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Success in the “Den” – IP essentials

Following the recent finale of Dragons’ Den 20th series, it seems this is the ideal opportunity to provide a quick review of the highs, lows and lessons to be learned by other budding entrepreneurs regarding the need to protect their intellectual property at all times but especially when looking to expand a business.

The ability to demonstrate that you have considered your intellectual property rights as part of your overall business strategy is vital to showing investors that your business is worth investment. Investors will, at the very least, expect that your name is protected as a registered trade mark as a marker for a well-run business. They will be very interested to know whether you have existing patent protection, or are currently in the application process, as well as whether you have any registered design rights which will allow your business to grow.

As well as aiding business growth, properly protecting your intellectual property will help protect your business from competitors who may otherwise be able to copy your products, or even use similar branding. On the flip side, investors want to know that your business does not infringe the rights of others and so showing that you have considered IP rights at an early stage will always impress investors (whether in the Den or otherwise!).

So, what are some of the key IP considerations?

Do your branding homework

Before developing your brand, it is worthwhile checking if a similar brand name/logo is being used by a third party. There are a variety of free online sources that you can use to confirm this information yourself, such as Companies House and online trade mark registries (at the UK Intellectual Property Office (UKIPO), and further afield at TMView (tmdn.org) depending on where your target market is). As the business grows you may also want to obtain official clearance searches (we can help you with this) that you can rely on more than your own searches.

When carrying out these searches it is best to check not just the exact brand but also similar names/logos as the existence of similar brands can lead to risk of claims that your name infringes pre‑existing rights, preventing you from either obtaining trade mark protection or worse still forcing you to change your name.

You should also check if your preferred country domain name is available, to avoid having to purchase it from the owner (at a high cost) later on (although if you are happy to use something other than a .com or .co.uk, you should be able to find a free domain).

Once you know your name is free to use, register it as a trade mark (see below).

So, what if you find in this stage that other businesses have already registered what would have been your trade mark? You could enter a co-existence agreement with the third party to share the trade mark and this will allow you to use the mark, but does limit future growth as the Dragons pointed out to one unfortunate activewear entrepreneur. Therefore, it is probably time to think up a new name.

Create a company and website

If you have decided to operate as an incorporated company in the UK then you need to incorporate your company at Companies House. We can assist you with this.

You should purchase/register domain names and variants on the name – this is something you should be able to do easily. Provided the domain names are not already held by a third party through a recognised domain name registrar then this is easy and cheap.

This tech entrepreneur was unable to answer if he owned the name domain for his business which did lead to his confidence being shaken, however he was able to salvage the deal and secure investment.

Keep it confidential

When it comes to intellectual property, confidentiality isn’t just a good idea – it is essential! If you have developed a new product (including software) or an innovative process, you may be able to protect it with a patent. 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. The importance of patent protection is clear from this plant-based beauty and skin care entrepreneur who had already been granted patent protection for her product and secured an investment from two of the Dragons.

However, in certain fields, such as software development or food manufacture, if you can keep your information secret then that is the best protection. Nobody knows how the Google search engine algorithm works or the recipe for Coca Cola because both are kept confidential. Remember that while patents are powerful tools, the registration process necessarily discloses everything about the idea. Whichever way is best for your business, remember trade secrets are a vital part of your business’ value as “intangible assets”.

Register trade marks

Once you have settled on a unique brand, you will want to keep ensure that you are not confused with other businesses. You can register trade marks for a broad range of identifiers, including not only words and logos but also sounds, smells and even gifs. As long as what you want to register is not descriptive of your business and can be clearly and precisely defined, it can be registered as a trade mark. As such, as a minimum you should register your main trading name, company names, domain names and key product names (where different) as well as any logos.

It is also important to create a brand which is unique and eye-catching so that it can be registered as a trade mark, as the Dragon’s advised this micro-camper entrepreneur. This highlights the importance of carefully reviewing existing trade marks as noted above before you develop your branding. While in the UK, 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 ask us about registering trade marks. This is also a good opportunity to think about your target market, as a trade mark in the UK would not protect your business in Europe or further afield and we can help with this too.

Protecting your products/services

As well as trade marks, you can register other types of intellectual property including patents and design rights.

You should not forget copyright and rights in databases. Copyright arises automatically when you create something new that is your own “intellectual creation”. Ed Sheeran has been all over the news with his various legal cases which have challenged the “originality” of his work and he was able to show that he did not copy anyone. As an entrepreneur, copyright will protect the design of your website, the software you write, the design drawings for your products, your photographs and many other things provided you have not copied them from somewhere else. Database rights automatically protect your customer lists and marketing database.

Once you have an innovative technical solution or design, you should try (as far as possible) to prevent others from benefiting from your hard work.

Patents can be key in the manufacturing industry in order to protect various inventions as well as the production processes. When looking at your intellectual property strategy you should consider where your current and future target markets are and whether intellectual property protection is available and appropriate. As with trade marks, securing protection in one country does not protect your product globally. Correctly identifying the potential for your product, and protecting this potential, makes a business very attractive to investors. This was shown by two innovative entrepreneurs who went into the den with a granted UK patent and various international patents pending for their sunscreen applicator for kids.

There is a distinction between a “patent pending” and a granted patent, the latter having been approved by a patent examiner and providing the creator with security over their product and allowing them to claim against third parties who infringe on the patent. A patent pending, on the other hand, is strictly a deterrent on the basis that the patent may be granted and after this the creator would be able to claim. Until granted, it does not provide the right to claim itself.

You may also want to protect designs, particularly if you work in fashion similar to this handbag entrepreneur. Novel designs automatically benefit from protection of the shape and configuration of the product as an unregistered design. However, you can also register the design to benefit from a longer exclusive monopoly right. If you would like advice on how to best protect your design, please contact us.

Clean up ownership of IP

As with all property, intellectual property must have an owner and investors will want to ensure that the company in which they are investing owns all of its assets or has clear licences to use them. If you have started a limited company, your creations may be owned by you personally and these will need to be assigned formally or licensed to the company. As your business grows and you begin to engage others to help, you must include assignment (or licence) provisions in your employment, consultancy, design, software and other contracts so that all the intellectual property rights can be used by the company. Perhaps more importantly, make sure that all the founders transfer their intellectual property rights to the company. There are far too many tales of founders falling out and walking away from a business with the IP rights which underpin the business.

It is important that everything detailing your ownership is carefully documented. One father and son entrepreneur-ing duo in the Den particularly stood out here with their football themed boardgame. Having secured licences from a variety of professional football clubs, they were able to use the clubs’ branding in their board game without infringing the various clubs’ rights, helping obtain offers from two of the Dragons.

Final matters

As a new business, there are a million things to think of (and pay for). So where should you direct your limited resources?

It is free to keep things confidential and copyright arises automatically. Trade marks and designs are cheap to register (a few hundred pounds for UK protection) but what if you need to enforce your rights against others. Many a “David” has been struck down by “Goliath”, but a good business insurance product can enable you to enforce your rights or protect you from unwarranted threats. We advise asking your insurance broker about IP coverage which is sometimes ‘free’ with a good policy.

Finally, IP Rights are “property”. They can be used as security for loans and other investment. Therefore, whether you are looking for funding or looking for an exit, the bigger your portfolio of IP rights, the more chance you have of securing the true value for your business.

Dragons don’t give away their money but when a business has good IP, you can tame the beasts and get to the gold they guard.

Iain Connor is a Partner in Michelmores’ intellectual property team.

Michelmores run award-winning programmes for tech businesses and investors, including MiVentures and the MAINStream angel investor network.

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