How to Sabotage Your IP Position – Part One
Whether it’s out of haste, budget pressure, poor guidance, or just not knowing what they don’t know, early missteps around intellectual property can have long-term and often irreversible consequences for startups and SMEs.
In part one of this guide, we summarise the first two of the five most common ways we’ve seen early-stage ventures and SMEs unknowingly sabotage their IP – together with the practices businesses can employ to avoid making the same mistakes and instead cultivate powerful and future-proof IP positions.
Mistake #1 – Approaching IP with a ‘fire and forget’ mindset
In the rush to get protection in place, many new ventures file IP rights, like patents or trade marks, as a box ticking exercise to appease advisors, board members and the like.
While getting protection early on is often critical, it’s equally important to realise that IP is not a static task to be completed once and then forgotten. IP needs to be viewed as a fluid value driver and risk management framework that should evolve with your business.
As a business grows and commercial scope begins to expand, team leaders must maintain active engagement with their IP position and strategy. It’s very easy to let IP take the back burner in view of product development, team scaling and sales – you know, the fun stuff.
However, treat your IP rights as a liability and they will become one, draining your resources while becoming completely misaligned with your business model and technology. Rather dangerously, this misalignment and resource drain often takes place slowly in the background while giving you a false sense of security … a disastrous recipe during funding rounds, due diligence and any market expansion!
So how do you avoid this?
Stop treating IP as an afterthought and instead view it as another core business function that needs a dedicated manager and regular attention. In particular, assign a team member the role of delegating time every quarter to:
Perform internal IP audits by checking that:
- any IP rights you’ve filed are actually pursuing your current or near-future commercial offerings,
- any contractors, consultants, collaborators and employees have exhaustively assigned their IP rights to the business (more on this in Part Two),
- any R&D or trialling of products/tech relating to IP you have not yet filed protection for, isn’t being performed in a way that could be considered public disclosure or an offer for sale,
- Check competitor activity by:
- performing general online web searching (i.e., on social media, LinkedIn, Google, online publications in your field etc) to ascertain key competitor’s future plans,
- performing up to date freedom-to-operate (FTO) searching on any IP rights filed in your jurisdictions of interest,
Call/meet with your IP attorney(s) and update them on:
- your current and future commercial plans, especially any planned expansions into new markets/countries,
- any notable competitor activity, and
- any partnerships or collaborations that involve potentially developing new IP.
Delegating just a few hours every quarter for the above can help develop an incredibly robust IP position for your business, as well as provide powerful leverage over most competitors who barely implement any of these practices, once a year, if ever.
Mistake #2 – Not Being Able to Communicate Your IP Position with Confidence
Many businesses incorrectly assume their IP attorneys can respond to any tricky IP questions from third parties (investors etc), on their behalf.
However, legal professionals, such as lawyers or patent and trade mark attorneys, are typically bound by ‘client attorney’ privilege. Avid watchers of law and true crime dramas may be familiar with the concept, which basically means that your attorney is required to keep anything you (the client) tell them confidential.
However, this works both ways. If you or the attorney (in some circumstances) disclose certain information to third parties outside of the client-attorney relationship, you risk potentially waiving that privilege. Waiver of privilege can be detrimental in a number of scenarios, especially to the legal professional, and is a topic in its own right that extends beyond the scope of this guide.
However, what you need to know is that the ability to appropriately communicate key aspects of your IP position can be a critical skill, because:
- your IP attorney may not be able to disclose certain information to third parties, or at the least not in a timely manner given the many angles that they might need to consider regarding privilege, and
- if you need to disclose aspects of your IP position to third parties, you must do it with a balance of confidence, so that you can alleviate key concerns, but also prudence, so that you don’t disclose certain sensitive information and risk waiving privilege in respect of that information.
This becomes more important during time-sensitive due diligence scenarios, where floundering or appearing uncertain or unable to answer key IP questions can quickly lose confidence in interested parties, or even jeopardize a deal entirely.
So how do you avoid this?
IP education – the best way to develop confident and strategic communication is to learn about IP from a technical point of view, and how those technicalities relate to your business.
You should therefore invest into IP education and training for your team leaders (via either free online resources, or ideally via tailored training sessions prepared by your IP attorney) so that you can each confidently communicate:
- the type of IP rights or applications you have in place, including where they have been filed (e.g., provisional AU patent vs PCT international application vs standard US patent) as well as their current status (filed, under examination, granted, lapsed etc.) and expected registration/grant timelines,
- a general understanding of how prior art can be relevant to any filed IP rights, and how that could affect a third party interested in your business,
- a general understanding of how freedom-to-operate is relevant to your competitors’ and your own commercial activities, and how that could also affect a third party interested in your business.
Note this is not an exhaustive list of all IP considerations that may be relevant during, e.g., due diligence, nor is this list a suggestion that you should necessarily divulge this type of information at the drop of a hat, without first consulting with your IP attorney.
Rather, it is an example of the kind of information you should possess internally so that you can confidently field questions and have a productive conversation about your IP position – without appearing either overly open or naïve (raising red flags as to whether you’re adequately protected, informed or competent) or overly defensive and guarded (raising red flags as to potential issues being hidden from the third party).
A final note – if a third party pushes for you to divulge sensitive information (for example, the specifics of any FTO or validity risks), respectfully let them know you need to consult with your IP attorney first and do so immediately. Sophisticated investors should appreciate your savviness, and if they don’t, you probably won’t want to be working with them.
COMING NEXT IN PART TWO …
We hope you’ve enjoyed reading this first part of our guide on the most common IP mistakes we see early ventures make.
In the next part, we cover IP ownership issues, freedom-to-operate issues and more, so stay tuned for more high-value expertise on how to protect your IP position.
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!
