NIP Problems in the bud

NIP Problems in the bud

Fast-growing businesses have many competing demands on their valuable time and (often limited) resources. It isn't surprising therefore, that developing an intellectual property (IP) strategy and investing in IP protection is often put off to another day.

IP is frequently a company's most valuable asset, and failing to look after it early on can give rise to problems as a business grows. In this article, we look at three of the most common pitfalls.

Protecting your brand

Coming up with a company or product name is a key consideration for a nascent business. Once decided upon, you should consider commissioning proper clearance searches for existing trademarks that might conflict with it. This is not an expensive process and drastically reduces the risk of future infringement actions as the business expands and is noticed by competitors.

Registering your brand name as a trade mark in key jurisdictions not only gives the company leverage to use against would-be imitators, but creates an identifiable asset on which to "hang" brand value.

IP ownership

For most start-ups, work is often done by friends, contractors and employees on an informal or even voluntary basis. When an employee creates IP in the course of their employment, it will usually vest with the employer. However, businesses are often caught out when consultants, founders, freelancers or contractors create IP without any formal agreement in place.

This can lead to disputes over IP ownership and issues as to whether further payment is required for the company to own it. Even if the individual is willing to assign the IP to the company, this still requires a retrospective written agreement. It is far better to ensure agreements are in place in advance with anyone creating IP for the benefit of the company.

Employees leaving with your ideas

Confidential information and know-how can be key assets. Departing employees taking what they have learnt in the company's early days to a competitor, or setting up a competing business of their own, can be hugely damaging.

The misuse of confidential information is usually expressly forbidden by employment contracts, and employees also owe their employers an equitable duty of confidence. However, it is harder to protect information after employment has ended, unless it is a trade secret which the company has taken clear steps to protect.

You should take time to identify what information you consider to be genuinely confidential and limit access to this information to key employees. Not everyone needs access to business plans, customer lists and pricing strategy information.

Careful thought about employee notice periods and tailoring post-termination restrictive covenants to an employee's role can also pay huge dividends.

Conclusion

Even when money's too tight to mention there are things that can be done to protect the long-term future of the business. It might sound trite to say that an ounce of prevention is worth a pound of cure, but where IP is concerned, this is most certainly the case.

This article first featured in our summer 2019 edition of Business Bridge.

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