You have just received the exciting news that your start-up has been accepted into a business accelerator program. There are many challenges ahead, and one of them is developing a strong intellectual property portfolio with limited funds. According to Graham, Merges, Samuelson, and Sichelman(1), 82% of VC backed start-ups had patent protection, and 97% of VC backed biotech start-ups had patent protection.
Many new businesses believe that patent or trademark protection is out of reach due to cost prohibitions, and so little effort is spent developing the portfolio. However, this can limit funding opportunities as many intellectual property issues are time sensitive and ignoring them at this critical time can have long-lasting downstream consequences. Further, even with a limited budget, there are actions that can set the company up for IP success.
Employment and Independent Contractor Agreements
One issue that can kill funding in the diligence review phase is the inability for a company to show ownership of intellectual property. Independent contractors and even employees can be the default owners of concepts they contribute, even when paid by the company. Make sure employment agreements and independent contractor agreements are utilized, and make sure they include assignment clauses clearly assigning all IP to the company. Be careful if you are hiring employees that may have non-compete clauses from their former employers.
Non-disclosure and Confidentiality Agreements
NDAs are a key tool for start-ups to use to make sure that discussions with potential partners, investors, etc., do not kill intellectual property rights out of the box. These agreements typically require parties to maintain confidentiality, but be careful that you use an agreement that protects your company. Some NDAs include assignment clauses so make sure to review these documents before signing.
Even if you do not file a single patent application while at the accelerator, that does not mean you can ignore your inventions. Instead, one important thing that can be developed is internal documentation showing your IP portfolio as a collection of disclosures, with documentation as to their technical benefits, their business value, the inventors, the date of conception, etc. This internal tracking can in some cases be even more valuable than actually filing a patent application. Investors understand that every patent has a weakness and so if there is a choice between a company with a single patent or a company with a whole list of documented inventions showing continual development and improvement, often a more robust potential portfolio is a safer investment. Also, internal tracking ensures that concepts are not lost along the development path.
The internal development of your intellectual property portfolio needs to recognize that not every idea will lead to a patent. The better practice is to document each concept, track its progress, prioritize the concepts in terms of the business impact and value, and then when funding is available utilize the process to select specific cases for filing. This approach shows a measured analysis with a business focus. Brainstorming meeting can be held to help gather concepts. Patent landscape analyses can be used to guide the brainstorming and identify areas of opportunity.
Business accelerators are a great opportunity for your business. Even with limited funding, you can use this time to develop your IP portfolio through internal tracking and properly utilize agreements to ensure that once funding is secured, there are ample opportunities for strong patent filings.
Technology Association of Oregon would like to offer our thanks to John Russell, of McCoy Russell for providing thought leadership on this subject and invite you to find out more by connecting with them at email@example.com.
Graham, Stuart J.H., Merges, Robert P., Samuelson, Pam, & Sichelman, Ted. High Technology Entrepreneurs And The Patent System: Results of The 2008 Berkeley Patent Survey. Vol. 24:4 p1277. 2009.