Startup Intellectual Property Checklist- Part 1

Intellectual property is key to the success of a technology startup. But, what is intellectual property? How do you protect it? What about the intellectual property of others? This checklist provides a basic primer on key intellectual property issues each founder should understand, and a simple To-Do list of action items. Part 1 of this series will feature items 1-3, so stay tuned for future posts. STARTUP INTELLECTUAL PROPERTY CHECKLIST Part 1 1) Get All Founders to Assign Intellectual Property to Company 2) Patents, Trademarks & Copyrights – Pick & Prioritize the Right Intellectual Property for Your Company 3) Budget & Funding for Intellectual Property Part 2 4) Trademark Registration 5) Copyright Registration 6) Patentable vs. Infringing – Know the Difference Part 3 7) Design Patents vs. Utility Patents – Choose the Right Filings 8) Patent Search – Find Out What’s Patentable 9) Provisional Patent Applications Part 4 10) Nonprovisional Patent Applications 11) Slogging Through the Patent Application Process (aka “Patent Prosecution”) 12) International Patent Protection ___ 1) Get All Founders to Assign Intellectual Property to Company Why should anyone believe in a startup where the founders have not given their relevant intellectual property to the company? Imagine trying to raise capital, and a potential investor asks what would prevent any one of the co‑founders from departing and starting a competing business. Each co‑founder should sign a legal document transferring their relevant intellectual property to the company. While you’re at it, any signed employment agreements with the founders’ former employers should be reexamined to see if a potential ownership dispute may arise over the IP to be assigned to the startup. Do this at the earliest possible stage of your company, which means now if you haven’t done so already. If your company is in the technology sector and experiencing growth, you will likely hire employees who contribute to your company’s innovation. Be prepared by having a well-drafted employment agreement in place before that first hire. Certain states popular with startups, such as California, have laws that limit the extent to which an employer can require an employee to assign inventions to the company. 2) Patents, Trademarks & Copyrights – Pick & Prioritize the Right Intellectual Property for Your Company What makes your product better or different? The answer is key to determining which IP rights to pursue. IP rights are about exclusivity. So, what is it about your concept that you want to keep your competitors from using? If you think that competitors will not be able to copy or reverse engineer the technology, then you might consider safeguarding it as a trade secret, which will require certain steps to maintain its secrecy. Otherwise, pursue patents. Think of a patent as a tradeoff – in exchange for disclosing your invention to the government and general public, the government offers you the right to exclude others from practicing your invention for a period of time. Of course, your invention must meet certain requirements in order to be patentable, such as being unique and not obvious over the prior art. Before launching, consider whether you want to pursue any foreign patent protection. If so, you must secure a patent filing date before disclosing the invention to the public. If you’re concerned about patent protection in the US only, keep in mind that you must apply for a patent within 1 year of your earliest disclosure of the invention. Though not comprehensive, the following chart is intended to steer startups in the right direction based on their products/concepts. It (almost) goes without saying that you should confer with your patent attorney first before deciding which IP to pursue. CLICK HERE to download a PDF version of the chart above. 3) Budget & Funding for Intellectual Property Protecting your startup’s intellectual property on a limited budget can be difficult, but not impossible. Of the 3 types of IP filings – patents, trademarks & copyrights – utility patents take the most time and money to obtain. Let’s start with the simpler IP filings that require little to no funding: trademark, copyright, design patent and provisional patent applications. If you’re willing to spend the time to figure out how to file a trademark application properly, then skip middlemen services and proceed directly to the USPTO site. If not, go with an experienced IP attorney who will perform at least a preliminary USPTO search prior to filing. There are experienced trademark attorneys who will prepare and file your trademark application at a fixed rate (Trademark app form). Fixed trademark attorney fees typically exclude responses to USPTO rejections (i.e., trademark Office Actions) that require legal arguments and/or research. While a single copyright application is not a huge expense, the costs can add up if you have multiple works to register. In this case, you might save money by using an experienced IP attorney who may be able to group multiple works into a single copyright application if certain qualifications are met. Consult with an IP attorney preferably before launching because works that are unpublished may be easier to consolidate into a single copyright filing. Plus, a copyright owner will have additional rights to attorney’s fees and/or statutory money damages if the effective date of registration is prior to the time when an infringer begins copying the copyrighted work. The variable cost in design patent applications depends on whether the required patent drawings may be avoided and replaced with photographs of the design, thus saving on patent illustrator fees. The USPTO may allow photos if they show the design more clearly than line drawings. A provisional patent application can be filed for less than $1K if you’re willing to draft the content yourself. So, a few thousand dollars may sufficiently cover the IP filings that should be made during your early stage of your business. The tricky part is paying for any non-provisional patent applications. One strategy for deferring costs is to file one or more provisional patent applications, and buy yourself some time before having to invest in a non‑provisional application. Each provisional filing carries a 1‑year deadline for converting to a non-provisional application. The initial preparation and filing of a non-provisional application can cost $10K or more, and that’s just the beginning of a long, expensive process. You can expect a series of written rejections by the patent examiner, called patent Office Actions, which will trigger more fees. Be wary of any patent drafting service or invention submission company that promises an early allowance of your utility application. If your current budget does not allow for a $10K+ non-provisional patent filing, why not pitch your concept to a patent attorney who may be willing to invest in your technology by deferring attorney’s fees? If you are interested in pitching your idea to our firm, feel free and contact us. While it would be best to apply for your IP as early as possible, budgetary constraints may require delaying the more expensive filings. The following table provides some guidance as to what IP should be filed now versus those filings that could be delayed for a limited time. CLICK HERE to download a PDF version of the chart above. Some argue that swapping equity for legal services may deter future investors. But, I have yet to meet an investor who became discouraged in funding a startup due to my vested interest in the startup’s success. Shouldn’t both startups and investors alike be encouraged that their patent attorney believes in the company’s technology and future? Nearly every attorney, myself included, will gladly accept cash for legal services. The attorney bears no risk in that conventional transaction. It takes a different attorney who is willing to share the risk and go along for the ride.