Common IP Mistakes Startups Make & How to Prevent Them
By Blair Beven | Principal Partner
When it comes to any new startup venture, and in the rush to scale to Seed A, many founders forget to pay attention to one of their most valuable assets – intellectual property (IP). A startup, by its very nature, exists to create something new, novel, and distinctive. This means creating new intellectual property rights. These can take the form of a new trade mark, copyright, design, or patentable invention.
Whether it’s the name of your startup, a novel biotech software, or even just your ideas, protecting your IP early can be the difference between success and failure. Within this article, our Principal Partner, Blair Beven, breaks down the most common IP mistakes startups make and delves into practical ways to avoid them and protect what matters the most.
Registering a Business Name with ASIC Doesn’t Mean You Own the Trade Mark
A common misconception is that by registering a business name through the Australian Securities and Investments Commission (ASIC) or purchasing the domain name, you own the name of your startup.
However, this is not correct. To exclusively own the name of your brand, you must register it as a trade mark through the Australian government’s intellectual property authority, IP Australia. A trade mark is an IP right that protects a recognisable sign, for example, a brand name, logo, catchphrase, design, or expression, that consumers use to identify the products or services provided by your business. Registering a trade mark with IP Australia helps prevent your brand from being used by others without your permission and allows you to consolidate your market share.
It is important to remember that trade mark rights are national rights, which means that if you register a trade mark in Australia, your protection is limited to this jurisdiction. If you want to register your brand as a trade mark in other countries, you must register it with each country’s IP office, or you can register it via the World Intellectual Property Organisation, which has over 193 member states, including Australia, New Zealand, the United States and the United Kingdom.
Skipping the Trade Mark Search Before Applying
It’s easy to get attached to your business name; however, if you haven’t checked whether it’s eligible to be registered as a trade mark, you could be setting yourself up for failure from the get go.
It’s best practice to conduct a trade mark search, or – as IP lawyers call it – an availability search to ensure that your brand is available for use and registration in the countries in which you operate. This will help you avoid accidentally infringing another entity’s trade mark before you take significant steps to invest in the marketing of your business. Failing to conduct an availability search means that you could be starting your startup on shifting sand.
Most countries have a trade mark database or official trade marks register that shows all existing registered and pending trade marks. You can search these registers for trade marks similar or identical to your own brand to determine whether your brand is actually available. Australia’s trade mark register can be accessed through the IP Australia website.
As a real-life example, Australian startup Afterpay failed to conduct thorough trade mark searches before they launched. The brand ‘Afterpay’ was actually already being used by a Dutch company, which had registered the trade mark ‘Afterpay’ in the UK and the EU. As such, Afterpay was forced to rebrand its UK and European operations to ‘Clearpay’. This was frustrating for Afterpay, as changing their brand name meant that they lost the goodwill they established in the ‘Afterpay’ name and would have to start from scratch with a new brand. ¹
Don’t Pick a Generic Brand Name
In Australia, trade marks won’t be accepted if they are generic or common terms for the goods or services for which they are registered. For example, you can’t register ‘best computers’ if you are selling computers. To receive registration, a trade mark must be unique, distinctive, stand out, and not be just a descriptive term. It also can’t be offensive or similar to any prior registered trade marks that could cause confusion in the marketplace. ²
NDA Before You Pitch
Before you pitch your new idea to investors (or even friends), get them to sign a Non-Disclosure Agreement (NDA). NDAs are legally binding documents that ensure that parties keep shared information confidential. Without this protection, there’s a risk of your ideas being stolen or used without explicit permission.
This specifically comes into play if you are interested in filing a patent, as for something to be patentable, it must be new and inventive. Therefore, publicly disclosing your invention before filing a patent application could jeopardise your ability to get a registered patent. NDAs are therefore important to ensure that confidentiality is maintained during a pitch.
Should Founders Own the IP?
When a founder leaves a startup, it can create tension around who owns the IP. To avoid this, it’s crucial that any IP created by the founders is owned by the company as opposed to individuals within the company.
A best practice is to assign the IP to a separate holding company that solely owns the IP. This way, if any issues arise, the IP remains protected. This company will hold and manage the IP assets and can license the IP rights to the operating companies.
The same can be said for employees, for whom are employed to action the ideas of the founders or even create new and novel ways to conduct the business or create new products and services. Sometimes, without an agreement, it can cause some confusion as to “who owns the IP” within the company.
Overlooking IP as a Whole
Many startups make the critical mistake of overlooking IP altogether, sometimes simply because they don’t know what it is and how they can best use it to monetise their ideas.
IP is an intangible property right, which means it operates under similar laws to those governing tangible property. Like physical property, it can be sold, licensed, and assigned. Registering your new IP is a sound deterrent to copiers and acts to completely stop others from using your IP without authority. To date, there have been several well-known cases of substantial damages awarded for infringement of IP.
Therefore, taking the time to understand the basics of IP, what IP rights you are creating and working with an IP law firm (like us at XVII Degrees) that can save you from making these common mistakes and protect your startup.
For more intellectual property insights, follow us at XVII Degrees.
References:
[1] Sydney Morning Herald. (2019). Afterpay to adopt Clearpay name for UK launch. Retrieved from https://www.smh.com.au/business/companies/afterpay-to-adopt-clearpay-name-for-uk-launch-20190430-p51iix.html
[2] Trade Marks Act 1995 (Cth). Retrieved from https://www.legislation.gov.au/C2004A04969/latest
Photo by Startaê Team on Unsplash
