Widget Image
Connect with:
Monday / March 27.

Intellectual property for start-ups and entrepreneurs, Part I: the importance and risks of IP

By Dr. Kalyan C. Kankanala

Intellectual Property (IP) protection can provide both business and competitive advantage to a company by

  • Providing much needed market exclusivity;
  • Providing the tools to sustain and grow the business;
  • Laying a foundation of assets to raise investment and funds;
  • Enhancing financial valuation and minimising dilution from investments;
  • Preventing misuse and misappropriation of assets; and
  • Offering the business tools to face competition from large entities.
Avoiding or mitigating risks is some times more important than protecting a start-up’s intellectual assets because one instance of infringement may destroy the company.

 

While IP is assuming high importance for all companies, its value for a start-up can be extremely significant depending on the nature of the start-up. It has the potential to generate value in many ways, but it can do so only if a start-up uses IP in an appropriate manner.

The Risks of Intellectual Property

It must be borne in mind that IP provides only one layer of business value among many others that can make or break a business. Despite the significance of IP to start-up companies, limitations with respect to financial and other resources in such companies pose challenges for protecting and managing IP assets.

Furthermore, more often than not start-ups focus on protecting their intellectual property but ignore the risks from intellectual property of third parties. Avoiding or mitigating risks is some times more important than protecting a start-up’s intellectual assets because one instance of infringement may destroy the company.

It must be borne in mind that IP provides only one layer of business value among many others that can make or break a business.

How to Mitigate IP Risks

Some of the basic steps that must be taken by every start-up to mitigate IP risks are:

  • Review potential problems for the business from intellectual property or patents of third parties. A good IP attorney will be able to do this and provide an opinion on IP risks and ways of avoiding or mitigating them.
  • Technology driven start-ups must undertake Freedom to Operate (FTO) analysis before launching the business in each country.

If the business is online and has an international reach, the FTO analysis must cover all important markets. Otherwise, a start-up always faces the risk of road blocks from blocking patents, which may put an end to the business, and in the worst case require the start-up to pay millions of dollars in damages for infringement.

  • Implement a system that will spot, process and mitigate IP risks on a continuous basis. For online businesses and e-commerce businesses, take-down policies, and licensing strategies will help substantially.

These steps are very general, and the nature of actions required to minimise damage from competitors’ IP or Patents varies from business to business. Though it may be slightly costly, it is advisable to get an attorney’s opinion before investing heavily in the business. Attorneys with a business sense will provide business options instead of only legal opinions.

Dr. Kalyan C. Kankanala is the Managing Partner of BananaIP. He is visiting faculty at the National Law School of India University (NLSIU), Bangalore, and a guest lecturer at IIM, Bangalore.

This post originally appeared on Sinapse.

Read Part 2 : Intellectual Property for Start-Ups and Entrepreneurs, Part II: Trademarks for Business