For tech startups, the most valuable assets are often invisible. While businesses have traditionally been built on physical resources, the contemporary economy is increasingly driven by intangibles. Chip firm Arm, for example, won a valuation of $40 billion and a reputation as the UK’s leading technology company, despite never making a single chip. Instead, the company designs the processor architecture used in countless devices.
This business model based on intellectual property It has transformed the stock markets. In 1985, less than a third of all assets in the S&P 500 were classified as intangibles by 2020, that proportion had risen to about 90%. Startups, however, may overlook intellectual property protection in their initial plans.
According to Robert Lind, a patent attorney at the intellectual property firm Marks & Clerk, they are taking a big risk. Lind recently wrote an electronic book on how to protect and monetize your intellectual property. He shared his best tips with TNW.
1. Start your research as soon as possible
Get your tickets for TNW Valencia in March!
The heart of technology reaches the heart of the Mediterranean
According to Lind, technology companies often neglect IP until their business is exposed to financial and creative danger. He advises them to start their research before they really need it.
Naturally, Lind suggests that your study material include his eBook. But she doesn’t recommend relying on professional advisers at all times.
“Arm yourself with the knowledge up front, so you know when to bring in the experts and when you don’t need to bring them in,” Lind says.
For tech startups, patents are the main form of intellectual property that can be protected. Founders should educate themselves on what a patent is, how to obtain one, how third-party patents are enforced, and how third-party patents can be interpreted.
2. Keep it confidential
It goes without saying that your brilliant idea should be kept private, but that’s easier said than done.
“Going public doesn’t just mean selling a product,” Lind says. “It could mean presenting a conference paper, publishing a journal article, or putting information on your website. Be very careful about publishing your ideas before deciding if something is patentable.”
3. Diligently identify your innovations
Innovations are the lifeblood of patents, but they are not always easy to identify. Many researchers and engineers don’t realize that their work could be valuable intellectual property.
“It’s very important that you have regular internal reviews and milestones in your project plans to consider what innovations have been made and whether or not they should be patented,” Lind says.
Once you’ve identified an asset, you can get professional advice on whether or not it’s patentable.
4. Protect your rights
Seasoned investors know the value of IP. Venture capitalists will use patents as evidence that a company is well run, at a certain stage of development, and with a niche market. Your due diligence will likely differentiate between filing an application and receiving a patent granted.
However, start-ups often prioritize investment in R&D over the protection of their intellectual property. Lind remembers this problem that arose at a green technology company. The team had a very small portfolio of intellectual property, raising questions about its value to investors.
“It’s the protection that really crystallizes the value of the R&D you’re doing,” Lind says.
5. Design a clear IP strategy
An intellectual property strategy must start with clear objectives. Generally speaking, this will involve maximizing value at a desired point of exit or investment, while remaining within the bounds of financial prudence.
Registered rights are territorial, so you will need to identify where to register your IP assets. This analysis can incorporate the size, potential, costs and effectiveness of the territory.
A cautious approach may defer costs and commitments, but keep in mind that the registration process can be slow. To avoid delays, file early in key territories, respond quickly to objections, and take advantage of opportunities to discuss issues with patent examiners. Careful cost forecasting and budgeting will help cover any difficulties that arise.
“You have to pursue your strategy pretty aggressively,” Lind says. “But unless you know where you want to go from the start, you probably won’t get anywhere useful.”
6. Assign your intellectual property to your company and the future
You need to make sure that your IP is assigned to technology that you can sell. According to Lind, it’s surprisingly easy to obtain patents that don’t align with your most valuable assets.
“Make sure your patents really cover what are the efficient and smart parts, that’s very important,” he says.
Your IP must also be future-proof, as the final product can be very different from the original vision. One of Lind’s past clients, dna push, raised $60 million after building a portfolio of patent rights with diverse potential. While the company already sells a consumer product, its IP could also be embedded into other devices or applications.
“Make sure your IP has a wide enough scope to cover not only what you’re doing now, but also what you’re doing in the future,” Lind suggests.
7. Keep building your portfolio
Lind advises startups to look beyond those early patents for their big idea. After all, each patent only lasts for 20 years.
“A slow startup can take 10 years to bring their product to market, which only leaves them 10 years for the patent,” Lind says. “They have to keep innovating and patenting to be able to keep that pipeline going.”
8. Solve your property problems
Staff cooperation can be crucial in registering IP. The signatures of the inventors, designers, directors, and owners may be required on legal documents. If you can’t get a name on the dotted line, you could be in major trouble.
To escape this fate, Lind recommends getting the necessary agreements while everyone is happy and cooperative.
“Make sure you clear all that property and keep proper records throughout the process,” he says. “And do it while everyone is still friends, and before you start making money.”