For tech startups, the most valuable assets are often invisible. While businesses have traditionally been built on physical resources, the modern economy is increasingly driven by intangible assets. The chip company Arm, for example, made money a valuation of $40 billion and a reputation as the UK’s leading technology company – although it never made a single chip. Instead, the company designs the processor architecture used in countless devices.
This intellectual property based business model changed the stock markets. While less than a third of all assets in the S&P 500 were classified as intangible in 1985, by 2020 that proportion had risen around 90%. However, startups can overlook IP protection in their initial plans.
According to Robert Lind, a patent attorney at IP law firm Marks & Clerk, they are taking a big risk. Lind wrote recently an e-book how to protect and monetize their intellectual property. He shared his top tips with TNW.
1. Start your research as soon as possible
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According to Lind, tech companies often neglect intellectual property until their business faces creative and financial jeopardy. He advises them to start researching before you really need it.
Of course, Lind suggests that her study material includes his e-book. But he doesn’t recommend relying on professional advisors at every turn.
“Arm yourself with the knowledge from the start so you know when to call in experts and when not,” says Lind.
For tech startups, patents are the primary form of intellectual property that can be protected. Founders should educate themselves about what a patent is, how to obtain one, how to enforce it, and how third-party patents can be interpreted.
2. Keep it confidential
It should go without saying that your brilliant idea should remain private, but that’s easier said than done.
“An IPO isn’t just about 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 have decided if something is patentable.”
3. Carefully identify your innovations
Innovations are the lifeblood of patents, but they are not always easy to identify. Many researchers and engineers are unaware that their work could be valuable intellectual property.
“It’s very important that you have regular internal reviews and milestones in your project plans to check what innovations have been made and whether or not they should be patented,” says Lind.
Lind spent 24 years as a patent attorney at Marks & Clerk. He graduated from Glasgow University with a BEng in Electrical Engineering and Electronics and went on to do a PhD in Bioelectronics.
Once you have identified an asset, you can get professional advice on whether or not you could patent it.
4. Protect your rights
Experienced investors know the value of intellectual property. Venture capitalists will use patents as evidence that a company is well run, at a certain stage of development and has a niche in the market. Your duty of care will likely differentiate between filing an application and receiving a granted patent.
However, startups often prioritize investments in research and development over protecting their intellectual property. Lind recalls this problem encountered 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 of your research and development work,” says Lind.
5. Develop a clear IP strategy
An IP strategy should start with clear goals. Broadly speaking, this means maximizing value at a desired exit or investment point while staying within the limits of financial prudence.
Registered rights are territorial, so you need to indicate where you need to register your IP assets. This analysis can include the area’s size, potential, cost and effectiveness.
A prudent strategy can defer costs and obligations, but keep in mind that the registration process can be slow. To avoid delays, file early in key areas, respond quickly to objections, and seize opportunities to discuss issues with patent examiners. Careful cost forecasting and budgeting will help cover any pitfalls that may arise.
“You should be quite aggressive in your strategy,” says Lind. “But if you don’t know where you’re going from the start, you probably won’t get anywhere useful.”
6. Assign your IP to your company – and the future
You must ensure that your IP is associated with the technology you are able to sell. According to Lind, it’s surprisingly easy to get patents that don’t line up with your most valuable assets.
“Make sure your patents actually cover the efficient and clever parts – that’s very important,” he says.
The e-book is available as a free download from the Marks & Clerk website.
Your intellectual property should also be future-proof, as the end product can vary wildly from 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 is already selling a consumer product, its IP could also be integrated into various other devices or apps.
“Make sure your intellectual property is broad enough to cover not just what you’re doing now, but what you’re doing in the future,” suggests Lind.
7. Keep building your portfolio
Lind advises startups to look beyond the first few patents for their big idea. After all, each patent only lasts 20 years.
“A slow-burn startup might take 10 years to bring their product to market, which leaves them with only 10 years to patent,” says Lind. “They have to keep innovating and keeping patenting so they can keep that pipeline going.”
8. Solve your ownership problems
Collaboration among employees can be critical to intellectual property registration. Signatures of inventors, designers, directors, and owners may all be required on legal documents. If you don’t get a name on the dotted line, you could be in big trouble.
To avoid this fate, Lind recommends getting the necessary agreements while everyone is happy and cooperating.
“Make sure you clear all ownership and keep proper records throughout the process,” he says. “And do it while everyone is still friends — and before you start making any money.”
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