Top 10 Intellectual Property mistakes made by SMEs and entrepreneurs

When defining an IP strategy, there is no room for error, yet the same mistakes are often made by business owners; putting their intellectual property on the line. Here are the top 10 IP mistakes made by entrepreneurs and SMEs:

1. Public disclosure of ideas

Disclosing innovative ideas, particularly inventions, before filing for proper IP protection may prevent patent/design protection and bring the innovation into the public domain. This would prevent the entrepreneur from benefiting from the competitive advantage that would have been available through IP, effectively transferring knowledge for free and without any means of control to actual or potential competitors.

2. Not conducting patent / trademark / design searches

Before building a business model around an innovative activity, whether it is an invention (patent), a product or a service name (trademark) or a creative design, it is advisable to do a detailed search to determine if there are any existing third-party rights that will hinder efforts to secure IP protection. Entrepreneurs tend to rely on their knowledge of the market and assume that simply because they do not know about a competing product, they will be able to secure an IP protection. Searching databases often reveals prior art or prior use that may require entrepreneur to change their IP protection approach.

3. Not using IP maps to create an R&D project

Also known as “going red ocean” and risking Freedom to Operate. There is always a risk of “reinventing the wheel”. The market place is not an accurate indicator of existing and/or third party protected technologies. Conducting a patent mapping (technology landscape) analysis may provide valuable information on technology before investing substantial amounts of time and funding into a research project. Indeed, it is very plausible that the technology or a critical component of it is under patent protection. A technology landscape analysis may reveal that a university or another early-stage startup may have already secured pertinent patent rights. A landscape analysis will not only prevent wasting of resources in reinventing the wheel, but also provide valuable insights into the state of technology to identify other areas of improvement or opportunities to innovate around third-party technologies.

4. Not establishing clear IP ownership provisions in employment agreements or with third party providers

Depending on national jurisdiction, the result of work conducted by employees or independent contractors may not belong to the company. The company may find itself in the position of not being able to use the fruits of the project they have financed as the IP ownership rights may be unclear or belong completely to a third person. It is advisable to introduce an IP ownership provision in the employee agreements, to identify ownership of IP even between co-founders and be cautious of critical work that is outsourced to external partners. As a corollary, the start-up should be the title holder of the IP as opposed to a real person that may be founder of the startup.

5. Not monitoring the competition’s IP

Monitoring the competition’s IP filings tends to provide critical market competitive intelligence. This can be done via patent landscape analysis, trademark or design searches. Information thus obtained may not only act as an early warning tools about new technologies or products that competitor is about to introduce to the market but also allows the start-up to strategically respond by pro-active R&D or marketing activities.

6. Not identifying existing IP

Most start-ups as well as SMEs often fail to recognize existing valuable assets within the business. Not being aware of a valuable intellectual asset will prevent the startup to come up with a protection strategy. This is often the case with highly technical start-ups that dismiss the know-how as generic or ignore available trade secrets protections as an alternative to patenting. A start-up should periodically ask, “What is it that we are doing better than others?” the answer is likely to point towards an intangible asset that would be worth protecting.

7. Lack of IP documentation

This can include, for example, not documenting or recording ideation white boarding sessions. It is always a good habit to develop reflexes to keep records of ideation and research conducted before a concrete result is reached that can be subject to filing for IP protection. Not only can these documents be useful down the road in the event that the ownership or date of creation of the innovation is challenged, but recording such processes as part of corporate memory is a sound policy decision.

8. Innovation without rights (i.e., building a startup on university owned technology)

Most early-stage start-ups will have to build their product on top of an existing IP platform. Particularly in the context of academic innovations, a researcher may simply assume to have rights on the innovation by virtue of being the inventor. However, most of the time, this will not be the case and the IP rights on the technology are more likely to belong to the university. The entrepreneur /researcher should ensure that the start-up is entitled to use the innovation, often through a negotiated license agreement, with the university.

9. No budget for IP protection /Not using IP experts (patent and trademark attorneys) to obtain IP rights

Securing IP protection can be costly even if the cost is spread over several years. A start-up is usually lacking sufficient funding and is likely to not allocate enough resources for IP filings, maintenance costs as well as for fees to be paid for IP experts who will assist the company with its filings. Entrepreneurs will usually try to manage the costs by either deferring filing for IP, try to draft application documents in house or opt for cheaper but unqualified outside service providers. A poorly drafted IP application can be worse than not filing for IP at all and errors can be very expensive to rectify, if at all possible. Running out of IP budget midway through an application process (e.g., at national phase for an international patent application) could be as fatal to the start-up’s business model as a poorly drafted document. Start-ups must carefully budget for the costs of securing IP and it is recommended that IP protection costs including services fees for service providers are factored in during fund raising process.

10. Not protecting in the right jurisdictions

IP rights are national and are protected in the jurisdiction in which they have been granted. Entrepreneurs must be careful to protect the innovation in the right jurisdictions. It is a balancing act as more jurisdictions are added to the application process, the higher the costs. Typically, entrepreneurs will seek to protect the innovation where the start-up has a market, and/or where the competition is. It is a strategic decision that requires understanding of the IP protection process, access to market information and budget management. This is an area where an experienced IP expert can assist the start-up with the decision-making process.