Founders need to make sure that all the employees assign their innovations to the company. Agreements with contractors and consultants should also provide clarity on who will own what.
By Ravi Bhola
Intellectual property (IP) could arguably be one of the most valuable assets of any young enterprise. Therefore, it must be managed well. Emerging enterprises may find the following pointers useful to help them leverage IP well.
No to Procrastination
One of the biggest challenges for founders is to set their priorities right. While innovation is the key differentiator in the marketplace, founders often end up procrastinating filing or registering IP. This is essentially because raising capital, building the team, and finding customer are critical for the survival of any young business. However, any procrastination in registering IP can be a deal-breaker. Unless small businesses or startups ferociously monopolize their innovation, there will be copycats everywhere.
Founders need to make sure that all the employees assign their innovations to the company. Agreements with contractors and consultants should also provide clarity on who will own what. In fact, it is prudent that founders also assign their innovations to the business. Investors want to see IP ownership in the name of the company. They usually don’t like IP ownership in the name of the founders, and definitely not in the name of the employee or consultant or contractor.
Not every IP is protectable. To obtain a patent, your innovation should be globally new. For example, innovating something for the first time in India is not adequate if someone in the US has already innovated it beforehand. So, a comprehensive prior art search before filing IP is advisable.
Identifying Inventor; Required Disclosures
Identifying the inventor for a patent is not similar to identifying the author for an article in a scientific journal. Generally, almost the people who are part of the research project are named as authors in an article in a scientific journal. On the other hand, only the people who have contributed to the idea are named as inventors in the patent. Someone simply executing someone else’s idea cannot be considered as an inventor. Hence, contributing ideas or enhancing the ideas are the determinants for inventorship. A good patent specification should be long enough to disclose the invention and short enough to protect know-how. know-how and trade secrets are important components of IP and are often underutilized.
Your innovation can often be covered by multiple layers of IP. And, each layer is unique and can further strengthen your monopoly. For example, a medical device can be patented for technical advancement, design protected for aesthetic value, have brand protection, and so on.
Growing up, young businesses have to manage several uncertainties including identification of markets they need to focus on. Since resources are limited, they need to make difficult choices. Problem is compounded as IP shall be sought in various countries within prescribed timelines. If you miss the timeline, the opportunity to monopolize your innovation in that country is generally irretrievably lost. And, investors are bullish when a monopoly is available in all the key markets/countries. So, within these constraints, startups need to timely make the right choices.
The startup ecosystem has matured with time. And, governments have played a huge role in supporting this ecosystem. Even in IP, startups enjoy a significant reduction in government fee to obtain IP registration. In addition, a substantial part of the expenditure incurred by such businesses can be reimbursed under various schemes run by several state governments and the central government.
Freedom to Practice Patent
It is very important for you as a small business to appreciate that owning a patent doesn’t always mean that having the freedom to practice invention sitting in that patent. This is so because there could be a situation where one of the components of your invention is already patented by someone else. Hence, you may need to take a licence from that person or employ some other strategy to practice your own patent. However, to minimize any risk of being sued, it is advisable to analyze the situation around – freedom to practice.
Quality in Focus
Large-size IP portfolio usually creates greater competitive advantage and higher valuation. However, one shouldn’t lose sight of quality when expanding IP portfolio. Otherwise, large size IP portfolio could simply be a white elephant.
(Ravi Bhola is the Partner and Chair of Patents Practice at K&S Partners. Views expressed are the author’s own.)