For most tech startups, the real asset is not a sleek office or shiny gadgets; it is intellectual property (IP). Your code, brand, and ideas are the foundation of value. But if you don't secure ownership, that foundation can collapse overnight.
Too many founders discover this the hard way, battling co-founders in court over who owns what, or losing investors because the company doesn't legally control its own IP.
In this edition, we break down how to lock down your IP from Day 1, sidestep costly mistakes, and position your startup for growth and investment.
What Types of IP Do Startups Typically Own?
- Copyright: Covers creative works like source code, app designs, website content, marketing materials, and videos. In most countries, copyright protection arises automatically once the work is created, though registration with the relevant authority can strengthen your legal position.
- Trademark: These protect the unique identifiers of your brand (i.e., names, logos, taglines, colours, or even sounds). For example, the Nokia ringtone is a registered trademark in several countries. Unlike copyright, trademarks generally must be registered with the appropriate national or regional trademark office to be enforceable.
- Patents & Industrial Designs: Patents protect new inventions (such as technical solutions or processes), while industrial designs protect the look-and-feel or aesthetic features of products. For instance, Apple holds design patents over elements of the iPhone's appearance. To be enforceable, these rights must be registered with the relevant patent and design office in each jurisdiction.
- Trade Secrets: These are your "secret sauce" — confidential business information such as algorithms, customer lists, or proprietary processes that give you an edge. Unlike patents or trademarks, trade secrets don't require registration. Instead, they are protected through internal security measures and legal tools like Non-Disclosure Agreements (NDAs) or confidentiality clauses in contracts.
Common pitfalls startups face when it comes to IP ownership
- Issues around IP Registration
- Delaying Registration: Many founders think they'll register their IP "later." The risk? Someone else beats you to it, forcing an expensive rebrand. For example, Fastest Cakes in Ibadan, Nigeria, was delisted by the Corporate Affairs Commission (CAC) after another company had already trademarked the phrase "fastest cakes."
- Incomplete Coverage: Registering your trademark in only one class leaves gaps. Your brand might still be vulnerable in other categories tied to your business. The dispute between Zap Africa and Zap by Paystack shows how limited coverage can create costly conflicts.
- Assuming Local Rights apply Globally: A Nigerian trademark does not protect you in Ghana, Kenya, or the UK. Startups with regional or international ambitions often discover too late that someone else has registered their brand in target markets.
- DIY Gone Wrong: Relying on friends, "agents," or online shortcuts to file registrations often leads to errors in ownership, scope, or validity. Founders sometimes find that their trademarks are registered in an individual's name instead of the company's, complicating future investment or exit plans.
- Ignoring Renewals: Trademark protection isn't "once and done." Many startups forget to track renewal timelines, leading to accidental lapses that open the door for competitors to take over their marks.
- Weak Founders' Agreements
Many startups collapse not because the idea was bad, but because the co-founders never agreed on who owned what. The first rule is never to leave anything to memory. A solid Founders' Agreement can save you a ton of stress. It would clearly spell out what each co-founder brought to the table at the start of the company and what each co-founder gets in return for their IP.
Pro tip: Make sure all co-founders transfer ownership of every idea and piece of IP they develop to the company. If one co-founder walks away without transferring theirs, your startup could lose its core assets. This is bad for business, even worse for fundraising.
- Skipping IP Assignments with Contractors
By default, independent contractors and freelancers usually own the intellectual property they create unless a contract assigns it to the company. For employees, many jurisdictions presume that IP created in the course of employment belongs to the employer, but clear contracts are still essential to avoid disputes. Without clear IP assignment clauses, your startup risks losing control of code, designs, or content it paid for.
It doesn't stop there. Even client contributions can create complications. Your terms of service should make it clear that feedback, feature suggestions, or ideas shared while using your product are owned by your company.
- Poor Brand Monitoring
Spotting infringement early can save your startup from costly battles later. Many early-stage founders assume that enforcing IP rights is too expensive, so they ignore infringements until it is too late. By then, the other party may have built a stronger legal claim.
The reality is that enforcement does not always mean a drawn-out lawsuit. Often, a well-drafted Cease and Desist letter from your legal team is enough to stop the infringement. Allowing competitors or bigger brands to freely use your IP weakens your position and erodes your value. Protecting your brand is not optional; it is an investment in your startup's future.
Best Practices to adopt from Day 1
- Incorporate your startup early– Register your startup as a Limited Liability Company. This gives your business its own legal identity, allowing the company (not individual founders) to own and protect its IP from the start.
- Lock it down with a Founders' Agreement– Get your co-founders to sign a robust Founder's Agreement or IP transfer agreement. Make sure your startup legally owns all ideas and IP.
- Register core IP quickly– Don't wait. Depending on the type of IP, valid claims of ownership might critically depend on registration.
- IP assignments for everyone– whether it is employees, contractors, or freelancers, ensure they sign agreements that transfer any IP they create to your startup. Where necessary, use Non-Disclosure and Non-Circumvention Agreements to protect trade secrets and sensitive ideas.
- Set clear internal policies– Define IP ownership protocols during engagement and following founders or staff exit.
Conclusion
Every startup starts with an idea. That idea becomes a key IP asset
driving growth and taking the startup global. Securing ownership of
your startup's IP is mission-critical. You do not have to learn
the hard way.
What's the biggest IP mistake you've seen startups make?
To view original Tope Adebayo article, please click here.
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.
