A great idea, its implementation, and the team members. These are typically the components, though not necessarily in that order, leading to a startup’s success and the elements which potential investors, whether VCs, angel investors or institutional investors, focus on. Whereas the idea (as a concept) cannot be patented and remains unprotected, what an enterprise investing in innovation, can and should do, is to take timely action to protect the second and third components, namely its intellectual property (IP) and the way it is disclosed, both inside and outside the enterprise. The documentation of IP rights and the choice of appropriate means of protection should be one of the main priorities of a startup, as soon as it is set up, rather than later before a potential funding.
There is a widespread perception in the Greek start up ecosystem that IP rights are limited to patents (for inventions and software, depending on the jurisdiction where protection is sought), copyright (for software and literary and artistic works, etc.), and trademark (for the company’s brand and products). Nevertheless, other forms of IP, including algorithms, methods, know-how, industrial designs, databases and their processing, are also of equally important added value. Nearly anything with business value that is not disclosed to third parties may constitute intellectual property and, for that reason, a value driver for enterprises, especially for startups. The manner, timing and territorial protection of these assets, need to be considered in the context of the broader business plan, and not in a fragmented and occasional way, , and should constitute an integral part of a startup’s business plan.
For instance, certain IP rights may be better secured as trade secrets, therefore not disclosed to the public and not subject to time restrictions or monopolization, risking, however, their concurrent and independent development by competitors. Conversely, it is preferable to disclose other IP rights to the public, with the prospect of acquiring exclusive proprietary rights, but at the same time triggering both the start of their time limitation and the challenge (“invitation”) to competitors to further improve them and eventually make them obsolete.
An additional common perception is that the above issues do not concern the members of a startup at the outset, but rather at a later stage when the form of the product/service or even the very scope of the business has been crystallised. This approach may prove highly problematic particularly when a partner, or even worse a founding member, leaves the team, and concerns relating to the proprietorship and the prevention of disclosing IP to third parties arise. In such cases, timely contractual provision of rights and obligations, by means of confidentiality and assignment agreements, with any party having the slightest access to the company’s IP, from the founders to the most occasional partner or supplier, is essential for the financing and growth of a startup. Needless to say that, besides the substantive issues , no investor would be willing to be confronted with such dispute and only find out, in the context of a legal due diligence or, worse, following an investment round, that no complete chain of ownership title of IP rights exists. Particular attention is required in cases where, at the very beginning, the founding members of a startup work simultaneously for another employer and the issue of the employer’s rights on the outcome of the innovation activity of the employee / start up founder is likely to arise.
These misconceptions and the relatively ‘lax’ approach to IP rights protection are also reflected in international indicators of innovation and inventive activity, where our country usually ranks disproportionately low in relation to the quality of its human capital. Therefore, the promotion of an IP rights protection strategy is not only crucial for startups themselves but is also inextricably linked to the advancement of innovation and the attraction of investment in the startup ecosystem.
© Logaras Law (2023). All contents on this website, including logos, trademarks, texts, newsletters and articles (hereinafter the “Contents”), are protected under intellectual property law. Except where otherwise stated, use, downloading, reproduction and distribution in whatever form and by whatever medium (including Internet) for whole or part of the Contents available on this website and newsletter is not authorized.