Safeguarding Your Most Valuable Assets: Why Startups Cannot Ignore Intellectual Property

Safeguarding Your Most Valuable Assets: Why Startups Cannot Ignore Intellectual Property

A startup has a huge checklist of things to address in the nascent stage. These vary from legalities, team-building, office space, product development, marketing, funding, finance, expansion etc. However, a very crucial and important aspect that is more than often overlooked is IP or Intellectual Property.

Having a disruptive idea, product or business proposition is generally not enough to secure a holding in the market that you are bound to enter. What is even more important is that you firmly secure and protect these ideas and processes, lest someone copies your idea and makes your product/service redundant or eats into your market share. It could be anyone – a trusted confidante, a foe or even your own employees!

There are many facets when it comes to IP protection for startups and the major hurdle is the cost it takes to file for Intellectual Properties. However, it is to be noted that holding IP’s is not only a way to safeguard your idea, but also a great way to gauge your position in a very competitive and dynamic startup battlefield.

Filing for IPs involves knowing if your idea, product or process has already been patented by anyone around the globe and if there needs to be any changes or modification made to your product or service to ensure you don’t violate someone else’s IP. This saves many startups from being crushed even before they can launch. Thus, even though it might involve some amount of capital to be invested, IPs are a great way of protecting your startup from unwanted litigations and uncertainties that can jeopardize the entire business in the future.

Apart from protection, Intellectual Properties are a great intangible asset to the startup as the protection of these ideas and processes will prevent competitors from emerging. Therefore, it is one of the key factors in securing funding for the startup. Investors are always interested in funding companies that have IPs with them as this gives them a sense of security about parking their money in a safe haven! Sometimes, companies even find ways of monetizing their IPs by licensing their processes or patented technologies to other companies to manufacture and market, and subsequently charge a royalty for the same.

Intellectual Properties can be protected broadly through three different methods (and more than often all three are used):

  • Copyrights
  • Trademarks
  • Patents

According to the Startup Genome Project,

IP has, in fact, been identified as the key ingredient for startups across the world to get a competitive advantage in the market.

All these factors make it very obvious that IPs are increasingly being used and filed, especially by technology-based startups today. This is because the technology space is now witnessing more innovations than ever before, with new and ingenious things being developed across the globe. Startups in the tech world therefore need to make sure that their research and ingenious codes are protected from the sharks waiting out there to grab the earliest opportunity to pounce onto an idea, because while products may take time to replicate, technology, if stolen, is easy to replicate in no time, and that can be the death knell for your business.

A very recent and relevant example of a startup having used IP to protect its newest feature and to secure further investment is the Indian mobile wallet and ecommerce company -Freecharge. Freecharge has been the first company in the very competitive online payment and couponing market, to file a patent on one of its newest features. They are working on eliminating the use of an OTP (One Time Password) while conducting online transactions. This is a very good sign when it comes to the progress being made by startups in filing patents to protect their IPs against competition while making intangible assets for further funding.

Rahul Dev, a patent and trademark attorney at Tech Corp Legal said that the trend of filing patents among startups is catching up but patents are being filed not solely for the purpose of protecting against theft of innovation or technology. He said,

The portfolio of patents — even if their registration is pending — becomes a highly valuable intangible asset for the company during fund raising.” In such a scenario, patents serve as a business tool rather than a legal tool, especially for firms that are global in nature, as patents command a high premium in the US and UK.

These facts clearly indicate that IP is one of the most crucial tools that a startup can leverage to get a competitive edge in the market. Even though it may seem to be an expensive proposition, it’s long term dividends cannot be ignored, and hence it is important to focus on budgeting for them. This investment will not only protect the innovation, idea or process, but also provide the most valuable intangible asset that will instill more confidence in the mind of all stakeholders involved, therefore giving you that much needed edge over others in the race.

Author

Founder at eTailing India. Co-Founder at Indian School of eBusiness (ISeB)
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