Deep tech startups are often characterized by the disruptive nature of their technologies, which are backed by years of heavy research & development and rich intellectual property. Because of this, having a plan to protect one’s IP should be at the core of deep tech startups’ overall business strategy. But because founders’ priorities are ever-growing and building an IP strategy can be complex and implicate some costs, IP protection can take a backseat. However, the costs of not prioritizing this can be quite consequential, financially and for the core business of the startup. To help shed light on the importance of devising an IP strategy and the key things to consider when building or improving your own, we sought out a few insights from experts in the field:
Tristan Morse is a Senior Consultant at Humphreys Law. Humphreys Law is a focused, full-service law firm working on the full lifecycle for technology companies and investors. Almost uniquely amongst smaller firms, HLaw advises on fund formations, VC investments and tech M&A, as well as advising on commercial contracts and the related IP, data protection, tax and regulatory issues.
Dr. Jamie Soon-Kesteloot is proud to be a STEM community servant leader by night, and an Innovation Scientist / IP Strategist by day. She earned a Ph.D in Chemistry, specialising in Nanotechnology from the National University of Singapore and Master in IP Law and Management from the Centre for International Intellectual Property Studies. Jamie has successfully helped many companies safeguard their innovation and is a servant leader for diversity in the science and technology community. This year, she co-launched a new initiative “There’s no IP in Pitch” – an IP leadership coaching program to help deep tech startup founders demystify IP and move towards building an IP strategy which makes sense for their startups.
Let’s start with a pretty basic question. Do deep tech startups really need IP protection?
Tristan: Yes. Businesses face the outside world and a trademark connects the technology supplied (in the form of goods and/or services) with the genuine supplier. Trademarks are badges of origin.
Designs protect the outward features of the appearance of technology.
Copyright protects the outward manifestation or expression of the drivers behind technology (for example software code), but there is no copyright in a mere idea, just in its manifestation.
Patents protect technical advances, inventive steps beyond the mere obvious.
Except for copyright (which generally arises automatically), trademarks, designs and patents need to be registered nationally and/or regionally in order to obtain statutory monopolies on them, otherwise called “protection”.
More info about different types of IP protection here.
Could you share your top 3 reasons for why startups should consider protecting their IP?
1. You wouldn’t walk out naked, so why should your product?
2. You wouldn’t like to be locked out of your home, so why would you lock yourself out of the invention (that you spent so many years researching on) by not owning the IP rights to it?
3. In 1975, intangible assets accounted for 17% of corporate value. Today, it is 90%. The strategic IP rights held by your startup might be the golden ticket to a golden exit (or unicornship).
1. Without effective IP protection, it becomes more difficult – if not impossible – to deter free-riders from benefiting from your technology.
2. Registrations also have a deterrent effect as they appear on publicly accessible online registers, thereby deterring any conflict before it starts.
3. Investors expect to see Intellectual property rights effectively protected and secured before parting with their money and/or expertise.
When should startups start building an IP strategy & what are the key steps to get started?
Tristan: Patent, trademark and design and patent registrations are generally granted on a first-come first-served basis and so it is always prudent to get applications filed as soon as is practicable, and to reserve the funding for doing so, before someone else files for something identical or similar that then becomes an obstacle.
Speak to an intellectual property lawyer as soon as possible even if it is just to get an idea of a filing strategy, so that costs can be budgeted for from the outset.
Jamie: In my opinion, it should start at the idea conception stage, even before starting to build anything. A competitor product and patent landscape should be made to understand what potential competition are doing, and where there could be a patent white space. The aim is to identify alternative technical routes to achieve similar or better technical benefits to solve a technical problem. Or even better, identify a blue ocean zone. If you need partners to make it happen, make sure a good contract is in place to govern the collaboration.
Then, it would depend on the type of product built by the startup:
If the offer is a physical product, then patent protection should start as soon as the proof-of-concept is made (TRL >3-4). Once the first prototypes are built, one should also evaluate the need for design patents. Trademarks should also be considered.
If the product is a software or has software which accompanies the physical product, patent protection can start even earlier, once the founder figures out which data is needed to derive what. They should also consider if they need to set up software licensing agreements if third-party softwares are deployed. Freedom-to-operate should also not be overlooked at this stage.
Once the business model canvas and a basic understanding of the market readiness level >4-5 is established, startups should identify their unique selling proposition (i.e. why would customers buy their product over their competitor’s?) and develop a 360° IP strategy around the USP to strengthen the initial protection already made. By this time, they would have received the search reports of the first patents and developed a clearer idea of where their invention stands.
What are the most common mistakes you’ve seen startups make in their IP strategy?
Tristan: In short, placing IP protection on the back-burner and then facing an expensive fight for e.g. a brand name that the business is already committed to.
In terms of designs and patents, timing can be critical with a limited window in which to file applications before you might have unwittingly undermined your own position and, for example, invalidated your own design.
Jamie: Here are my top 3:
1. Protecting only the physical device and not use cases of how the data collected by their physical device is used (analytics) to solve the problem.
2. Thinking that software cannot be protected.
3. Thinking that they do not need IP (especially for deep tech startups) or trying to draft their own patents to save money – I can’t decide which is worse.
What are the risks involved when the IP is shared with the university/partnering institutes? How can those be mitigated?
Jamie: Good fences make good neighbors. This is true for IP as well. Make sure you have a contract and that terms and boundaries are clearly stated out.
Tristan: “Ideas” must be recorded in writing or other material form and discussions and demonstrations should take place under the express cloak of confidence in order to guard against misappropriation and misuse, and the destruction of novelty for patents, utility patents and designs. Due diligence will need to be undertaken to ensure the university/partnering institute owns the rights it says it does and is not infringing on any third-party rights (and vice versa). In the event collaboration goes ahead, agreements will need to be drawn up and signed covering (amongst other aspects) ownership, registration, licensing and use of any existing and future IP rights relevant to or arising out of the collaboration, and financial arrangements relating thereto.
How important is it to have multiple geographical patents?
Jamie: If infringement or counterfeits occur in a country which you did not apply IP rights for, then you cannot enforce IP rights in that country. Simple as that.
A granted patent is valid for 20 years. Integrate telescopic vision when building your business model canvas so that you can build an IP strategy which still makes sense in 15 years.
Tristan: Patents are territorial, i.e. they are valid and enforceable only in the country in which patent protection is obtained. Businesses will prudently acquire patents (and/or other IP protection) in those countries in which they are operational and/or market their products. There is no “worldwide” patent. However, the Patent Cooperation Treaty enables a single international patent application to be made covering up to over 150 member countries. The European Patent System centralises patent application procedures in over 35 European member countries up to and including grant and post-grant opposition. Nevertheless, as matters stand, validity and enforcement actions must be brought and pursued through national courts under national laws.
What can be learned from the CRISPR patent battle?
Tristan: In the life sciences sector, individual researchers and organisations are often seeking to pursue the same or similar goals. It is vital to secure foundation patents for the base technology as early as possible. Otherwise, subsequent foundation patents may be liable to challenge on grounds of lack of novelty and/or obviousness over the prior art. As the technology advances with applications in different fields, product-specific patents become important in order to protect and capitalise on investment. The flip side of all this is that competition may be stifled, which highlights the need for adequate cross-licensing arrangements and patent pools.