How to Sabotage Your IP Position – Part Two
In part one of this guide covering the most common IP mistakes made by new ventures, we covered the common issues of approaching IP with a ‘fire and forget’ mindset and not being able to communicate your IP position with confidence.
In part two, we cover an additional two critical missteps made by new ventures, as well as a common thread tying all these mistakes together.
Mistake #3 – Confusing the Ability to Obtain IP Rights With Your Freedom to Operate
Freedom to operate (FTO) relates to your ability to commercialise a product or service without infringing on the active IP rights of others.
Many businesses incorrectly assume that possessing a registered IP right (i.e., a patent or trade mark) automatically means that they’re free to commercialise their product or brand. Unfortunately, that’s not true. While having your own IP rights may protect your venture, they don’t guarantee that you’re not infringing on someone else’s rights.
Confusing, right? Let’s break it down:
Put simply, obtaining registered IP rights typically involves getting your IP application (for a patent, design or trade mark) through an examination process conducted by the IP Office of a given country.
Examination is a mammoth topic of its own, but for our purposes, what you need to know is that it typically focuses on ensuring your application meets legal requirements for protection, but doesn’t necessarily focus on locating the active IP rights of third parties, nor determining whether commercialising your products/services might infringe those IP rights. So, it doesn’t provide a clear picture of your FTO status.
As a result, you could be granted a patent for a technology while simultaneously infringing someone else’s active patent on a similar or even identical technology, for example.
Your FTO position therefore requires dedicated searching and consideration separate from securing your own IP rights. It’s something you need to monitor regularly, especially when launching new products or entering new markets. Conflating these two issues can have very expensive consequences, like having to comply with demands of an aggrieved third party, undergoing an expensive redesign or retooling, or withdrawing from a market entirely.
So how do you avoid this?
Developing a thorough FTO strategy encompasses the following elements:
- Perform comprehensive initial FTO searches to identify any potential FTO risks (3rd party IP rights) from major known (and unknown) competitors. These initial searches should focus on:
- Screening relevant technology or goods/services classes in your area of operation, as well as adjacent or related classes.
- Searching broadly and without bias toward specific IP owners or applicants, i.e., not limiting to known competitors, but also conducting focused searches on key known players when appropriate.
- Searching in currently relevant jurisdictions, as well jurisdictions that may become relevant in the next 2-3 years.
- Searching for IP rights relevant not only to your product, but also methods of manufacture, assembly, and delivery of services/goods, i.e., the logistics crucial to ability to scale.
- After that, establish a regular FTO ‘top-up’ search that updates your FTO position every few months or every quarter. This essentially involves re-running the same searches as above, but only for IP rights published since the initial search, allowing you to stay on top of known and emerging FTO risks.
Where any relevant FTO risks are identified, ensure you understand how it can impact your product offering, whether the scope of the FTO risk is variable/can still change and plan potential workarounds.
Establishing an FTO strategy does not need to be expensive, and you can ask your IP attorney to scale the above strategy based on your current budget and risk tolerance. However, not having any FTO strategy can be incredibly costly down the line, think smashing into a stranger’s supercar without third party car insurance of your own… not a fun adventure!
Mistake #4 – Failing to Establish Ownership as and When IP is Created
Collaboration is an inevitable reality, and sometimes necessity, for any innovative venture or SME.
Many businesses often rely on external contractors, consultants, co-founders, employees and business partnerships to develop their suite of offerings.
However, contracts end, co-founders and employees leave, and collaborators or partners change directions. While these events are par for the course in the business world, they can turn into enormous headaches if IP ownership and assignment was not handled appropriately and exhaustively, i.e., prior to a departure, as and when the IP was actually created.
Fast forward months or years, and this can mean chasing the signatures of ex-employees now in different companies or even countries to establish legal ownership of your IP.
These exes of old may at times be at best apathetic to your email pleas, completely unreachable, or at worst, aim to act in bad faith or leverage the situation for their own benefit.
If you can’t establish a clean chain of title/ownership, you don’t own your IP.
You then can’t legally sell it (to an acquirer), licence it, or enforce it – making years of IP expenditure and R&D, if not your entire business, completely redundant.
So how do you avoid this?
Developing a healthy chain of title involves:
- keeping an up-to-date record of all parties who may be significantly contributing to the development of a product, including employees of businesses outside your own
- ensuring that all potentially contributing parties exhaustively assign their IP rights in relation to the product/project, to your company, by way of dedicated IP assignment (separately from, and irrespective of any other contracts i.e., NDAs, employment contracts, project agreements etc.)
- establishing a procedure for signing dedicated IP assignments at the commencement of a relationship or new project (ideally), or at the least before the relationship or project ends
Of course, another key factor is maintaining a positive relationship with parties even after a project ends, so that in a worst-case scenario of having to chase signatures, you can trust they will receive your requests amicably and respond in a timely manner.
No relationship is permanent, except maybe the one with your mortgage provider … don’t make the mistake of letting your IP ownership fall into disarray.
The Common Theme – A Lack of IP Education
It may be obvious at this point that all of these mistakes involve either a lack of awareness or incorrectly held beliefs about how IP works – oftentimes both.
The best remedy is to develop a bit of IP sophistication and education amongst key members of your team.
You can’t know everything or be everywhere at once, however, developing a sound initial grasp of IP systems and concepts can give you a massive competitive advantage compared to similar new ventures in your space.
What’s more, you’ll then only need to gradually refine your understanding over time, to keep your books in order. A lot of IP firms regularly publish educational content on their blogs and social media, and some IP attorneys may offer bespoke educational seminars for your team.
Staying informed can go a long way in cultivating a robust IP position that helps your business thrive in the near future and beyond!
If you have any questions about the information in this article, feel free to reach out to the author or another member of the team at MBIP for all your IP service needs!
