JD Supra publishes a series of posts, “Legal Perspectives,” and Knobbe Martens partners answered the question: What’s the biggest mistake startup entrepreneurs make with respect to their intellectual property, and what can they do to fix it?
Below are excerpts from Salima Merani, Michael Guiliana, and Tom Arno that were featured in this post. For the full article, read 7 Intellectual Property Mistakes Startup Entrepreneurs Often Make.
Entrepreneurs Don’t Invest Sufficient Time, Money, and Thought In Their IP
No Focus on Global Patent Standards
Salima Merani, Ph.D., partner at Knobbe Martens: “Startups, with their limited budgets in the very early stages, often file patent applications without an eye towards global patent standards. Years later, when it comes time to pursue international rights outside the United States, the deficiencies from the early days can come back to impede or impair the patent portfolio. Sophisticated startups, typically involving some venture firm board members or serial entrepreneurs, not only engage law firms that have a global perspective, but also invest meaningfully in intellectual property and global strategy even when funds are scarce.”
Entrepreneurs Don’t Focus on How Patents Can Protect Revenue
Michael Guiliana, partner at Knobbe Martens: “Startups often fall into a trap of investing in patents primarily to protect the “genius” of their inventions. For example, excitement over the cleverness or elegance of a technological solution can be a driving force behind investment in patent protection. Such excitement can distract a startup from understanding or focusing on how patents can protect revenue and market share. Sophisticated entrepreneurs should map the drivers of their current, anticipated and potential future revenue streams, and work closely with patent counsel to ensure future patent investments are rationally tied to protecting those revenue drivers.”
Entrepreneurs Don’t Focus Enough On IP Ownership
Gaps in IP Title Chains
Tom Arno, partner in the Knobbe Martens San Diego office: “A significant but generally avoidable mistake start-up companies make is failing to establish clear chain of title of intellectual property ownership. This problem has only increased as more startups bootstrap themselves as far as possible with outsourced product development services. Defining and documenting appropriate ownership is generally easy to do when done at the right time, but can be difficult to subsequently fix. Potential investors and acquirers will look for clearly documented ownership of all intellectual property by the target company, and it is surprising how often gaps in intellectual property title chains get discovered during due diligence for these transactions. Even if unresolved questions with regard to chain of title may not prevent investment or acquisition, company valuation can be reduced for reasons that in many cases could have been readily addressed if considered earlier.”
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