Intellectual Property Protection for Startups
Establishing a new business can be very exciting and rewarding. The stages leading up to the launch of the startup can be a hectic period with many things to take into account, including registering the business, obtaining the correct licences and permits, hiring employees and selecting the premises for the business’ operations. Equally important is protecting the intellectual property (IP) of the business and its brand. An essential part of IP protection is ensuring you control and own the IP Assets. It is important to get the IP ownership right early. This will be relevant in crucial steps such as registering your business or dealing with issues of potential copyright breaches and ultimately selling or developing an exit strategy. Furthermore, taking these steps will help ensure your startup maintains and grows the value of its IP.
This article will look at how your business can protect its Intellectual Property or IP, and why this is important.
What is IP?
Essentially, IP refers to the designs and creations of the author/creator’s mind or intellect. IP is typically divided into three categories: copyright, trademarks, and patents. IP may include things like:
- The name under which a business operates.
- Designs and logos.
- Written information or products of the business.
Why Should the Startup Own its IP?
Generally, a large part of the startup’s value is derived from these intangible IP assets, like those listed above and may have been created by employees or contractors.
It is important when IP is being created for a business by employees and contractors that the employees or contractors specifically acknowledge that ownership of the IP is with the business and the contractors or employees specifically assign any ownership rights they may have in the IP they create for the business. Without this specific acknowledgement there can be problems for the business. Ensuring ownership is with the business will help the business maintain and grow its value.
As a business grows potential investors to the business will require proof of IP ownership before they invest in the business. If there are issues on the business’ IP ownership rights, investors will choose not to invest in the business or may postpone investment until the ownership problems are resolved. For example, if you contract the services of a software developer, who develops software for the company, and there is later an ownership dispute as to who owns the IP in the software, there is the potential that the business could lose a crucial asset. For this reason, it is important that the IP ownership rights are appropriately assigned and documented. This will minimise the risk of disputes arising in the future, and to allow founders of the business to focus on the growth of the business.
What is Copyright?
Copyright protects the rights that exist in or are given to virtually every original creative material such as text, artistic work, music, computer programs, sound recordings and films that you write, draw or record. It protects material such as book manuals designs and screenplays. Copyright law is complex and specifically dealt with in the Copyright Act. Rights in copyright can be assigned or licensed to other parties as mentioned above. It is critical with employees and contractors that they assign to a business all rights they have in any copyright material which they have created. This is commonly done by
- A separate deed of assignment of copyright; or
- Specifically, in the employee/contractor agreement.
What is a Trademark?
Essentially, a trademark is a registered form of IP that prevents others from copying certain phrases, images, or patterns. This enables you to distinguish your business from others. For more on trademarks and the rights they afford, please see our article: ‘What’s in a name? Registering business names in Australia’.
Key Takeaways
- A significant proportion of the startup’s value will often come from its intangible assets, or IP.
- IP is owned by its creator (e.g. employee or a contractor), however this ownership right should always be assigned to a business.
- Protecting the intellectual property of a startup is important to help it maintain its value, and to attract investment opportunities.
- Depending on the type of IP you wish to assign to the company, the procedure for assignment differs. If you are unsure about this please seek legal advice.
If you have any questions about IP ownership in a business, or the assignment of IP rights as an intellectual property law firm we regularly advise on all aspects of IP Protection. For more information contactLord Commercial Lawyers on (03) 9600 0162 or email us at info@lordlaw.com.au or fill out the form on this page.
