Top 10 Intellectual Property Mistakes Made by Emerging Companies – by Randy Whitmeyer

October 06, 2014

Increasingly, the value of companies (particularly technology companies) is correlated to the strength of their intellectual property (“IP”) rights – their patents, trade secrets, copyright, and trademarks. Growing a new company can be exciting and fast-paced, but paying close attention to intellectual property is a crucial step that should never be overlooked. Here is our countdown of the most common IP mistakes made by entrepreneurs and tech start-ups.

10. “We can save money by using contractors for IP development and not worrying about agreements.”

There is nothing inherently wrong with using contractors. However, without an express assignment, IP is almost always owned by the independent contractor, not the company who paid for the work.

9. “We are excited that our scientific founder published a paper on a really important improvement.”

Foreign patent rights may be lost. There is a one-year grace period in the US to file for patent protection after public disclosure, and there is usually NO grace period overseas.

8. “We signed a great long-term partnering agreement! Their agreement looked well-written so we used it.”

It can be very hard to notice the clauses that are missing from a contract, which might be crucial. Default rules regarding joint ownership of IP can frustrate the intentions of the parties.

7. “Open Source software and other materials on the Internet are saving us a lot of time. It’s great that they are so easy to download, and it’s just like public domain materials.”

Careful attention should be paid to the Terms of Use associated with downloaded items. Much open source software has a “viral” quality and can infect software that is intended to be proprietary.

6. “We filed our provisional patent application on our own. We can hire a lawyer to clean it up when we file a non-provisional based on this provisional.”

A provisional must contain a full description of the invention to support the non-provisional.

5. “Since we were able to incorporate our company name and obtain a domain name for our company and products, there is no reason to worry about trademarks.”

Federal trademark rights will trump rights in corporate names and domain name.

4. “As founders, we don’t need to sign any documents related to IP.”

Taking care of proper IP assignments when the company is formed can avoid major hassles in later company stages.

3. “We patented our technology, so there is no need to worry about freedom to operate.”

A patent does not provide the patent owner with the right to practice the invention, only the right to prevent others from practicing the invention.

2. “We are moving so fast –negotiating and signing Nondisclosure Agreements will just slow us down.”

Trade secret and patent protection is predicated on maintaining secrecy, so failure to enter into appropriate NDA’s can seriously affect both types of IP.

1. “We don’t need an Intellectual Property Plan – Let’s file on everything (or nothing)”

Many patents are too narrow and do not focus on commercially valuable components. Many trademarks cover logos, slogans and styles that change within a few years. Companies should neither overspend nor underspend on IP protection.

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