IP clinches deals in the Den
With the latest series of Dragons' Den recently gracing our TV screens every Sunday evening, one recurring hurdle for a lot of the budding entrepreneurs is IP protection.
Properly considering intellectual property (IP) rights in your overall business strategy is often key to clinching a deal in the Den. Particularly if you are producing products for sale, the Dragons will frequently fire questions relating to what patent protection you have obtained, what trade mark have you got registered and whether you own the domain name.
IP protection and strategy should be a high priority for manufacturers, whose most valuable asset may be its IP rights. IP rights help an owner to prevent competitors from offering similar products, using similar brand names, open up opportunities to make money out of licensing your IP rights and often impress the Dragons.
So what are some of the key IP considerations?
1. Carry out some basic online searches
Invest some time into checking search engines, Companies House and online trade mark registries at the UK Intellectual Property Office (UKIPO), Office for Harmonization in the Internal Market (OHIM) and further afield depending on where your target market is) to check whether your chosen brand name/logo is already being used by a third party. Also check similar names/logos as this can lead to risk of trade mark infringement. You may want to obtain official clearance searches (via a trade mark attorney) that you can rely on more than your own searches. Check if the domain name is available.
2. Protect your confidential information
Whilst it is normally a good idea to keep your new business idea a secret before you are ready to market (to maintain a competitive edge), it is absolutely essential if you have developed a product (including software) or a process that could be patentable. If you do not maintain confidentiality you risk losing the ability to patent it. Please ask us if you need a non-disclosure agreement to protect your position.
3. Develop your trading name
If you have decided to operate as an incorporated company in the UK then you need to decide on your company name and properly incorporate your company at Companies House. We can assist you with this. Note that you can decide to trade under different names than your 'limited company' name as this entrepreneur has done with her brand Good Bubble.
You may also want to purchase/register domain names and variants on the name – this is something you should be able to do easily, if the domain names are not already held by a third party through a recognised domain name registrar.
4. Protect your name and logo
Consider registering your main trading name, brand names and logos. You will also need to think about where your target market is and whether you want to go for UK protection, EU wide protection (called "community" marks) or further afield. Whilst you may gain automatic IP rights without registration in certain names and logos, registered rights provide much stronger protection against third parties – better you own the trade mark than someone else! We recommend you take legal advice in registering trade marks. This vitiligo skin care entrepreneur "forgot" to put her trade mark on her packaging almost losing the Dragons' confidence (but she secured investment).
5. Consider other IP protection
As well as trade marks, you can register other types of IP including patents and design rights. Patents can be key in the manufacturing industry in order to protect various inventions as well as the production processes. When looking at your IP strategy you should consider where your current and future target markets are and whether IP protection is appropriate. Some countries like China have a first-to-file system, meaning that if someone goes off and registers your trading name before you, you will find it very difficult to then obtain the registered name (Apple and Facebook have both faced this issue!).
In the UK there are various IP rights that arise automatically including copyright and unregistered design rights. It can be important to retain evidence of your creation and often creators will sign and date their own work and sometimes even post it back to themselves. On websites, marketing materials and certain goods, owners of copyright tend to assert their rights by inserting a short copyright notice, for example: © Michelmores LLP (sometimes followed by the year created). This is not essential but makes third parties aware of your IP rights. Also not essential, but potentially helpful, is to assert your rights over your trade marks whether registered (by inserting the ® symbol) or unregistered marks (by inserting the ™ symbol). Note that it is a criminal offence to use the ® symbol for an unregistered mark, so be careful.
You may also want to protect your IP by not telling anyone about it – i.e. by keeping a trade secret. Keeping recipes as trade secrets is sometimes used in the food and drink industry, which this entrepreneur of a new range of crisps (Tags®) might have considered.
6. Clean up ownership of IP
Most investors want to see that the company they are investing in owns all of the IP rights or has clear licences to use the IP rights. Often in start-ups, an entrepreneur will invent something which is technically owned by him/her as an individual. In order for the invention to be owned by the company, there must be a legal assignment from the inventor(s) to the company. Investors may even ask to see this agreement. Care must also be taken to ensure IP rights are legally transferred through employment contracts, consultancy contracts, design contracts and other contracts where individuals or third parties are developing IP for the company.
A lot of the above require time and financial investment, so we often advise clients to prioritise various stages if budgets are tight (as well as wider considerations like employment contracts, directors' service contracts, shareholder agreements and articles of association). This yoga product entrepreneur explained that he had spent £60,000 (!) on registering his intellectual property rights (his company has a patent for his exercise apparatus).
If you have a good brand or product, you will probably be copied at some point. If you have registered rights you should be in a much stronger position to dissuade potential copiers and stop actual copiers.
Michelmores: We have developed a range of Business Starter Packs, specifically designed to provide starting or expanding businesses with their essential and basic legal documents, support and commercial advice. Getting your 'legals' cleaned up can make your business much more appealing to potential investors/Dragons (as well as ensuring you are complying with your legal obligations).
The Intellectual property Office (IPO): Contains lots of information on IP rights and has also taken a keen interest in the Dragons this series with its IP blog on each episode – an interesting read for any entrepreneur (particularly if you're thinking of applying to the Den!).
This article is in no way an exhaustive list of IP or business start-up considerations, for more information please contact David Thompson, Partner in our Commercial team.