Startups must prioritize IPRs

The Covid pandemic has proven the fact that anyone from anywhere in the world can make a product or come up with an idea for anyone and disrupt the business ecosystem. Startups are not new to this game of disruption, which we all know has been their fundamental basis for making out-of-the-box ideas work for them in the marketplace.

Today’s world has totally changed, with customers dictating market trends and needs. Companies must anticipate the curve and not only compete with their peers, but also compete with new startups in their sectors with low-cost high-tech solutions.

Most of the time, start-ups lack the acumen and bandwidth to benefit from the full protection available under the Intellectual Property Rights (IPR) regime. To get started, they need to assess and prioritize the intellectual property rights involved in their business. Depending on the type of industry involved, different IPRs play an important role in the business.

Not being able to identify and manage IPs will cause problems for the startup’s business, especially when negotiating with future investors or exiting its business. For many startups, intellectual property rights are the only available asset. It is important to note that certain IPRs such as patents and designs must be registered before being disclosed to the public or to investors. On the other hand, other IPRs like trademarks and copyright do not need to be compulsorily registered to be protected, but the cardinal rule is still that a registered IPR has greater value and acts as evidence of the use of DPI before the courts as well as enforcement agencies.

The most important point for any startup before working on an idea or product is to be very clear and doubly sure that it does not infringe on another person’s intellectual property rights – this will ensure safety against unjustified disputes or legal actions that can thwart its business activities before they even start. It is therefore more vital for startups to make careful and calculated IP decisions in their early stage and to perform proper due diligence on the IP rights they use or intend to use.

The key to leveraging intellectual property rights is proper documentation and strong, foolproof agreements for the management of the various intellectual property rights owned, created, or acquired in the future by startups. It is relevant to have properly entered into non-disclosure agreements, agreements with employees or independent contractors. Usually, the intellectual property is created either by the founders, or by a key employee, or by a third party. The intellectual property so created must be protected by an appropriate agreement between the founder or key employee or a third party, as the case may be, and the startup.

If this fundamental step of protecting ideas by agreement is neglected, it creates several bottlenecks later when those ideas become fruitful. Accordingly, startups must ensure that anything created on behalf of the startup belongs to them and not the employee or a third party. It is always advisable to spend time and effort in the beginning to enter into elaborate assignments, licenses or user agreements, with provisions for any issues related to intellectual property rights after termination. Another reason to prioritize IPRs is that it will help them improve their business valuation, generate better customer base, protect their competitive advantage, use intellectual property as a marketing advantage, and use IPRs as a source potential revenue through licensing and fundraising from VCs and banks.

To conclude, in the long-term interest of startups and as a best practice, an IP policy for the management of various intellectual property rights will ensure minimal conflicts between founders, employees and other stakeholders for better sustainability in today’s globalized world.

(Editor is Head, Legal and IPR, Resolute Group of Companies, and Registered Patent and Trademark Agent)

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