Five things every new business needs to know about protecting intellectual property

By Dan Pearce, Holding Redlich partner; Emily Booth, Holding Redlich partner; Madeleine Stevens, Holding Redlich lawyer; and Seamus Herrick, Holding Redlich graduate.

The early stages of a business can be a minefield. But you can avoid potential battles later on by considering at least these five intellectual property essentials and common misconceptions about them.

Five key considerations for protecting intellectual property

1. Signed non-disclosure agreements are not always practical.
2. Patents are commonly misunderstood.
3. Trademarks are king.
4. The good news is copyright protection is a given.
5. Don’t assume you will own the intellectual property without a contract.

1. Signed non-disclosure agreements are not always practical

As lawyers, we generally prefer to see the person you are discussing your confidential information with sign a non-disclosure agreement. This will make it clear that the parties agreed what information was confidential and that it was intended not to be further disclosed. If the other party then breaks this agreement, the breach will be much easier to enforce. However, founding a new business is not always conducive to such formalities.

Think creatively about how you could draw the other party’s attention to the confidential nature of the information – there might be terms agreed to electronically if giving an online demonstration of your product for instance. Or if asking for a signed agreement, electronically or otherwise, won’t be practical, at least make sure that all information physically shown to a third party has a confidential watermark or verbally draw the person’s attention to this fact, then make a note of this interaction.

At law, in the absence of a signed agreement, what ultimately needs to be shown is that the recipient should have known that the information disclosed implied a duty on that person to keep it confidential. A signed agreement is preferable but if a signed agreement is not realistic commercially, look at other ways you can draw the person’s attention to this fact.

2. Patents are commonly misunderstood

Patents are often confused with other types of intellectual property and people often do not realise that to obtain a patent, your idea must be a new and inventive device, substance, method or process. Meeting the inventive step is difficult and, for instance, software codes may not meet this step as often as people think. A patent or design registration will however give you a very powerful right to enforce in your intellectual property for up to 20 years. The registration process does, however, need to be commenced early on and can be a costly and time-consuming exercise.

3. Trademarks are king

Trademarks can give you the exclusive right to use your brand name or logo in respect of the goods and services you sell. Trademarks can be registered fairly inexpensively and registration carries with it the goodwill and reputation of the business, which becomes more valuable as the business grows. It is much harder to enforce rights in an unregistered trademark.

The best trademarks are memorable, clever or catchy words or distinctive logos. Avoid descriptive words because a trademark is unlikely to obtain registration if it does not distinguish your product or service but merely describes what it is. Equally, while the word ‘apple’ would not be able to be registered in the class of goods that covers fruit it was able to be registered for computer products.

4. The good news is copyright protection is a given

Copyright is an automatic right that subsists in creative works, for example, musical, dramatic, literary and artistic works. Importantly, it will usually protect software code, as it is written. In Australia, you do not need to register your copyright interests. There is no copyright in an idea itself; the rights are enforceable upon the idea being reduced to a material form. So always ensure that the material (for example, written code) is dated and documented. Copyright can be assigned and licensed and is a valuable commodity that covers the ‘look and feel’ of your idea.

5. Don’t assume you will own the intellectual property without a contract

Be aware that in almost all cases, copyright in a creative work (such as code or a logo you pay a developer to create) will remain with the author, regardless of whether you commissioned the work. Therefore where a contractor has been retained to produce material that attracts copyright protection, ensure that there are the relevant assignments in the contract to ensure you own all the rights you paid to have created.

Many arrangements with service providers will be informal arrangements, particularly at the start of a project. Document these arrangements as best as you can to avoid issues and disputes down the track. Include clear provisions with respect to who owns the IP, particularly in the case of an independent contractor providing services, or between partners. Employers will own the IP in the material created by employees in the course of their employment, but the tests of who is an employee and what is in the course of employment are not straightforward and need to be examined for many reasons (not just IP alone).

Finally, if you are licensing IP you should consider if you have the right to transfer whatever you are licensing to third parties down the track and review the terms of the licence carefully. These clauses will often not come back to bite until there is a dispute over IP that has become incredibly valuable to a business, and importantly may affect any sale or valuation of your business when it comes time to cash in on your IP.

Every business is different and so each business’ IP strategy will also be different. The above is just a taste of the issues that could become relevant.

This article was originally published on November 22, 2015.

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