IP is the backbone of many tech companies. An emerging company can have valuable assets in its trade marks, patents, copyright or designs.
The value and importance of IP is exemplified by tech giants such as Apple, Samsung, Google and Oracle, and other IP-centric companies, such as Intel, Microsoft, Facebook and Amazon. Companies that proactively take steps to secure and protect their IP rights are afforded a competitive edge – it enables them to prevent and deter 'copycats', while also providing them with a valuable asset which can be licensed or sold.
Despite this, IP is not always a top priority for tech start-ups or emerging companies and an early IP dispute can quickly exhaust the resources of a fledgling start-up. Below, we discuss here the top three IP issues any tech start-up or new company should consider from the outset.
- Identify and seek IP protection early
The first step is to identify what IP is relevant and what steps need to be taken to protect it. The steps differ for each type of IP right:
- Trade marks and branding. The selection of a company brand name or the name of a new product should be the starting point for all new companies. A trade mark is a badge of origin – to be registrable, it must be capable of distinguishing a company's goods or services from those of another. Names or logos that are unrelated to a company's goods or services represent the 'gold standard'. Apple and Amazon are good examples of such trade marks. It is also important to remember that trade marks are more than just a name – in Australia, protection can be obtained for logos, colour, sound and shape marks (amongst other signs).
Before selecting a trade mark or branding, it is critical to consider the state of the market and any existing prior rights. This is a separate consideration to securing a company or business name. A trade mark search is a simple and effective way to ensure that your proposed name is new and available to use (i.e. will not infringe another person's trade mark).
- Patents and trade secrets. Patents protect new inventions. The registration of a patent gives the owner a right to exploit the invention (or allow others to do so) during the term of the patent. In Australia, there are two types of patents – standard and innovation patents. While standard patents provide the longest period of protection (20 years), the innovation patent is an attractive option for tech start-ups and emerging companies. With a lower inventive threshold requirement and the ability to obtain a patent very quickly (within as little as one month), the innovation patent is able to provide start-ups with 8 years of exclusivity. This, combined with the fact that innovation patents provide the same infringement remedies as standard patents and are not subject to a pre-grant opposition procedure, means that it is relatively straight forward for new or emerging companies to obtain a powerful enforcement tool.
However, the innovation patent system is on the way out. Legislation currently before the Senate – the IP Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019 (Cth) (Bill) – will (if passed) have the effect of abolishing the innovation patent. While there is a grace period of 12 months after the Bill receives royal assent to apply for innovation patents, the time to act is running short.
The alternative to patents is trade secrets (or confidential information). The two are mutually exclusive. As confidentiality underpins trade secrets, secrecy is essential.
Start-ups that wish to protect inventions by trade secrets should consider how this form of protection aligns with the company's business strategy. For start-ups with minimal capital, trade secrets may be an effective way to protect an invention prior to obtaining the necessary funding and investment to commercialise or test the invention.
Confidentiality is also critical for patents. The need to keep the invention private and out of the public domain before filing for a patent can be overlooked in the early stages of securing capital. Tech start-ups wishing to obtain patent protection should ensure that they have appropriate confidentiality or non-disclosure agreements in place before entering into funding discussions or presenting the new invention or technology to prospective customers.
- Copyright. Unlike patents or trade marks, there is no system of registration for copyright. Copyright protection is automatic once the work has been put into material form. The central tenant of copyright is that it protects the particular expression – copyright does not protect facts, information or ideas. To be protectable, copyright must be original and created by a human author. The human author requirement raises interesting questions in the tech space in light of the emergence of artificial intelligence and the increased reliance on algorithms and machine learning.
For tech start-ups, software and computer programs can attract copyright protection. While software is protectable as a 'literary work', any copyright in software code that is partly based on open source will need careful consideration as it raises questions as to whether the software code is original. Separately, copyright may also provide tech start-ups with the ability to protect user interfaces for digital technologies (i.e. on the basis that they are artistic works).
- Designs. Registered designs can be used to protect the visual features of the technology, but importantly not the technology itself. While designs are more frequently utilised in protecting the look of products (widgets), in the digital technology space, designs may provide start-ups with the ability to protect the graphical user interface of products.
- Ensure you own the IP rights
Once you have determined which IP rights to protect, the next step is to ensure that the right is owned by the correct entity. For many companies, the failure to execute proper agreements or obtain relevant assignments from inventors can result in protracted IP ownership disputes. Such headaches can be avoided by ensuring that your company has the proper agreements in place.
For tech start-ups, particular attention should be paid to the following issues:
- The terms of any contractual arrangements with third parties. For example, have any third party inventors assigned their IP rights to the company? Is the third party under an obligation of confidence or subject to a non-disclosure agreement?
- The scope of any assignment and rights to any developmental IP. For example, is the assignment limited to a particular technology or IP right (patent or copyright), or does it extend to the assignment of all future IP rights?
- As particular rights (and limitations) apply to jointly owned IP, special attention should be had to any arrangements that contemplate the co-ownership of IP. Co-ownership can also be difficult to navigate when the interest of co-owners cease to align.
- Tax implications arising from the transfer of IP between different entities.
- Think global
Finally, it is important to think beyond Australia. While many start-up companies are often focused on building the business locally, this can impact on the breadth of IP protection around the world. Copycats need not be located in Australia. This issue comes into sharp focus in the context of patents and trade marks.
Considering at the outset which countries your company may wish to enter will help ensure that the relevant protection is achieved as early as possible. For example, the filing of a patent via the Patent Cooperation Treaty (PCT) allows the patentee to seek protection in Australia, as well as numerous other countries. Engaging with patent advisors early about the global patent filing strategy is key to obtaining robust global protection.
Similarly, trade mark protection can be sought globally based on rights sought or obtained in Australia. The costs for such efforts can be spread across a longer period by making use of provisions that allow you to rely on an earlier Australian filing date for applications filed up to six months thereafter. This is also helpful in preventing what may otherwise be a costly and avoidable dispute in another country.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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