Intellectual Property + Early-Stage Business Founders: What to Consider Now

By Wendy Heilbut

Early-stage business founders have a lot to think about – from business development to technical infrastructure, from fundraising to employee management, and the list goes on . . . we work with a lot of our early- and growth-stage clients on another important area: intellectual property (or “IP”) protection needs.  Each enterprise is unique, but the legal needs can include trademarks, copyrights, patents, trade secrets, IP licenses and works made-for-hire.  I will address each of these briefly here, but please keep in mind that these can be complex issues and each situation poses individual challenges that should not be considered without assessing your broader goals with a lawyer that has specific experience handling intellectual property matters.

Trademarks – The purpose of a trademark is to identify the source of a brand and protect consumers from being confused in the marketplace.  In the U.S., the rule is first to use a trademark wins, (some countries prize first to file an application for a trademark) but a limited set of your ownership rights begin when you start to use the trademark.  Additional rights attach when you file and/or gain registration of your trademark with the U.S. Patent and Trademark Office (or “USPTO”).

When should a time-strapped start-up founder spend resources on prosecuting a trademark?  It depends upon how important your brand will be to your success.  If you will be relying upon end consumers of your goods or services recognizing and knowing your brand, it is important to think about your trademark right away.  Before you sink business development dollars or social media capital into a brand name, be sure you will be able to protect it with a federally registered trademark.  You can do a quick internet and USPTO search yourself to get a broad picture, but eventually you will need to hire a trademark lawyer to conduct a search for you and begin the process of filing your application.  There are few things more crippling to a boot-strapped startup than a name change that eliminates the goodwill garnered through grassroots early stage efforts.

Copyrights – To qualify for copyright protection, the eligible subject matter (e.g., books, films, music, plays, code, etc.) must be “[o]riginal works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” (17 U.S.C. § 102.)

If your enterprise has created a unique artistic, technical, literary or instructive work you can avail yourself of U.S. copyright protection.  Unlike trademarks, since the work is unique, there is no need to rush to file.  Some rights attach as soon as you create your work, others will be available to the creator once the copyright has been filed and registered.  If you wish to license, sell or are worried about being knocked-off, you should proceed to register your copyright with the U.S. Copyright Office and avail yourself of an attorney who can help you wade through the process.

Patents – If you have created, or will be designing a new, useful and non-obvious inventions you should consult a patent attorney (we can refer you to our favorites!) as soon as possible as a lot of the value of your business will be tied to the successful prosecution of your patent.  Although we don’t handle patent matters in house, we refer these clients to close friends of the firm to ensure that our clients’ technologies are well protected.

IP Licenses – Try to look at intellectual property as an asset class, not merely the property of your company.  By licensing your intellectual property to another entity, you can create tremendous value in your company and its holdings.  Think about the IP you own and how it might be valuable to other companies.  I love helping clients think through this and discuss how to bring incremental value to their business through assets they already hold!

Additionally, if any of the founders or employees of your company created IP (think about writing code for your website, conducting research for your patents, etc.) outside of a specific agreement with the company, you need to be sure to license or assign that IP to your company.  This is important and a piece many founders overlook, be sure your entity – not individual employees – own or at least have a license to all IP that the company needs and uses.

Work Made-For-Hire – while this is not exclusively an IP issue, it comes up in the intellectual property context quite frequently.  Anytime any IP is created for an entity, be sure it is under the auspice of a work made-for-hire agreement.  These can be stand-alone agreements, an aspect of an employment or contractor’s agreement or even part of an agreement between co-founders.  As long as intellectual property is created as part of a work made-for-hire agreement, the IP will be the property of the company and you will not need to license or assign it to the company separately.

If you have further questions, reach out to us!  We love helping you protect and grow what is more important to your company.