Patents & Intellectual Property: What Every Entrepreneur Should Know

Patents and intellectual property (commonly called “IP”) are an endless subject of debate for anyone working on a new idea.

When should you file? How do you know if your work, in the early stages, is unique enough that it needs protection? These sorts of questions come up all the time, as evidenced by a recent inquiry on Quora.

The answers are often fairly complicated, and require a competent lawyer to help dig into. But there are some general rules to keep in mind, as well as reasonable triggers for when you should start paying attention to patents and copyright for your work (not to mention hiring that lawyer).

Here are a few things to keep in mind…

  • Ideas are cheap (execution is not)
  • In a crowded market, patents are about defensibility
  • The relationship between patents, copyright, and trademarks
  • Work for hires and third party contracts

Ideas Are Cheap (Execution is Not)

A common misconception of first time entrepreneurs is that you can patent an idea. In fact, this is almost never possible under patent law. Instead, you patent the process or way a specific idea is executed on. And while it’s true that can include vaguely defined executions like rounded edges on a rectangle for mobile devices, most or the time, for a patent to be valuable, it has to be relevant to a specific process or process goal.

Notable exceptions include first to market ideas (which are very rare), and military + science oriented technologies where process is extremely detailed.

In a Crowded Market, Patents are About Defensibility

If you’re working on an idea that addresses a market with a lot of existing competitors, patents typically increase in importance.

For example, let’s say you have built code for the web or mobile apps that connects drivers and customers for some sort of delivery. That’s a field that is extremely crowded — and as a result you might need to protect yourself against larger rivals who have more money to burn on court time, or to ensure that investors are on board.

The Relationship Between Patents, Copyright, and Trademarks

For core product companies, patents are probably the most useful. But understanding and knowing about copyright and trademarks can be a useful exercise, too. In particular, understanding that your core patent may need to be described via marketing and/or communications materials in order to reach a target audience of customers is a critical step.

Ernst & Young has a quick primer that is helpful in understanding the three areas, and first time entrepreneurs in particular should be familiar with the basic structures around each.

Work For Hires and Third Party Contracts

The area that stimulates the most debate and problems is in hiring third party contractors: whether you’re employing someone to create code, a product design or prototype, or some other core intellectual property, it’s important that you set up a clear, reasonable contract.

It’s not uncommon to have an overly broad agreement or a verbal understanding that is later broken when someone who creates a main body of work heads out to build a product or company out of it on their own. Many early stage companies and startups struggle with this, and because courts have to rely on interpretations by founders, early employees, or even contractors in a situation, having a work for hire or third party contract that is clear and can be backed up later is something you should work with a lawyer on if there is any core product being built by a non-founder of the company.

Your idea, this thing that has inspired you to consider crowdfunding, is precious. Overlooking the steps you need to take to protect it could cost you not only court costs, but the very product you are so passionate about. Make sure you spend the time protecting it.

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