Waiting to Protect Intellectual Property Could Doom Your Startup

By: Mark McCareins and Pete Slawniak

Does your fledgling startup really need to pour time and money into protecting its intellectual property?

Most likely, yes, says Mark McCareins, a clinical professor of business law at the Kellogg School and former senior partner at the law firm Winston and Strawn LLP.  “Almost every startup has an idea that’s probably worth protecting, whether it’s a piece of software or a bit of code or a totally new invention.”

Yet for many early-stage entrepreneurs, intellectual property (IP) is an afterthought, a topic for consideration once the product has been developed, the business plan has been put in place, and discussions with potential investors or customers are already in the works.

McCareins recently sat down with Pete Slawniak, an intellectual property lawyer at Argonne National Laboratory, and advisor to Argonne’s startup incubator called Chain Reaction Innovations.

Their conversation touched on what startups of all stripes should know about patents, nondisclosure agreements, and the wisdom of using that inexpensive online legal service.

Here are some takeaways from their discussion, edited for length and clarity.

Think about IP early on—while you are still developing your product.

Slawniak: As soon as a company starts to invest in research and product development, it's time to begin planning some sort of protection for that investment. Ideally, this happens when a company is evaluating its business strategy. The question to ask is, “Will this intellectual property offer competitive advantage?”

It's never too early to think about this, because preliminary groundwork agreements—whether that's a grant application, an incubator membership, or some sort of joint venture agreement—are all going to have IP terms.

McCareins: If you don’t address IP early, you run the risk of either A, spending all this money in research and development on something that isn't patentable, or B, incubating with a third party, but because you have not protected your IP rights sufficiently, you allow the third party or others to extract your IP away from you without you even knowing it.

Slawniak: U.S. patent law is very generous—you have up to one year from the date of a public disclosure to file a patent application. But in most other countries, you lose patent rights as soon as there's a public disclosure of the invention.

And public disclosure doesn't have to be a sale: it could be an advertisement or even testing a prototype out there on the street without having nondisclosure agreements in place. Let me give you just one anecdote from an old case that jumps to mind: an inventor designed and prototyped a great new motor for their boat – something that had serious market potential. Then that inventor went on a boating trip with one of his friends. Many years later, when that inventor went to enforce his patent against a competitor, lo and behold, the court deemed the boat trip a public disclosure that invalidated his patent rights, even though the friends never knew how the motor worked. That should serve as a cautionary tale about disclosing an invention.

So it's important to start thinking about patents even before you start talking to any potential customers and attempting to monetize an idea.

Read More >> https://insight.kellogg.northwestern.edu/article/waiting-to-protect-intellectual-property-could-doom-your-startup