or all of them) is enough to protect their brand. However, this is not the case. You need a registered trade mark to:
- have the exclusive right to use your brand in your industry; and
- take action against similar businesses using a brand that is the same or deceptively similar to yours.
You could have unregistered trade mark rights if you’ve been using a name or logo for a long period of time and it’s capable of distinguishing your goods and services from those of other businesses.
However, it’s difficult for most businesses to prove such unregistered rights. The easiest way of ensuring you have enforceable trade mark protection is to proactively register your marks with IP Australia. Most businesses will register their business name, logo and any slogans they use. However, businesses like McDonalds also have registered trade marks for their well-known product lines, like ‘Big Mac’ and ‘Happy Meal’.
A registered trade mark will give you brand protection for 10 years, with the option for renewal at the expiration of every 10 year period.
There are also other commercial benefits of trade mark registration. Having a registered trade mark as part of your IP arsenal is a valuable asset you can sell, or derive income from through licensing it to other people.
4. Forgetting to Check That You’re Not Infringing Others’ IP Rights
Another common mistake is not putting safeguards in place to ensure your business doesn’t infringe others’ IP rights.
Businesses often use pictures or content they’ve found online when creating their own website, without checking if those images are copyright protected. This is a breach of the copyright owner’s rights and they could take enforcement action against you.
Another example is businesses copying the terms and conditions of a competitor’s website for use on their own. Again, this is a breach of copyright and you could find yourself in hot water if the owner decides to take action against you.
You should also put safeguards in place when you are getting others to assist you in creating IP. For example, you may contract a developer. Your software development agreement should state that the developer will indemnify you against any claims by third parties that the material the developer has created for your business infringes on their IP rights. This means that the developer will be financially responsible for such legal proceedings.
Taking a proactive approach to protecting your IP will ensure you sidestep common mistakes. These mistakes will cost you commercially: your brand image and bottom line could be impacted by an IP dispute. Four of the most common mistakes to avoid are:
- not properly defining who owns the IP;
- leaving a business with someone else’s IP;
- failing to protect your brand; and
- forgetting to check that you’re not infringing others’ IP rights.