When the Time is Right to Get Legal Protection for Great Startup Ideas
If you are a certain age, you may have grown up listening to the Smiths ask this really pertinent question. If you aren’t a certain age—just know that before there was a Kurt and Nirvana, there was something else called Morrissey and the Smiths. Aron and I are old, so for comparison, insert whatever hipster martyr-complex band is ruling the day. We honestly don’t know, although we like to fool others, especially ourselves.
“When you say it’s gonna happen now
Well, when exactly do you mean?”
– The Smiths, How Soon Is Now?
Both Kurt and Morrissey, like great startup founders, always had good ideas, but likely never quite knew which were going to hit. Or when. So how do you protect a good idea? Many startup founders, much like the early days for the Smiths and Nirvana—are rich with ideas, but otherwise, hit the mark on all standing definitions of financial impoverishment.
There is little doubt, especially to the startup founder, that it is worthwhile to think about intellectual property (IP) from the get-go. But even when short on cash, there are some things that can be done, if not for free, then at least inexpensively. There are other things that cost money. Stadium tours ain’t cheap even for the world’s greatest garage bands.
IP Light
A great place to start is to determine whether you have an idea at all. And by “you,” that could mean your company. You could have an incorporated company which is its own “legal person.” A key next step is to get your employees to agree (in writing) to assign any IP they create to the company while working on its behalf. That’s not particularly expensive, but could go a long way. You can do this from day one that you have someone working for you—either as a direct employee or as a contractor.
If you are still formulating and need to speak to other stakeholders (not employees) about your ideas, you have a decision to make. Do you trust the people you are talking to? If not, then don’t. At least not in the early days.
It is also important to think about trademarks as early as possible. This is your signature to the outside world and the direct way your potential clients are going to find you. It can become a valuable piece of your brand. At least take a look on the CIPO and USPTO websites and do a google search for the proposed name of your company, product, service or business line. Even better is to get it registered – which is relatively inexpensive.
Trademark registration provides the exclusive right to use that mark. It is an effective legal tool to prevent others from imitating your mark. While imitation may be a form of flattery, it is not always good for business. The process to register (in Canada) is more intensive compared to copyright protection and can take 12 to 18 months, but then long-term protection is ensured.
Copyright is free. At least in Canada, it occurs automatically by default. You can mark work with a © without registering your copyright. Coolbeans!©
Even with a registered copyright (which is cheap), you would still need to pay money to enforce your rights. Do you think the composer of Happy Birthday is collecting their full share of royalties? Believe it or not—it is still technically under copyright.
You might be dealing with “Trade Secrets” which is information you choose to keep, well, secret. We still don’t know the formula for Coca Cola (although it is rumored to involve sugar). You can maintain this secrecy through a variety of tools including confidentiality and non-disclosure agreements. The more complex your idea, the greater likelihood is that you should talk to a lawyer rather than just pull these agreements from the internet.
Heavy Duty IP
Some things inescapably cost money. If you are planning to attract investors, they are going to need to see adequate measures in place that protect the IP of the company-or at least understand that you are thinking about such measures. This may mean you have paid the money to put protections in place, or have built up the war chest to pursue those that violate your rights. In some cases, you may need to have both.
Patent protection costs money on both ends and also takes a considerable amount of another commodity that is at a premium for startups: time.
What is “patentable subject matter”? Key considerations include:
1. Novelty – new compared to what is already filed/published, including any of your own publications;
2. Not Obvious – cannot be a simple tweak as an improvement;
3. Utility – does what it is described to do; and
4. Subject Matter – satisfies patent office requirements.
If meeting that initial test, you would consider pursuing a patent if your work is:
1. easy to develop independently or through reverse engineering;
2. hard to protect/keep secret;
3. backed by a team with money since significant costs involved with filing/enforcing a patent.
But perhaps it’s not worth the cost if your IP has a short life span since by the time the patent is issued, it might have already lost its value.
Patents can be the most effective form of IP asset. Unfortunately, drafting and filing a patent application is not cheap and takes a long time. It is heavily dependent on how complicated the invention or technology is. Lawyer fees can range from $5,000 to $30,000 plus filing and government fees. Better not buy the office cappuccino maker just yet.
At some point, you then have to pay for your lawyer to negotiate with the patent office over the scope of protection to which you are entitled which is usually 12 to 18 months after filing the application. Again, cost varies with complexity.
But what does this get you? An exclusive right to make, use and sell the patented invention. Perhaps more importantly, credibility with investors, and opportunity to make money by licensing or selling the product yourself.
When it comes to protecting your idea—you need to decide if you are going to be content with busking your way along or if you are truly ready to turn pro with the help of legal assistance.
Written by Jason Moyse in collaboration with Aron Solomon.
