Building Your IP Strategy for Patent-Intensive Tech Startups – Part 3: IP Management

This is the third 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 Two: Future IP)

For early-stage tech startups, developing a robust intellectual property (IP) strategy is critical: it protects your business in a competitive market, and shows investors that your intangible assets have long-term value.

Our previous posts in this series define what an IP strategy is, and discuss how you can catalog your company’s existing IP and project a path for future IP. Essentially, what you want to achieve with your IP will determine what types of IP protection you need to pursue.

In this post, we’ll take a closer look at the next step in the process of creating an IP strategy: developing a plan to manage your IP as part of your business operation. Who will be responsible for making key decisions? How much should you budget toward IP protection?

Having a smart IP management plan ensures that your IP strategy turns into a functioning IP program that stays aligned with your business’s goals.

Identifying decision-makers: Establishing an IP committee

Once you’ve cataloged your company’s existing and future IP, the next step will be to outline how you will actually put your IP strategy into motion. You need a plan for how your company will take action, make decisions and consider new information as the IP strategy is executed over time.

As such, we recommend establishing an IP committee comprising key decision-makers within your company. The committee’s role will be to execute the IP strategy in alignment with your business’s goals, and to respond quickly and strategically to new  developments as they arise.

In deciding who to place on the IP committee, ask yourself these questions:

1. Who will be in charge of making decisions regarding IP matters for your tech company?

Your company will respond to IP issues more efficiently if a clear chain of command is established from the outset.

The ultimate decision-maker on your IP committee should be someone who holds a position of authority within the company, and who is also technically qualified to make informed judgments about your IP portfolio. This could be an in-house IP counsel or an executive outside the legal department (e.g., CEO or CTO).

2. In addition to the decision-maker, who else will be on your IP committee?

Your IP committee should also include people who can provide expertise on different aspects of IP such as law, business, and technology. For example, if you are innovating in wind energy, you may wish to include a team member who understands recent trends in the renewables industry.

The size of your IP committee will depend on what your company hopes to gain from its IP portfolio. A larger company with more complex IP assets may benefit from having a larger team that can cover more areas of expertise. On the other hand, a smaller team can usually make decisions faster and collaborate more efficiently.

An IP committee of 3-5 people is usually a good balance for most tech startups.

3. What outside expertise will you engage for IP development? (Law firms, consultants, etc.)

Often, you’ll need someone with specialized knowledge to serve on your IP team, but it doesn’t make sense to hire them as an employee. For example, perhaps you need outside counsel with deep experience in a highly specialized technical area — say, a patent attorney who understands AI or another high-tech area.

In other words, you’ll want to identify what personnel and skills are needed outside the company, and outsource those positions to qualified individuals or firms.

Executing your IP strategy: Setting an IP budget

Tech startups typically don’t have the resources to patent every new innovation put forward by their R&D team — even though that would be ideal! As such, your IP committee will also determine your company’s budget priorities.

4. To protect the existing and future IP that you identified earlier on, what do you need to budget for IP matters over the next 3 years?

Previously, we’ve stressed the importance of not cutting corners on your IP budget. By investing in robust IP protections, you enable your business to assert its competitive advantage, establish its market value, and encourage innovation in the long run.

With that in mind, you’re probably wondering how much it typically costs to pursue IP protection (and especially patent protection, as it’s usually the most expensive option). Ultimately, the answer depends on several factors including what type of patent application you’re filing, where you’re filing, and the complexity of the technology involved.

That said, we’ve put together an infographic estimating the cost of pursuing patent protection — you can download it here.

Most tech startups begin with a very modest IP budget in their first year ($10,000 to $20,000), while they’re still trying to raise outside investment. But after the first year, a typical IP budget for an IP-centric tech startup ramps up significantly, often on the order of $100,000 to $1,000,000 per year as the company’s technology and IP assets mature. 

IP management: Using open source software

Using open source software can be more cost-effective and flexible, which is why open source software is increasingly being incorporated into new projects.

If you’re tapping into open source software for your innovation, keep in mind that open source software is not free to use in the public domain (i.e., it’s still subject to copyright and other restrictions). It’s only free and open to the extent that the source code is available to users to use, modify, and share, according to the specific terms of the open source license.

In fact, open source software can come with strict conditions for its use, which can have serious implications for your IP strategy. That’s why, in managing your existing and future IP, you need to ask:

5. Will you be using any open source software? If so, how will you ensure compliance with open source licenses?

Depending on the licensing terms, using open source software could raise challenges like:

• Inadvertently using code that violates someone else’s IP
• Disrupting your ability to enforce or protect your own IP, or to pursue your own IP strategy
• Being unable to claim financial compensation from entities infringing your IP
• Being required to distribute your modifications under the same open source license

Consequently, we highly recommend using caution when considering whether to utilize open source software. If you decide to go forward with open source, you should document the specific open source software that’s being used, and proactively take steps to ensure compliance with the license terms.

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

To see how an IP management plan might look in practice, we’re once again returning to our fictitious example of SmartOStat, Inc. As introduced in our previous blog posts in this series, SmartOStat, Inc. is innovating in the smart home thermostat market.

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

1. Who will be making decisions regarding IP matters for SmartOStat, Inc.? Co-founder and CTO Davis Chilly will manage the IP portfolio initially.
   
   
2. In addition to the decision-maker, who else will be on your IP committee? Co-founders Davis Chilly and Carl Sweat, as well as our outside IP attorney, will serve as SmartOStat’s IP committee. In addition, we will designate one of our early technical employees as “IP liaison” to manage deadlines and day-to-day IP matters.
   
   
3. What outside expertise will you engage for IP development? SmartOStat has engaged the law firm Franklin Smith to handle all IP matters, including patent and trademark filings and development agreements.
   
   
4. To protect the existing and future IP listed above, what do you need to budget for IP matters over the next 3 years?
   • Year 1: $40,000
     1. File two new patent applications
     2. Negotiate waiver/license with St. Bartholomew University
     3. Joint development agreement for smartphone app
     4. Maintenance of existing IP
   • Year 2: $60,000
     1. File three new patent applications
     2. Possible new trademark filings
     3. Expand existing filings internationally
     4. Maintenance and prosecution of existing IP
   • Year 3: $80,000
     1. File four new patent applications
     2. Continue international filings
     3. Maintenance and prosecution of existing IP
        
5. Will you be using any open source software? If so, how will you ensure compliance with open source licenses?
   We do not plan to use any open source software.
   OR
   We’ll use open source code under the GPU GNL open source license. We’ll also use Black Duck software to manage open source software usage.

Finding the right legal partnership

In the final part of this series, we’ll be diving deep into IP mapping, which identifies the geographic regions best suited for your business as well as any industry crossovers you could pursue — so watch this space!

An essential component of effective IP management is partnering with the right law firm to meet your needs. Not sure where to begin? Start with our list of 22 questions to ask before hiring a patent law firm.

If you have more questions about legal partnerships to protect your innovations, please reach out to us. We’d love to hear from you!