Brodies: lock up your IP to secure deals investment
Think of any successful business and you’ll probably jump first to those that have a strong brand or portfolio of intellectual property rights that has helped make them successful. Whether it be Apple, Google, or – closer to home – Skyscanner, a large part of their value is built on IP.
In many businesses, IP will be a key asset that investors look for, whether it’s your brand name, technology you have developed, or the “secret sauce” that makes your business different.
For online businesses, brand is even more important. Anyone can build a website for letting and booking short-term accommodation or getting a takeaway delivered from a local restaurant, but Airbnb and Deliveroo are successful because they have invested aggressively in building their presence and brand. The impact of that brand strength can be easily witnessed when people commonly refer to “booking an Airbnb”, or “getting a Deliveroo” for dinner.
Main types of IP
Unregistered rights arise automatically upon creation. Registered rights are subject to a formal application process and must satisfy set criteria to be registered. They are granted by national or supranational registries, for example, the Intellectual Property Office in the UK. Some IP is only protected for a set period of time. Other rights can continue forever.
The main types of IP include:
- Trade marks – they protect the identification of the source of a product or brand. Business names and logos are the most common form. While some rights can arise automatically through the generation of goodwill, registered trade mark protection provides holders with much stronger rights against third parties.
- Copyright – they protect the expression of an idea (but not the idea itself). For example, website content and computer code, text, audio or film recordings.
- Design rights – they protect the appearance of a product (including its shape, features, pattern or designs).
- Patents – they protect inventions. The invention must be new and capable of industrial application.
- Rights in databases – they protect certain rights in relation to databases.
- Confidential information and trade secrets.
Get ownership of your IP
When considering new ideas, branding or designs, ensure you document everything and ensure confidentiality agreements are in place with anyone who has knowledge of the idea.
It is also worth considering the IP rights of others – investment should be made in proper clearance searches to check whether there are any existing rights that are identical or similar. Think about the sort of checks investors will make when considering investing in your business.
IP is generally owned by the person who creates it. If that person is an employee, then the standard position is usually that it will belong to the employer. However, where a third-party consultant or company is hired to create on your behalf, ownership of those IP rights won’t transfer unless there is a written agreement in place.Top five recommendations
- Ensure that everyone involved in the business and developing IP is either engaged under a contract of employment, with detailed IP provisions, or have entered into a written assignation of the IP they create.
- Carry out appropriate searches in key territories before choosing your trading name, brand or logo. If you don’t do this, and your brand infringes a third party, you may incur the costs of an expensive rebrand – and possibly be liable for damages.
- Use a non-disclosure agreement (NDA) when sharing confidential or proprietary information with third parties. But don’t just rely on the NDA, share only what is necessary and make sure you are comfortable doing so with that third party.
- If your business is developing anything potentially patentable, keep it entirely confidential and engage a patent agent to obtain advice on its patentability.
- When using third party IP, obtain an appropriate licence. Think about what rights you will need. How will you use that IP? How dependant is your business on it? If it is core to your business, you don’t want the third party being able to terminate it at will.
Finally, maintain clear records of the IP you develop and intend to use. Doing so makes it much easier to take or defend infringement actions. It will also give potential investors comfort when they carry out their diligence on your business.
Martin Sloan is a partner at Brodies, specialising in IP, technology and data.