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By LegalEdge News

Tech Startups / Scaleups – how to protect your key assets: Intellectual Property


Protecting IP is key for tech businesses. It might feel like a distraction and/ or a low priority/ high expense when you’re in start-up mode, but it can make all the difference when scaling/ fundraising, and it will help you stay ahead of the competition. If you don’t, it can be very expensive to fix later on, if it’s even fixable…. We often hear about companies that have failed to get ownership of their IP from their tech developer, former employees taking trade secrets and setting up in competition, etc. This is why you need to understand how to own and protect it now.  So here are some pointers on what’s important and what’s not, how to do what’s needed quickly and efficiently, and a quick summary in case you haven’t got time for anything else.

TL;DR

Staff/ supplier contracts (i.e. anyone that works for you):Ensure copyright in work created by staff/ suppliers is owned by the company. Note: companies, freelancers and contractors need to actually assign it otherwise the business won’t own it.
 
Get confirmation that they won’t use 3rd party IP without consent (infringe) and that they will follow licence terms.
 
Prohibit staff from sharing trade secrets and confidential information, including source code.
 
Customer and other contracts:Ensure ownership of your copyright is clearly stated in your contracts.
 
Prohibit them from sharing trade secrets and confidential information.
Brand and taglines:Register trade marks (as well as domain names, company names, etc) in the main jurisdiction(s) in which you operate. 
Patents, design rights and other assets/IP rights:Consider whether you have any other valuable IP assets. It might make sense to register patents and / or design rights if design elements are an important part of your products. 

Long version

1. SOURCE CODE, OBJECT CODE, USER INTERFACE, GRAPHICS/DESIGNS

Copyright protects the actual expression of your source code and object code, as well as the graphics and user interface.

Generally, whoever creates the work automatically gets worldwide copyright protection as soon as it is created. In the UK, an employer automatically owns copyright in work created by employees provided its creation is part of their job. HOWEVER, that’s NOT the case with freelancers/ contractors, so you should always have IP assignment clauses in agreements. This is particularly important with developers and designers. You should also get them to confirm (in their agreements) that they will not breach any 3rd party IP rights, and that they will keep records of other 3rd party IP used, e.g. if they use software libraries, stock image providers, open source software etc. (It’s best to have all of this for employees too.)

You should also ensure that customer agreements include clauses confirming what IP you own in your products and whether you use/rely on any third party IP.

If you have a unique GUI (graphical user interface – e.g. unique icons and arrows) and/ or shape to your software and it’s a core part of your value, you can also obtain registered (and/ or unregistered) design rights over the visual appearance.

Unlike trade marks, design rights and patents, there is no public registry that logs copyright ownership, apart from in the US, where registration is not mandatory, but if you do it you get extra protection.

2. IDEAS and KNOW-HOW

Ideas, know-how and other trade secrets and confidential information can only be protected if they are not in the public domain.

Examples of trade secrets include source code, AI algorithms, non-public datasets, food and drink recipes, etc. Confidential Information is broader and includes non-technical commercially valuable information such as pricing and profit margins, customer lists, etc.

Whenever information like this is to be shared, the recipient should confirm in writing that they will keep it safe and not disclose it to anyone else. That includes in staff, supplier and customer contracts.  If in doubt use a simple Non-disclosure Agreement (NDA)/ Confidentiality Agreement.

Ideas may also be protected by registering a patent, provided the idea is new and inventive. But it’s very difficult to obtain a patent for software functionality unless there is a highly ‘technical effect’ e.g. it’s something that improves the speed of software, or involves something like cryptography or AI, or it results in the improvement of a physical object (so can be useful for hardware companies). Also, patents are expensive, so you need to do a cost/ benefit analysis. They last for 20 years from the date of filing, but can take years to be granted, especially in the US, which has a large backlog. You also have to publish the invention, which means it cannot be kept secret. Patents are rarely useful or cost effective for software companies unless combined with unique hardware.

In the US, patent trolls are companies that purchase patents, usually for core technologies, and try to extract licence fees for them. This is a risk if you do business in the US, so you should consider doing a ‘freedom to operate’ search. However, as software patents have become more difficult to obtain, the risks have reduced.

3. BRAND NAMES and TAG LINES

Your business and key product/ service names, taglines etc. need to be registered as trade marks, which are a powerful and cost effective way to protect your brand and the goodwill generated by it. If not, and someone else registers something similar or uses a similar name, they might be able to force you to change your name and branding, give up domain names, social media accounts, etc. (see our blog on Getting ROI from your Trade Mark

In order to register names / tag lines as trade marks, they need to be unique, not too similar to anyone else’s for similar products/ services, and not too descriptive, so not using words or phrases that others generally use, such as “Software as a Service”, “Financial Advisor App” “Best Software”, “Fastest Support Services”, etc.

It’s also important to apply to register the right kind of trade mark, in the right class(es) and for the right goods and/ or services (see our blog on common mistakes to make when registering a trade mark). And it’s also important to register in the jurisdictions in which you operate; registering in the UK, EU and US provides protection in over 50% of the global markets by GDP – check out our blog on this too. 

We can help with your IP strategy and safeguard your IP and reputation as you grow. We can assess what you have, prioritise what you need (and what you don’t need) to do, and help implement it too. Please get in touch if you want to discuss this.

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