Protecting Your Startup: Five Intellectual Property Mistakes to Avoid

Turning an idea into a product, and building a company to commercialise that product is not easy. Prototyping, raising funds and engaging with third party manufacturers can be complex, expensive and time-consuming. These concerns can often lead to the startup overlooking a crucial aspect for its success in the long term: Intellectual Property.

In this article, we will talk about five IP topics, focusing on patent rights, that we believe will be useful to early-stage startups to avoid making common mistakes which can damage their prospects in the medium to long term.

1. Desire to file a patent quickly at low cost without the help of a professional representative

Saving costs by asking your lead engineer to draft a patent application may be tempting, especially as using AI appears to make that task simpler and more streamlined. However, this can be a false economy. Several criteria need to be satisfied when you file an application in order to obtain a valid and worthwhile patent, and more often than not, if they have not been considered at the filing stage, they are difficult to remedy later. For example:

• adding new subject matter to a patent application can have negative repercussions on the validity of the patent application at later stages.

• using AI as your “Patent Attorney” may result in an accidental disclosure to the public. Always check how your data is used by the AI service you use before you click send. Nevertheless, AI can be a powerful tool in patent drafting and prosecution, provided that a duty of confidentiality is in place, and that the output of an AI tool is carefully reviewed by a professional. For more information, see Visser AI’s hybrid intelligence service.

• many jurisdictions are based on a first to file system (rather than first to invent). Filing a patent application quickly may reduce the likelihood of new documents being prejudicial to the patent’s validity, or accidental disclosure. However, it is desirable for a patent application to be drafted well with a commercially useful scope of protection, keeping in mind the applicable rules relating to patent validity.

• It’s important to ensure that the entity filing the application has the right to be granted a patent. In practice, this means ensuring that title to the rights in the invention has passed from the inventor to the startup; fixing this later can be expensive and difficult, especially if the inventor has disappeared or is no longer friendly. And difficulties in showing you own the rights may affect your ability to attract funding.

2. Public disclosures

Disclosing an invention without having confidentiality obligations in place (like at a conference) can affect the validity of your patent application. In the UK and elsewhere, this can result in the patent rights being lost. Before disclosing your invention, even to a close friend:

• ensure the recipient is under a duty of confidentiality and, if not, set up a confidentiality agreement; or

• file a patent application.

However,  all hope is not lost if something is accidentally disclosed. For example, you may still be able to get patent protection in the US by using the 12-months’ grace period from the date of first disclosure by the inventor.

Also keep in mind that most jurisdictions have provisions to protect rights if public disclosure was made in breach of confidence. For example, a disgruntled ex-employee may disclose details relating to an invention before a patent application is filed. In that case, it may still be possible to file a patent application without the disclosure being prejudicial to validity provided it is filed within a certain amount of time from the date of the disclosure (typically 6 months).

3. Failing to set up enforceable contracts with third parties

Relying on a manufacturer overseas may be a viable solution for reducing the cost of getting your product to market. However, working with third parties often come with risks: for example, a manufacturer may start making your product and selling it in another country, becoming a competitor.

• Make sure you have a contract with the manufacturer which can be enforced in the manufacturer’s own country. You may win an action before a Court in your own country, but find it is not useful to prevent further misuse of your IP.

• Set out IP ownership clauses, clear terms of use, and enforceable penalties for breach of contract.

Similar arguments apply to research collaborations with third parties. For example, it is important to establish what is background and foreground IP well in advance of the start of a research collaboration; otherwise, the ownership of the research IP may be difficult to settle.

4. Clarity in how to use a patent

A patent can be a valuable tool to prevent others from working the patented invention, but it does not give you the right to work the invention: it is only a right to stop other people from using the invention.

Owning patents can increase the value of your company, particularly in the eyes of an investor.

This can be advantageous during early-stage funding, since you may be able to raise more money, or retain a larger slice of your company.

Remember this applies for other forms of registered intellectual properties as well, such as registered designs and trademarks.

5. Having an IP strategy

Products change from iteration to iteration. Having a patent with a broad scope of protection is often desirable, but an excessive breadth of the patent’s claims may render the patent invalid from the perspective of novelty and/or inventiveness. On the other hand, a patent that is too narrow may have limited commercial use, as it may be easy for a competitor to design around the patent, or it may be difficult to assert the patent during an infringement action.

Even if you have a broad enough valid patent that is still relevant throughout the different iterations of your product, you may want to consider drafting an IP strategy, and conducting regular patent portfolio reviews in order to:

• file more patent applications (or register designs) as the product evolves to cover new features – having multiple patents directed to different key aspects of a product may help in asserting your rights at a more granular level;

• consider licensing IP: if you are not using the patent yourself, this may be a valuable source of income; and

• abandon obsolete patents to save money on renewal fees.