Building Your IP Strategy for Patent-Intensive Tech Startups – Part 2: Future IP

This is the second in a four-part blog series on how to build an IP strategy for patent-intensive tech startups. (Read Part One: Existing IP and Part Three: IP Management)

Protecting intellectual property (IP) is a key consideration for any business. Basically, IP protection transforms your sweat equity and creative work into a business asset.

For tech startups, particularly those in the early stages, seeking robust IP protection is critical because it shows investors that your innovations are unique and can potentially be monetized.

In our previous blog post, we discussed how to assess your company’s existing IP for opportunities and risks. Here, we’ll be covering the same for future IP — that is, any IP that you haven’t developed yet, but will likely develop later down the line in association with your innovation.

But first, let’s back up and make sure we’re all on the same page about what an IP strategy even is.

What is an IP strategy?

An IP strategy is, simply, a plan for how your company will protect and manage its intangible assets.

Your IP strategy needs to be clear and concrete enough that you and others can follow and execute it over time; it also needs to be broad and flexible enough to account for all future unknowns.

Your IP strategy matters because it demonstrates how your company will have a competitive advantage in the market. As such, it’s ideally captured in a format that you can meaningfully show to investors, board members, and advisors.

You can think of IP strategy as serving two broad purposes:

• Defensive: Prevents competitors from stealing your work.
• Offensive: Leverages your intangible assets to prevent others from entering the market, or to generate revenue.

Smart tech companies will think of both perspectives, not just one. Both perspectives are critical for building a business with long-term success and sustainable value.

Key elements of an IP strategy

As mentioned above, it’s useful to organize your IP strategy in a format that can be communicated to others in a logical way and can be executed by your organization over time.

To do that, organize your IP strategy around these three essential elements:

1. IP Development and Ownership: Where is the IP coming from, and how will you obtain rights? You can break this down further into two components:
   1. Existing IP: Development and ownership of IP that already exists
   2. Future IP: Development and ownership of IP that will be created in the future
2. IP Management and Execution: How will you secure protection for your IP, and what will it cost?
3. IP Mapping and Utilization: What aspects of your product will be protected, and how will your business leverage IP assets?

All three elements can serve an offensive and defensive purpose.

In this post, we’ll be focusing only on crafting a strategy around future IP. The subsequent blog posts in this series will cover the other topics on the list, so be sure to check back soon!

IP development and ownership: Future IP

As the first step to documenting your IP strategy, we recommended cataloging your existing IP to lay out what your intangible assets are, as well as who owns what.

Next, you should do the same for future IP: namely, IP you will be developing later on in relation to the products or services that your tech startup is developing.

To do so, start by asking these three questions:

1. What key developments (problems to be solved, questions to be answered, systems to be built) are needed to unlock the full value and potential of your product or service?
2. Who will be solving these problems and how will you secure ownership of these developments?
3. What types of IP protection will you secure for these future developments?

Let’s take a deeper dive into what each question entails.

1. What key developments are needed to unlock the full value and potential of your product or service?

As you think about this question, it’s helpful to develop a technology roadmap for your company. A technology roadmap lays out the high-level milestones toward reaching the company’s long-term business goals. Many of those milestones are likely technical challenges that need to be solved, and the solutions to those technical challenges are the key developments that you’ll want to protect as part of your IP strategy.

For many types of IP protection, timing is essential. It’s possible for legal risks to manifest well before your business is ready to pursue formal protection. As an example, you could end up facing expensive legal challenges if you wait too long to seek trademark protection for a brand name. As another example, if you prematurely use or disclose your invention before you’ve filed a patent application, you might accidentally create prior art against yourself.

As such, a strong IP strategy should be proactive: it should take into account not only the work you’ve already done, but also how you intend to continue developing and refining your product or service in the future.   

2. Who will be solving these problems and how will you secure ownership of their developments?

As you think about your technology roadmap, who will be solving the critical technical challenges? Will you hire a team of full-time employees? Will you outsource anything to a third party? Will you be collaborating with another company or a university?

Believe it or not, your answers to these questions are critical components to building a strong IP strategy. The answer to “who?” often determines what agreements and legal arrangements that you need to have in place before people start doing any work. Otherwise, you might compromise your company’s ability to own the IP.

One common misconception startups have is that they own the rights to specific IP just because it was developed by someone under a work contract with the company (whether that’s full-time, part-time, or as a contractor).

To avoid this pitfall, it’s essential that you ask all employees and contractors to sign agreements that clearly establish your company’s ownership rights to the IP, typically by assigning ownership of the IP to your company.

Likewise, if you’re working with a university or another partnering institute for research and development, you will need to sign agreements that clearly address ownership, assignments, licensing, and any related financial arrangements.

3. What types of IP protection will you secure for these future developments?

There are four main types of intellectual property relevant to high-tech industries, each conferring a different level of legal protection:

1. Patents: Give you the right to exclude others from making, selling, using or importing a product or service.
2. Trade secrets: Formulas, processes, or other business information that derive their commercial value from being kept secret.
3. Trademarks: Protect any distinctive mark that differentiates a company’s product or service.
4. Copyrights: Protect original works of authorship that have been fixed in a tangible medium.

The type that’s most appropriate will depend on what type of innovation you’re looking to protect. In previous blog posts, we’ve covered the distinction between the four types more extensively. If you’d like to know more, do check these out:

• Patents vs trade secrets
• Patents vs trademarks vs copyrights

That said, for high-tech startups, patents or trade secrets will likely be your best bet.

Future IP illustrated: The fictitious example of SmartOStat, Inc.

To illustrate how a future IP strategy might look, let’s revisit the fictitious example of SmartOStat, Inc.

We first introduced SmartOStat, Inc. in our previous blog post from this series on existing IP. SmartOStat, Inc. is developing a smart home thermostat, and its existing IP includes sensors and an interface for its product.

Here’s how a company like SmartOStat, Inc. might approach the three questions we posed above:

Here’s how a company like SmartOStat, Inc. might approach the three questions we posed above:

1. Key developments	2. Inventors and ownership	3. Type of IP protection
Integrate sensors and control hardware into smaller form factor device	Hire a team of 5 full-time employees who will work directly with the founders to develop a prototype and solutions to these problems.   All IP will be assigned through standard employment agreements.	Patents
Create user guides that help simplify DIY installation for the thermostat device		Copyrights
Develop prototype compatible with heating systems in Europe and other international markets		Trademarks — for distinctive product names and branding
Develop smartphone app for remote system control	Engage a third-party app developer to create the smartphone app.   Work with outside counsel to ensure that the development agreement secures all necessary rights to SmartOStat Inc.	Trade secrets — for proprietary algorithms deployed in the cloud

The importance of partnering with a qualified patent attorney

In part 3 of this series, we move on to IP management and execution, where we discuss how to secure IP protections for your innovations and what it might cost.

In mapping out your existing and future IP, you may have found that patent protection will play an integral role in your business’s IP strategy, particularly if your startup is tech-intensive. Drafting high-quality patent applications is very technical, which is why we highly recommend partnering with an experienced attorney.

If you have any questions about the patent process, don’t hesitate to get in touch with us.