Intellectual Property Law Services

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Common IP Mistakes Startups Make
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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.

• They end up making mistakes that cost them not
  just money but reputation and even the loss of
  their own IP.

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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.
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Some of the common mistakes made by start-ups are
discussed in this article.
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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.
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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!
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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.
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.
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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.
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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.
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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.
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.
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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.
The services of IP consulting firms are very
popular among start-ups because start-ups often
make licensing errors due to lack of expertise.
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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.
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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.
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.
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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.
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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!
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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.
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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.
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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.
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• 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.

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• In order to avoid such mistakes, start-ups can
  seek expert advice from firms offering
  Intellectual Property (IP) services.

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• 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.