For many entrepreneurs, trying to start their business is an entirely new process. Often they are unsure of the next steps they need to take to make their enterprise successful. In those early stages, the focus falls on bigger picture issues, like research and development, funding, and sales. And while those are undeniably critical to a company’s development, most tend to forego seemingly unimportant details in favor of these more noteworthy areas.
But these small details can be important to a company’s overall success—in particular, intangible assets. In this series of three guest blog posts, we’ll explore the reasons why you need to address these overwhelming tasks and protect your business with Rocket Lawyer.
For early stage businesses, intangible assets make up 90 percent of the company’s value. And like any important asset, you want to make sure it’s protected.
But protecting your intangible assets requires knowing what they are. Because of concerns over more immediate issues, startups and small businesses often forego looking at intangible assets and developing an intellectual property (IP) strategy until they’re further along in their development—if at all. And not knowing what your intangible assets are can be a risky way to conduct your business.
In webinars or speaking engagements I’ve heard far too many entrepreneurs say that their company doesn’t have IP. It can be easy to assume that if you aren’t working in a technology-focused industry, your business isn’t generating any intellectual property.
The truth is that every company has IP of one form or another. Just because you may not be the next Elon Musk doesn’t mean that you don’t have valuable ideas and creative works that are worthy of being protected.
The Consequence of No Legal Protection
Others make the mistake of thinking that the IP they do have doesn’t fall under legal protection because it isn’t a patent. There are several different types of legal protection for intellectual property, depending on what you have. And equally as important as getting protection for your assets is getting the right type of protection. Making a mistake in how you file for legal protection can leave your assets exposed and potentially exploited by others.
Some companies have built their fortunes and lost them just as quickly by failing to secure the rights to the IP they were using. Grooveshark, the one-time music streaming site, stands out as an example of a company that was done in by copyright complaints, just as predecessors such as Napster were forced to shut down or legitimize their business practices.
If you’re using the creative works of others in any way, you must make sure that you have the right to do so before putting their work on your site or in advertising or marketing.
How to Protect Your Patent
One of the biggest mistakes that entrepreneurs can make is not creating the necessary foundation for their business to go out and succeed. That means starting their business without creating a business entity. Not having a business entity can leave your personal assets at risk if you run into trouble with your company, or can create an issue if working with co-founders.
If you and your cofounders have patents that are registered in your names but not assigned to a company, that means your patents are not owned by the company. And if one or more of your cofounders decide to leave the company, you could be looking at a protracted IP ownership dispute.
Another ownership issue can arise if your company has either employees or contractors. If you have people working for you as employees, one of the first things you should have in place is an employment agreement that deals with confidentiality agreements and IP ownership. Without those agreements in place for contractors, you could be paying for work that you don’t end up owning.
For example, if you’re paying an outside company or contractor for custom software development, you could end up not owning the source code if you haven’t carefully read or constructed your agreement.
Failing to have the necessary insurance is another mistake that can end up costing your company in the unfortunate event you should need protection. There are several different types of insurance, from general liability to key person to intellectual property insurance. Take the time to understand what your insurance needs are and get the right policies in place to help protect against unforeseen circumstances.
The key to avoiding such costly mistakes is to spend the time and resources necessary to identify all the intangible assets your business has. That investment now will pay dividends later in avoiding unpleasant legal wrangling over IP ownership.
But in order to develop an effective strategy, it helps to understand the different types of IP protection that exist and what types of work each apply to. In the next part of this series, I’ll be talking about the different types of IP protection.
Use Traklight’s risk assessment as a guide to ensure you’re not missing any important early stage tasks! Traklight’s entire software platform is free for Rocket Lawyer visitors. Go here to get started.