For tech startups, the most valuable assets are often invisible. While businesses were traditionally built on physical resources, the contemporary economy is increasingly driven by intangibles. The chip firm Arm, for instance, earned a $40 billion valuation and a reputation as the UK’s leading tech company — despite never manufacturing a single chip. Instead, the company designs the processor architecture that’s used in countless devices.
This intellectual property-based business model has transformed stock markets. In 1985, under a third of all assets in the S&P 500 were classed as intangible by 2020, that proportion had risen to around 90%. Startups, however, can overlook IP protection in their initial plans.
According to Robert Lind, a patent attorney at IP firm Marks & Clerk, they’re taking a major risk. Lind recently wrote an e-book on how to protect and monetize their intellectual property. He shared his top tips with TNW.
1. Start your research ASAP
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According to Lind, tech firms often neglect IP until their business is exposed to creative and financial peril. He advises them to start their research before they really need it.
Naturally, Lind suggests their study material includes his e-book. But he doesn’t recommend relying on professional advisors at every turn.
“Arm yourself with the knowledge at the outset, so you know when to bring in the experts — and when you don’t need to bring them in,” says Lind.
For tech startups, patents are the primary form of IP that can be protected. Founders should educate themselves on what a patent is, how to get them, how they’re enforced, and how third-party patents can be interpreted.
2. Keep it confidential
It should go without saying that your brilliant idea should be kept private, but that’s easier said than done.
“Going public doesn’t just mean selling a product,” says Lind. “It could mean presenting a conference paper, publishing an article in a journal, or putting some information on your website. Be very careful about publishing your ideas before you’ve taken a view on whether something’s patentable.”
3. Diligently identify your innovations
Innovations are the lifeblood of patents, but they’re not always easy to identify. Many researchers and engineers don’t realize that their work could be valuable IP.
“It’s very important that you have regular reviews internally and milestones in your project plans to consider what innovations have been made and whether or not they should be patented,” says Lind.
Once you’ve identified an asset, you can get professional advice on whether or not it’s something you could patent.
4. Protect your rights
Experienced investors are savvy about the value of IP. Venture capitalists will use patents as evidence that a company is well-managed, at a certain development stage, and with a market niche. Their due diligence will likely differentiate between filing an application and receiving a granted patent.
Startups, however, often prioritize investing in R&D over protecting their IP. Lind recalls this issue emerging at a green tech company. The team had a very slim IP portfolio, which raised questions about its value to investors.
“It’s the protection that really crystallizes the value in the R&D that you’re doing,” says Lind.
5. Devise a clear IP strategy
An IP strategy should begin with clear objectives. Broadly, this will involve maximizing value at a desired point of exit or investment, while remaining within the confines of financial prudency.
Registered rights are territorial, so you’ll need to identify where to register your IP assets. This analysis can incorporate the territory’s size, potential, costs, and effectiveness.
A cautious strategy can defer costs and commitments, but bear in mind that the registration process can be slow. To avoid delays, file early in the key territories, respond quickly to objections, and embrace opportunities to discuss issues with patent examiners. Careful cost forecasting and budgeting will help cover any pitfalls that emerge.
“You should pursue your strategy quite aggressively,” says Lind. “But unless you know where you want to get to at the start, you’re probably not going to get anywhere useful.”
6. Map your IP to your business — and the future
You need to make sure your IP maps to the tech you can sell. According to Lind, it’s surprisingly easy to get patents granted that don’t align with your most valuable assets.
“Make sure your patents actually cover what the efficient and clever parts are — that’s very important,” he says.
Your IP should also be future-proofed, as the end product can be very different to the original vision. One of Lind’s previous clients, DNANudge, raised $60 million after building a portfolio of patent rights with diverse potential. While the company already sells a consumer product, its IP could also be integrated into various other devices or apps.
“Make sure your IP is broad enough in scope to cover not just what you’re doing now but also what you’re doing in the future,” suggests Lind.
7. Keep building your portfolio
Lind advises startups to look beyond those first few patents for their big idea. After all, each patent only lasts for 20 years.
“A slow-burn startup might take 10 years to get its product to market, which only leaves them with 10 years left on the patent,” says Lind. “They’ve got to keep innovating and keep patenting so they can keep that pipeline going.”
8. Resolve your ownership issues
The cooperation of staff can be crucial to registering IP. Signatures from inventors, designers, directors, and owners may all be required on legal documents. If you can’t get a name on the dotted line, you could have major problems.
To escape this fate, Lind recommends obtaining the necessary agreements while everyone is happy and cooperating.
“Make sure you clear all that ownership up and keep proper records all the way through the process,” he says. “And do it while everybody’s still friends — and before you start making money.”