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3 Mistakes Startups Make in Protecting Their Intellectual Property

3 Mistakes Startups Make in Protecting Their Intellectual Property

In the new information economy, a startup that begins with a good idea or new product can attract plenty of attention, funding, and the best talent its industry has to offer. The problem that many startups face, however, is that larger, more established competitors can beat them to the punch and bring similar offerings to market before they have a chance to get into production. To prevent this, startups must know the specifics of what it takes to protect their intellectual property rights from the very beginnings of their operation.

The good news is that the law provides plenty of ways for you to protect your idea from unauthorized duplication or outright theft. Still, the startup world is littered with companies who have failed to do so and find themselves fighting costly and protracted legal battles with little hope of winning. To help entrepreneurs and founders with this business-critical part of the startup journey, here’s a look at the three most common mistakes startups make regarding protecting their intellectual property and how best to avoid them.

Going it Alone

The laws surrounding copyrights and intellectual property in most developed economies exist for a reason: to protect innovators and investor capital and make it possible for new markets to grow and thrive. They are, however, immensely complex and difficult to navigate for those with little to no prior experience. The first step startups should take is to bring in a qualified intellectual property attorney at the earliest stages of product development to provide expert advice on what legal precautions are warranted. They can:

  • Help identify existing IP the founder brings to the table
  • Design employee confidentiality agreements
  • Define limits on third-party collaborations, including information sharing agreements
  • Decide if patents are necessary, and if so, help secure them

Although many startup founders balk at the costs of the process, every penny invested can mean the difference between a thriving enterprise or becoming another patent troll victim.

Failing to Document Development Processes

Startups, particularly those in digital and technology markets, operate at breakneck speed to turn their ideas into viable, marketable products. It’s an iterative approach that often leads to fast product maturation, but when it comes to intellectual property rights, the devil is in the details. If a startup is ever called upon to defend its rights to a particular idea or product, it’s essential to have thorough documentation of the processes and stages of development that the product went through. This helps to establish the company’s claim of ownership and demonstrates the investment in time and capital that went into it. Making sure to keep such documentation is invaluable if a situation arises where another claimant seeks to invalidate an existing patent by trying to prove that they had the idea first – a claim that can be nullified if the startup has adequate process documentation.

Not Establishing Adequate Internal Controls

Filing patents and insisting on NDAs is a good start for a startup that seeks to protect its valuable intellectual property, but they’re not an end unto themselves. For them to hold up, the company must take steps to enforce those protections through adequate internal control processes. At a minimum, confidential data should be kept in encrypted storage, with identity-based controls that limit access. This helps to keep trade secrets and other sensitive information safe from threats both external and internal. This also establishes an access trail that could help identify potential security risks. In short, the best way to protect intellectual property is to prevent it from falling into the wrong hands and to provide access only when there’s a legitimate business reason to do so.

Stick With the Process

It’s important for startups to realize that intellectual property protection requires an ongoing effort that will require different solutions at different times. In today’s litigious world, it’s simply not enough to stake a claim to an idea and then assume that it is safe from all attempts to circumvent it. Instead, it’s an effort that calls for a mix of defensive measures, some common-sense, and internal processes that work together to keep critical business knowledge and innovations in the right hands – and away from those who would misuse it or attempt to claim it as their own. It’s also something no startup can afford to get wrong if they hope to grow into a successful, profitable enterprise. So, to all of the startups and entrepreneurs out there, you now know where the intellectual property pitfalls lie, and now all you need to do is avoid them.


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by Dirk DeBie // Contributor to Businessing Magazine.

Opinions expressed by contributors are their own.