What Every Startup CEO Needs to Know About Intellectual Property

by / ⠀Startup Advice / August 25, 2012

Your fledgling startup needs a great deal of care and protection. For the first five years, startup businesses have a high failure rate and one of the biggest reasons is security. You will need cash flow for financial security, you will need IT for data security, and you will need legal safeguards in place for intellectual property security. Think about your key intellectual property assets: that is, your logos, your web design, app look and feel, the design elements of your branding. These can all be vulnerable areas for new businesses because you are probably doing it for the first time and hiring outsiders to do the heavy creative lifting.

As important as a good firewall is to your data security, a strong legal footing is necessary to protect your intellectual property.  Intellectual property means anything that identifies your brand and can provide you with economic benefits over the long haul. This includes designs, original blog posts or other writings, proprietary software, inventions and other juicy secrets.  We’re going to briefly discuss three areas of intellectual property: copyrights, trademarks and patents.

A copyright is the legal “hands-off” protection for original works of authorship, as long as they are fixed in a tangible medium of expression.  That means ideas don’t count. Facts, procedures, processes, systems, methods of operation, concepts, principles or discoveries are not eligible.  The good news is, you can copyright literary, musical, and dramatic works, photos, images, videos, movies, games, software, and miscellaneous things that we can’t even imagine yet. In most cases, it is not the core business model which requires copyright, but the marketing materials to promote it. Many new businesses these days start with no more than a logo and website, both of which were created by freelancers.

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When a work has been created for you by a freelancer, the copyright for the work only transfers to you after you pay for it and the freelancer expressly transfers copyright ownership to you. The first and most important rule of copyright law is that you must draw up a specific agreement to define copyright ownership for the proposed work, otherwise copyright ownership remains with the creator of the work, even if you’ve paid for it. Once you own the work, you have the right to exclude any other person from reproducing, preparing derivative works, distributing, performing, displaying (such as in a portfolio), or in some other way using the work. The transfer of copyright can be done without an attorney as long as you have a reliable contract agreement.

Trademarks are slightly different animals. A trademark only covers the name of your marketable item from being used by a competing business. This wasn’t meant to help you. Trademark law is designed toprotect consumers from confusion or deception by preventing knockoffs from tricking consumers with substandard materials.  Before you can register a trademark, you will need to do a trademark search. This also prevents you from accidently breaking the law by marketing under someone else’s trademark. Normally, this type of work requires a dedicated attorney.

Patents are where the real money is in industrial espionage. Inventions often form the core of a company and differentiation in the market becomes crucial to the success of this type of businesses. If your model depends on a device or process that is unique, useful, and non-obvious, you need a patent. Patent holders can effectively shut down third parties attempting to make, use or sell your baby.  The length of time you can hold them off depends on the type of invention. The hard part is getting that patent in the first place.  This is another example of where an attorney (only one with patent experience) will be invaluable.  If you are planning on developing a culture where inventions are churned out on a regular basis, you need to sit down and determine who owns the patent for what.  This means more complex legal arrangements and forms to sign.

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As your business grows, intellectual property rights concerns don’t go away (witness Apple and Google). In anything, they become more complex and significant.  Even if you have done everything right, you may have to defend your hard earned place in the marketplace from a “cease and desist” letter.  It’s common practice now for “scrapers” to pull any content they like off the internet, use it to make money, and sometimes sue the original content creator for infringement.  Keep good records, and know the outlines of the law.  Remember that the higher your little business flies, the more hunters there are who can see you.  Make sure you are ready to maneuver when the time comes and you can soar right past them.

Reggie Solomon is the founder of Kunvay, which provides an easy way to transfer copyright and intellectual property ownership online and own full and exclusive rights to the creative work and unique digital goods you receive from freelancers or anyone.  He can be reached at @reggiesolomon on Twitter.

About The Author

Matt Wilson

Matt Wilson is Co-Founder of Under30Experiences, a travel company for young people ages 21-35. He is the original Co-founder of Under30CEO (Acquired 2016). Matt is the Host of the Live Different Podcast and has 50+ Five Star iTunes Ratings on Health, Fitness, Business and Travel. He brings a unique, uncensored approach to his interviews and writing. His work is published on Under30CEO.com, Forbes, Inc. Magazine, Huffington Post, Reuters, and many others. Matt hosts yoga and fitness retreats in his free time and buys all his food from an organic farm in the jungle of Costa Rica where he lives. He is a shareholder of the Green Bay Packers.