INTRODUCTION
In today's fast-paced and highly competitive business landscape, startups are often at the forefront of innovation, driving growth with fresh ideas and cutting-edge technologies. Many startup founders do not consider the need to protect their innovations and ideas during the initial stages of establishing the business. Often, this consideration is delayed until later stages of growth, making it more challenging to protect the startups and founder's intellectual property rights. This underscores the critical need to protect innovation from the outset. Understanding the nuances of intellectual property law is not just a legal necessity but a strategic imperative. For startup founders, taking important steps to safeguard their innovation from the beginning can determine the difference between success and failure, providing a competitive edge and securing the company's future. This article explores the importance of intellectual property for startups, highlights common pitfalls, and offers practical advice on how to navigate the complex world of Intellectual Property (IP) protection to ensure sustained growth and innovation.
UNDERSTANDING INTELLECTUAL PROPERTY AND STARTUPS
Intellectual Property refers to creations of the mind, such as inventions, literary and artistic works, designs and symbols, names and images used in commerce1. However, it can also refer to a generic term that describes creations of the intellect, for which the law grants exclusive rights of appropriation to the designated owners. For startups, below are some types of IP that are relevant:
1. Trademarks: A trademark is a mark used or proposed to be used in relation to goods or services for the purpose of indicating a connection between the goods or services and a person having the right, either as a proprietor or as a registered user, to use the mark, whether with or without any indication of the identity of that person, and may include the shape of goods, their packaging and a combination of colours. Trademarks serve as a form of IP protection, granting exclusive rights to use the mark and preventing others from using similar marks that could cause confusion among consumers. Registering a trademark offers significant benefits to a startup founder, as it provides exclusive rights to use the mark in connection with specific goods and services, thereby preventing competitors from using similar marks that could dilute the brand and confuse consumers. Additionally, trademark registration enhances market presence; a distinctive and well-protected trademark can lead to increased visibility for the startup and create a sense of trust and reliability amongst consumers, as they will associate the trademark with the value and quality it represents.
It is important to note that as the startup grows and expands, it becomes essential to consider international trademark registration as protecting the trademark beyond national borders can help secure the brand's reputation in foreign markets. International trademark registration can be achieved through various mechanisms, including regional trademark systems and individual country registrations2. However, even upon securing a trademark registration, startups must implement measures to protect the value of their trademark, and such steps will include conducting marketplace monitoring for unauthorised use of the trademark and keeping a close eye on competitors, e-commerce platforms, social media platforms and other channels where the brand may be represented. Also, conducting ''IP Watches" to monitor new trademark applications to identify any potential conflicts or infringement activities. In the event of unauthorised use, startups can institute legal action to recover lost revenue resulting from such use and deter future occurrences3.
2. Patents: A patent is an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something or offers a new technical solution to a problem4. For startups to avail themselves of this right, a patent must be formally registered if it is new, result from inventive activity and capable of industrial application. In addition, patent registration is in order if an activity constitutes an improvement upon a patented invention and is new, results from inventive activity and is industrially applicable5. Some inventions do not qualify for patents, such as plant and animal varieties, biological processes for the production of plants and animals and inventions that are contrary to public order, morality or scientific principles.6 It is therefore important for startups to secure patents for their innovations to prevent unauthorised use by competitors and to have legal recourse in case of infringements. Investors are likely to support startups that have innovations already patented. Also, having your innovation patented provides a possible source of capital for startups through outright sale (assignment) or licensing arrangements, that allow others to use the inventions for a fee. Startups may choose to assign or license only specific rights, such as granting a well-established entity the right to sell their products while excluding the rights to manufacture, import, or utilise such in any other manner. This enables startups to retain their manufacturing expertise and preserve their competitive edge.
Additionally, patented products are protected against reverse engineering, preventing other companies from replicating the relevant product. License agreements can explicitly address reverse engineering to ensure further protection. Once the startup becomes an established brand, it can terminate the licensing agreement, subject to terms, and take over the exclusive sale of its product. It is important to note that the registration system in Nigeria differs from that of other countries, as it does not follow the examination system used in some other jurisdictions. Patent applications are not thoroughly examined to determine if a similar patent for the same product has already been granted or if the patent satisfies the eligibility criteria. The test for patentability is usually left to the Courts to determine whether or not the registered patent complies with established requirements.
3. Copyright: This is a legal term used to describe the rights that creators have over their literary and artistic works. Works covered by copyright range from books, music, paintings, sculpture, and films to computer programs, databases, advertisements, maps and technical drawings7. The Nigerian Copyright Act 2022 covers various forms of creative works such as audio-visual, musical, literary and broadcast. As a startup owner, copyright protection also extends to website designs, web content, advertisement audios, videos and jingles, amongst other works that may be created. Computer programs can also be classified as literary works and are eligible for copyright protection. Such works are eligible for copyright protection where some effort has been expended on creating the work and such creation must have been expressed in a definite medium of expression8. As the copyright owner of a work, a person enjoys economic rights such as the exclusive right to reproduce, distribute and create derivative works, as well as moral rights like attribution and the right to prevent distortion of a work. However, the registration of such works is not mandatory, since when a work meets the eligibility requirement, it receives automatic protection. It is, however, highly advisable to register the works to serve as a public notice and provide certain rights to the copyright owner in the event of an infringement9.
4. Trade Secrets: According to the World Intellectual Property Organisation (WIPO), trade secrets are IP rights related to confidential information which may be sold or licensed. For a piece of information to qualify as commercially valuable because it is a secret, it must be known to a limited group of persons and be subject to reasonable steps taken by the rightful holder of the information to keep it secret, including the use of confidentiality agreements for business partners and employees. Trade Secrets can be protected through contracts such as non-disclosure agreements and non-compete agreements and violations can be addressed through legal actions such as breach of contract and misappropriation of trade secrets. As a startup owner, it is important to identify information that qualifies as a trade secret, such as customer lists, formulas, manufacturing processes, and other critical data that provide a competitive edge. Startups can take measures like collaborating with third parties, implementing confidentiality agreements with employees, contractors, and vendors, and ensuring appropriate non-disclosure and invention disclosure agreements are signed. Additionally, limit access to confidential information using secure storage drives, document management systems, and password-protected files, require departing employees to return company materials upon termination and immediately revoke their access to company information, such as emails and accounts.
It is important to note that trade secrets only protect the startup from unauthorised use of the confidential information in a manner contrary to honest commercial practices but there is no protection if the information is acquired through another means such as independent development or reverse engineering by others or inadvertent disclosure of confidential information because steps were not taken to keep the information secret10.
INTELLECTUAL PROPERTY CHALLENGES AND HOW STARTUPS CAN AVOID COMMON PITFLLS
Startups, driven by innovation and rapid growth, often encounter several IP challenges that can hinder their progress. Some of these challenges include financial constraints, delays in IP registration, and vulnerability to IP infringements. To protect their key assets, startups should be mindful of the following strategies to avoid common pitfalls including:
1. Financial Constraints: Startups often operate on tight budgets, which can lead to delays in securing IP rights. Prioritising other business expenses, such as product development or marketing, over IP protection can result in inadequate safeguarding of their innovation. These delays increase the risk of third-party infringements. Therefore, startups must allocate sufficient resources for early IP protection to prevent potential losses.
2. Timely Registration and Maintenance of Intellectual Property: Startups should file their IP protection applications as early as possible. Delays in registration can result in missed opportunities, especially if competitors file similar IP claims first. After securing IP rights, startups must monitor renewal deadlines and ensure compliance with maintenance requirements. Failure to renew or update IP registration can lead to the loss of rights and revenue.
3. Vigilance Against Infringement: Once IP is registered, startups should regularly monitor their industry for potential infringements, such as unauthorised use of their patents, trademarks, or copyrights. Early detection allows for swift legal action to protect their rights. When infringements are identified, startups should not hesitate to enforce their IP rights through cease-and-desist letters, legal proceedings, or settlements.
4. Professional Advice: Many startup founders focus on raising funds and product development, neglecting the critical role of IP protection in securing their innovation. Startups should engage the services of an experienced IP lawyer at the initial stage to ensure that their IP strategy is robust, compliant with relevant laws, and tailored to the business's specific needs. An IP lawyer can provide strategic advice on global IP protection, licensing agreements, and potential IP disputes, helping to avoid costly mistakes down the line.
CONCLUSION
In conclusion, the protection of IP by a startup is pivotal to its future success or failure. For a startup to survive, thrive, and compete globally in the long run, it must prioritise the protection of its intellectual property. Investors value security and are more likely to be attracted to startups with a well-developed IP strategy from the founding stage. As a result, protecting innovation should be a priority from the very initial stages of establishing an enterprise.
Footnotes
1. https://www.wipo.int/about-ip/en/
2. https://www.pitchdrive.com/academy/the-importance-of-trademarks-safeguarding-your-startup-identity
3. https://www.mondaq.com/nigeria/trademark/1375970/intellectual-property-considerations-for-startups-in-nigeria
4. https://www.wipo.int/web/patents
5. Section 1 of the Patents and Designs Act
6. Section 4 of the Patents and Designs Act.
7. https://www.wipo.int/copyright/en/
8. Section 2 of the Copyright Act 2022
9.See sections 43 and 87(4) of the Copyright Act 2022
10. https://www.wipo.int/tradesecrets/en/protection.html
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.
