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How Startups and SMBs Can Craft an IP Protection Strategy That Works

Chris Porteous
Chris Porteous
Co-founder and CEO at Framestr

Small business owners can develop a sound IP strategy when they leverage the right types of internal protections and external controls. Here are five steps to get started.

These days, many startups and small businesses make their money from innovations they've developed to disrupt existing markets. And for that reason, they also have a big, invisible target painted on their backs. Why? They represent a threat to their more established, often larger competitors.

That's why they need to take steps to establish a comprehensiveintellectual property (IP) strategy to protect their most valuable assets in the earliest stages of development. The challenge is that startups and small businesses don't always have the resources to use every possible kind of IP protection available.

However, small business owners can do a decent job of protecting themselves if they know how to create an IP strategy that leverages the right types of internal protections and external controls. To help businesses protect their valuable IP from theft and misappropriation, here's a step-by-step guide to creating a multifaceted and effective IP protection strategy:

1. Identify and catalog existing intellectual property.

Before a business can act to protect its IP, it must first know what IP it has to protect. Although this might seem obvious, it's a step that many startups and small businesses either get wrong or fail to do entirely. This isn't because they're not trying, however. It's because the very concept of intellectual property can seem vague and elusive.

According to the World Intellectual Property Organization, the term is defined as: "Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names, and images used in commerce." And by that definition, nearly everything a business creates can be a form of IP. But for the purposes of an IP strategy, the important things fall under four categories of protection are:

  • Trademarks: Visuals that identify a business's brand, products, or services

  • Patents: Inventions or innovations that are the work of the business, its employees or assignees

  • Copyrights: Protection for artistic visual or auditory works, software, and other reproducible products

  • Trade Secrets: Economically valuable ideas, processes, and research data

At this stage, it's more important to try and document as many instances of IP as possible. If there's any confusion over what is or isn't IP, questionable items may be documented separately for later clarification.

2. Set IP protection priorities.

Once there's a clear picture of what IP the business needs to protect, the next step is to determine what IP is most deserving of protection. This is necessary, because most startups and small businesses have budgetary constraints that limit how much formal IP protection they can afford to protect. And because IP attorneys are among the highest paid in their field, this step is necessary to use their resources wisely.

The simplest rule of thumb to follow at this stage is to first sort the business's IP into two categories: revenue-producing and passive. Next, sort the revenue-producing list into an order that reflects the ongoing development stages of the business. In other words, the first IP to target should be what's valuable to the business right now, followed by things that will have greater value later on.

3. Add IP and confidentiality clauses to employment agreements.

Although it's not pleasant to think about, a business's IP is most likely to be stolen by an insider or a former employee. Even when it's not deliberate, many cases of IP misappropriation arise from improper disclosures by authorized employees or business partners. In that light, it's a must for businesses to codify employee responsibilities regarding confidentiality and IP protection right in their employment agreements.

Here again, however, businesses have to rely on experienced HR professionals and attorneys qualified in labor law to craft provisions that are both comprehensive and enforceable. For a good start, though, there are voluminous samples available to use as a boilerplate, to be adapted to the business's specific circumstances. And beyond that clause, it's also vital to spell out ownership of the work employees produce within every employment contract.

Employment clauses surrounding IP are of limited use, simply because they rarely provide remedies that can make up for lost or compromised IP. But they at least provide the business with some recourse if an employee fails to live up to their obligations. And they also serve as a deterrent for employees who would try to steal their employer's IP.

4. Craft an IP ownership agreement for founders and principals.

In many cases, businesses launch based on preexisting IP that founders and principals bring with them into the venture. When that happens, they have the option of either transferring ownership of that IP to the business or retaining it themselves. Either way, it's an arrangement that needs to be spelled out in a binding legal agreement.

Most of the time, this happens at the time the business is incorporated. In some cases, due to inexperience or a lack of legal advice, it gets overlooked. In most cases, founders opt to transfer ownership of their IP to the business. And this is a step that's almost always required as a condition of investment by venture capital firms or other early-stage financial contributors.

5. Hire an IP lawyer to handle the required filings.

The final step is to find and hire an IP lawyer to act on the priorities decided earlier in the process. They'll know how and when to file for the correct legal protections needed for the company's critical IP. And if there are financial constraints involved, they'll make short work of confirming the order of operations the business has decided upon.

The good news is that having done so much preparatory work, the legal fees resulting from this process won't be as overwhelming as they otherwise would be. This is because the majority of IP lawyers expect they will be one who has to complete all of the previous steps. By doing the legwork themselves, business owners can maximize their limited resources by spending them only on getting the real legal protection their IP needs and deserves.

The bottom line here is that startups and small businesses have a vested interest in making sure that their valuable IP remains under their control and isn't exploited by anyone else for gain – monetary or otherwise. And although many put off doing it because they fear it's either too complex or too expensive, it's an effort that's absolutely worth making. By creating a multifaceted IP protection plan by following the steps outlined here, they have a viable path toward doing so.

What's more, this approach helps minimize the bottom-line impact that IP protection often carries with it. It delivers maximum bang-for-your-buck results. Using this strategy, every startup and small business can afford to keep their IP safe, and ensure that they'll continue to profit from it over the long term. And that's a pretty decent foundation to build upon for long-term success in crowded and often cutthroat markets.

Image Credit: Prostock-Studio / Getty Images
Chris Porteous
Chris Porteous
business.com Member
I'm a serial entrepreneur and owner of three internet ventures, including My SEO Sucks. A contributor to ZeroHedge, Entrepreneur.com, Forbes, Inc.com, and dozens of other media outlets, I believe in SEO as a product. I developed a proprietary technology fueling the #1 rankings of My SEO Sucks clients. In guest speaking ventures across North American, I advocate for organic search traffic as the backbone of any comprehensive digital marketing strategy.