Intellectual Property and Start-Ups: A Guide To IP

IPRs or Intellectual Property Rights are often the most valuable asset of a technology start-up. Protecting such IP is essential to obtaining venture capital funding and preventing competitors stealing your innovative ideas.

Is the IP yours?

Ownership might be lost, say, because the start-up founder was working for someone else whilst developing their new idea.

If this is the case and the work is done in the office, using office resources and relates in some way to the employer’s business, there will be a question mark over ownership by the start-up. Most companies require new employees to sign confidentiality and invention assignment agreements, so anything developed at work will usually belong to that employer, not the start-up.

The same will be true for co-founders, each of whom might be employed by different companies, which later claim ownership. Unravelling the ownership of such IPRs created prior to the formation of the start-up will be even more complicated.

The converse is important in relation to employees and freelance / independent contractors working for the start-up. All should be obliged to sign such agreements.
Although, the general rule is that IP created in the course of employment automatically belongs to the employer (not the employee), it is advisable to have an express IP clause in employment contracts.

For third parties, such as independent contractors, it is crucial. In fact, a written agreement is required for certain types of IP transfers. Other obligations should include disclosure to the start-up of any ideas, inventions or discoveries relating to the consultancy agreement and an obligation to keep confidential any trade secrets and confidential information used in the business and / or belonging to the start-up.

If IPRs are developed jointly with other business partners or academic research centres (e.g., universities), agreements must be put in place prior to the collaboration, which clearly state who owns what and protect any confidential information or new discoveries.

Once you established ownership, can you enforce your rights?

What are Your IPRs and are they Sufficiently Protected?

Obtaining protection for IPRs is sometimes overlooked or given a lower priority to other issues. However, lack of protection can mean a start-up will be powerless to stop copying.

Protection will exist in many forms since there are different types of IPRs, not just patent protection. They are also usually territorial.
Imagine the year is 1892 and your start-up company has invented a new drink branded Coca-Cola. What are the IPRs?

Trade Mark / Service Marks: These are legal rights in a distinctive word, name, symbol, logo and even the shape of a product or its packaging, a colour, a sound or a scent, that is capable of distinguishing or actually distinguishes your goods / services from those of others. Domain names are also capable of being trade marks.
Such rights exist without registration, but to enforce them you will have to bring a costly and time-consuming passing-off action. It is better to register your rights and they will last forever provided you pay renewal fees every ten years. Not only will you strengthen your legal rights, but anyone searching the Trade Marks Register will be alerted as to your ownership.

Take a look at Coco-Cola Company’s trade mark registrations, including the name in its various forms, the get up and 3D shape of its ubiquitous bottle.

Copyright: In the UK, copyright covers original works of authorship such as advertising material, books and other literary works, art, website design, computer programs, music and films.

It does not protect the idea itself, but the expression of the idea. In simple terms, it prevents anyone copying a substantial part of the work or distributing it, subject to certain exceptions like fair dealing, education, news reporting, etc.

It exists upon creation and in the UK (unlike the US) there is no need to register it to enforce it.

The Coca Cola bottle label and all its advertising, whether print, media or online, will be protected by copyright.

Design Rights: Registered Rights protect the appearance (i.e., ornamentation and texture) and shape of the whole or part of consumer products and their packaging. In other words, it protects both 3D and 2D designs. The design must be new and have individual character. Again, registration will have a deterrent effect, putting third parties on notice which may deter someone launching a visually similar product. Protection lasts for a maximum period of 25 years, subject to renewal every five years.

Unregistered design rights also exist in the UK. These relate to the “design of the shape or configuration (whether internal or external) of the whole or part of an article”, but not surface decoration. Such rights attach primarily to 3D objects and are created automatically when the design is recorded in a design document. They last either 10 years after articles were first sold or 15 years after the design was created (whichever ends first).

Patents: Patents protect innovations that are novel and inventive and solve some technical problem. They are the best protection you can get for a new product or process and give the patent owner (the inventor or assignee) the exclusive right to prevent others exploiting (by making, using or selling) the patented subject matter described in the claims of the patent. Not every new invention is patentable, so it is important to get specialist advice early on.

To work out the first owner of the right to be granted a patent, first identify the inventor(s) – this is the person(s) who actually devised the invention. Secondly, check if such inventor(s) has a relevant employment contract or other agreement transferring the rights to others.

Also, there exist novelty-destroying disclosures, which can result in your patent application being refused or your granted patent being invalidated. These include informal disclosure of the invention to friends or to a third-party collaborator/researcher with no confidentiality agreement, or even simple publication.
Therefore, it is vital that both employees and third parties involved in developing new technology agree to non-disclosure / assignment obligations and invention disclosure to the employer/company.

Patent protection must be applied for and lasts for a maximum of 20 years from filing provided renewal fees are paid.

A Coca Cola patent example would include its unique system for manufacturing a coated plastic container having a gas barrier.

Trade Secrets and Confidential Information: This is information or data that is not generally known to the public that confers competitive edge or economic benefit to the owner because it is not generally known and the owner has made an effort to maintain its secrecy.

It gives the owner the right to prevent anyone stealing such information or breaching a confidentiality agreement protecting it. Examples include the recipe / formula for the Coca Cola drink, as well as customer lists, company data and computer programs.

Whilst not as secure as other forms of IPRs, trade secrets require neither documentation detailing product construction nor are they limited by time; they simply have to be kept secret, which explains why the Coca Cola recipe is kept in a vault.

Database Rights: Databases are protected under the law of copyright and under specific Database Regulations in the UK. Like copyright, Database Right is an automatic right which exists as soon as the database exists in a recorded form, whether held electronically or in paper form. It covers traditional mailing and customer lists, as well as card indexes, directories and protects the collection of data, not its constituent elements.
Generally, it lasts for 15 years from compilation or, if published, from when it was first made available to the public.

Takeaways

Make sure you know what IP your start-up owns, whether pre-existing IPRs created before the start-up’s formation or any subsequent IPRs.

Have an IP Policy in the Employees Handbook with guidelines for ownership and disclosure together with IP obligations in employee contracts. Any third-party who might create IP on behalf of the start-up must sign confidentiality and IP assignment agreements prior to any work or even discussions regarding a prospective collaboration.

This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited 2023.