Pandemic start-ups… what you need to know about IP
One of the few positives that we can take from the pandemic is that it seemed to act as a catalyst for new businesses. If the world turning upside down gave you the push you needed to go it alone, then you’re probably now starting to think about the realities of building your new business, and one of it’s founding stones has to be its intellectual property.
IP normally accounts for around 80% of the value of a creative business, and so when you’re working out what to budget for, IP protection should be high up on your list. But why, I hear you ask, should this be a consideration for start-ups? Surely I can wait until I’m a household name before protecting my brand and shouldn’t I look at years of trading stats before deciding which design is best to protect?
Well, no. Unfortunately time is very much of the essence when it comes to IP and, in the context of trade marks and registered designs, this is particularly true.
A trade mark can protect your brand name or logo. It’s a particularly powerful IP right as it can be renewed indefinitely and only becomes vulnerable if you stop using it. However, the UK trade mark register is a busy place, even more so after Brexit, and third parties can block your trade mark application or make a claim against you if they already have a similar trade mark registered in relation to similar goods and services. This means that start-ups can trade under a particular name without realising, until it’s too late, that their name would be unregistrable. Even worse, their use of their name could ultimately result in a trade mark infringement claim being made against them. This often leads to a large legal bill and a complete rebrand, something that’s particularly painful after years of marketing.
Registered designs are also a brilliant IP right and, in the UK at least, cheaper to secure than a trade mark. They protect the 3D and 2D aspects of an article (e.g. a piece of furniture or some product packaging) and last for up to 25 years. However a registered design must be novel and there is only a 12 month “grace period” for filing a new design. What this means in practice is that if you have disclosed your new design publicly, such as on social media or at a trade show, you only have 12 months to register it. If you wait any longer, the registration will be invalid, meaning that you’ll be unable to enforce it against third parties. That 12 months can go pretty quickly when you’re building a business and getting good advice early is key.
So what else is important? Well, an often-overlooked IP right is copyright. This protects a range of works including illustrations, text and software code. It’s a particularly useful IP right in that it’s unregistered, meaning that it’s free to own and comes in to being as soon as an original work is created. However, a common mistake for start-ups is to assume that because you have paid a freelancer to create some work for you (e.g. a logo for your business or a new website), you own that work. It’s a reasonable assumption but it’s not legally accurate. Instead, copyright is owned by the author of a work, unless they’re an employee acting in the course of employment. Start-ups rarely have employees, given the financial commitment, and so using freelancers is commonplace. However it’s vital that if you use a freelancer you have them sign sort of freelancer agreement which deals with the assignment of the copyright they create. Only with a written agreement can the default ownership position be changed and it’s best to do this early on in the life of your business, as all too often we see large sums being charged for copyright assignments years after their creation.
Finally, and whilst we’re on the topics on agreements, do not forget the importance of a good contract. Contracts are designed to avoid disputes and so putting them place is always a good idea for a fledging business. Be it a Non-Disclosure Agreement of Manufacturing Agreement, get it in writing and get it signed.
In conclusion, whether you’re a Covid CEO or Endemic Entrepreneur you mustn’t neglect the value of your IP. It’s likely to be the first thing an investor or an eventual purchaser of your business will ask about and, if you’ve done the ground work, it’s the quickest route to an increased valuation.
Written by Will Miles, Partner