IP for Start-ups – 5 Key Strategic Ideas

Usually the most valuable assets that start-ups own are intangible.

One of the key tools for start-ups for capturing this intangible value is by means of intellectual property (IP) registrations. Typical forms of intellectual property rights (IPR) include trademarks, patents, utility models, copyright and registered designs.

The following five key strategic points will help your start-up to make most of your most valuable assets.

IP is Valuable Property

Registered IP can be used as any other property. You can sell or buy it, you can license it, use it as a security or give it as a Christmas present. IP must be recognized as a con-crete asset for your company. Like any other assets, it needs to be protected and exploited in an efficient way.

Although IP is intangible and immaterial, it is still very real. Remember that the balance on your bank account is also immaterial – the fact that something does not exist on a material form (although you usually get a registration certificate) does not mean it is not valuable. 

For start-ups, the value of IP is usually measured at the time of an acqui-sition of the company or part of it. If the company has not registered its rights proper-ly, there might not be a lot to sell. Furthermore, IP registrations can add an additional and continuous revenue stream for your company through licensing.

For start-ups, registered IP also represent momentum: the brilliant idea is becoming a reality. That is why IP can also be used for the purposes of negotiating fi-nancing and agreements.

There is one key difference between material property and IP. The use of IP does not diminish the value of these rights or usually cause IP to lessen in any way. On the contrary, IP rights usually grow in value when they are used.
While it takes resources to actually print a book, ship it to stores and sell actual copies of it, books in electronic format can be reproduced almost infinitely with very low costs. Strategic sharing or licensing of your IP might bring goodwill, income and produce even stronger rights.

This means that start-ups need to be flexible when considering their IP strategy. In some cases, your property needs to be protected aggressively. In other cases, limited sharing or licensing of your IP can be extremely beneficial for your start-up.

Nomen est omen

Choosing a good and protectable name for your company or for the products and ser-vices offered by your company is an important part of the process of creating a strong brand.

When choosing a name, companies often consult advertising companies or offices specialized in concept design. However, you should not forget legal aspects when choosing a name for your company.

If the brand cannot be protected by a trademark or the domain the com-pany wishes to have is not available, it is very difficult to create a brand. Often the trademarks that are the best from the marketing perspective are the most challenging ones to protect legally.

When choosing a name for your company the first step is to list different name options and to analyze carefully how these names can be protected. You should first evaluate whether the general preconditions for the trademark registration are met.  
The name should not be unethical or misleading and it should not de-scribe any product or service (the so-called distinctive character of a trademark).

In general, the trademarks that are the easiest to register are purely cre-ated as a result of imagination. Even though it might be a positive thing, from the mar-keting aspect, that the product somehow describes the service, it is not desirable from the protection aspect since it will probably lead to a situation where the registration of the sign will be refused.

The next step is to assess the availability of the trademark. You can utilize various search engines and registers when assessing the risk of confusion. You can per-form searches, for instance, in the register of companies and associations or national and EU trademark registers.

Trademarks are classified according to type of goods and services that they cover. If a register contains an identical trademark registered for identical or similar goods or services, the best option is typically move on to your next best choice.
If a similar trademark is found to exist, it will be necessary to assess the likelihood of confusion between them, especially if the goods or services are identical or similar. Remember, your business name is not a trademark. In order to obtain a trademark, your mark needs to be registered as a trademark!

Registrations Give Security

Registration gives exclusive rights to start-ups and forms a monopoly. Besides bringing value, companies can be sure that they do not interfere with other companies’ IP rights.
Registrations give security to start-ups. With all the necessary registra-tions in place, the company can be sure that it is free to operate in the marketplace. On the other hand, start-ups can prevent others from using their registered IP rights or entering into market with identical or similar names.

While it is true that some forms of IP, such as trademarks, might some-times be acquired even without registration, it is strongly advisable to actively register your rights. Establishing a trademark through continuous use (without registering it) can take several years and such strategy contains considerable risks.

Start-ups usually do not have the luxury of time on their hands. It is much more advisable to be sure that there are no problems in the horizon and to document your rights. In the worst-case scenario, IP disputes can lead to rebranding, damages and huge legal bills.

Build your portfolio intelligently

Although start-ups are usually heavily bootstrapped in the beginning, the main brand and products should be trademarked in the very first phase of the start-up life cycle.
The critical first trademarks and domains should be acquired even before the first investment round. If necessary, FFF funding (friends, fools, and family) should be used in order to secure the key rights.

Furthermore, if your start-up company has invented something to a spe-cific technical problem, you need to be sure that you do not go public before securing your rights. Remember, novelty is a requirement for patents and registered design rights. 

IP rights are national, unless rights are created in such way that the right takes effect in a particular region (such as the EU). In most of the cases, start-ups need to register the rights in the countries they are targeting. This is a question of cost-benefit assessment as well. Even though start-ups do not necessarily have a lot re-sources, the companies need to think about the long-term benefits of securing their IP ownership.

The IP strategy depends, of course, on the field of the specific industry and the available resources. This said, the minimum standard for an EU-based tech-nology start-up could, for example, be the following:

•  Domain name/names secured;
• Main brand as EU trademark;
• Key product(s) as EU trademarks (preferably as word marks);
• Possible trademark registrations in other key areas, such as United States, Russia, China, Japan and/or Norway; and
• Thorough review and possible registrations of the IP rights in the field of your specific industry: patents, designs, utility models etc.

Luckily, not all of this has to be done alone. After the initial research work, one should contact an IP professional for the purpose of, for instance, more comprehensive IP searches and IP classification and registration procedures.

Antti Innanen
Legal Counsel
Dottir Oy