Ademola Adekunbi: Intellectual Property Law Basics For Startups
Ademola Adekunbi: Intellectual Property Law Basics For Startups

By Ademola Adekunbi

Ademola Adekunbi: Intellectual Property Law Basics For Startups
Intellectual property (IP) is a term used to describe the creations of the intellect. Although intangible (in the sense of not being physical), they are immensely valuable because they give the owner certain rights including the exclusive exploitation of the IP for profit and the right to exclude others from using the IP. These rights are generally known as IP Rights. The purpose of IP law is to protect and govern all aspects of IP Rights.

More often than not, when the protection of IP comes to mind, people tend to think it relates just to the media – artists, actors, and writers. IP is much more than that. There are various aspects of IP which also apply to large companies as well as startups.

WHY STARTUPS MUST PROTECT THEIR IP

Unfortunately, many startups have a laissez-faire mindset towards the protection of their IP Rights. This often stems from their belief in the notion that “ideas are a dime a dozen – only execution matters.” The problem with this mindset is that the delay in securing a startup’s IP can do severe and sometimes irreversible harm to the startup, from a legal and business standpoint. IP matters, which is why companies like Google, Apple, and other tech giants spend billions of dollars securing their IP.

The IP of a tech startup is typically its most valuable asset. The products and services it brings to market will help it secure market share and earn revenue, but neither the market share nor revenue will be secure unless the company can prevent other companies from stealing its concepts, brands, and inventions. IP also constitutes a major consideration for investors because they’ll want to know that your startup has control over all the ideas, code, and branding you’ll need to develop and market your products and services. Clearly, without its IP, a tech startup would have little leverage in the market, thus making it essential to protect these rights as quickly as possible.

As startups scale and begin to share information with more partners, vendors and other counterparties, the importance of securing their IP rises, especially in sectors such as fintech where API integrations (and the attendant access to each other’s systems) are customary. Whatever the sector though, the following are some of the most important IP Rights startups must focus on securing:

FORMS OF INTELLECTUAL PROPERTY RIGHTS TO PROTECT

Copyright

Copyright is an IP Right that covers works of creativity, including website and app source code, UI-UX designs, and marketing materials such as graphics, videos, and sound recordings. For a work to be deemed eligible for copyright, sufficient effort must have been expended on the work to make it original and distinct from any other work of the same type and the work must have been fixed in a definite medium of expression.

Copyright is conferred automatically on any work created. It doesn’t have to be registered to become active, and for companies, it generally remains in place for 70 years after the work was first published. Copyright automatically vests in the individual creator of the work, so it’s crucial for startups to execute IP assignment agreements to transfer copyright from employees, founders, and contractors to the company. If that is not done, the individual creator will be able to claim ownership and prevent the company from using the IP.

Trademarks

A trademark protects the brand of a company. This includes the name (including the names of any specific products or services), logo, tagline, and other brand elements. A startup’s brand is how it stands out from the competition and gains customer recognition. Without the protection of its trademarks, any other company could potentially use similar brand elements to mislead customers into buying their products or services instead. For a startup to benefit from the protection under the Trademarks Act, the trademark has to be registered with the Trademarks Registry.

A registered trademark is valid for 7 years but can be renewed from time to time for 14 years under the Trademark Act. Registration grants exclusive rights to use the trademark to the owner and the owner can bring an action for infringement of any registered trademark and get a court injunction mandating the infringing party to stop or to claim for damages, among other remedies. If your startup’s trademark is unregistered, you will only be able to bring a case under the legal principle known as “passing-off”, which prevents companies from using names, logos, and packaging, and other identifying characteristics that would make potential buyers think the product or service is from the original creator.

Patents

A patent protects technical inventions and innovations. This protection is particularly important to protect software or hardware innovations made by your startup. Not all inventions are patentable inventions, however. The Patent and Designs Act sets out conditions to be met for an invention to be deemed patentable:

The invention must be new and capable of industrial application or

The invention is an improvement on an already patented invention and is also capable of industrial application.

When a patent application is made and granted, it recognizes the applicant as the statutory inventor with exclusive control over the invention. Generally, the right to a patent is vested in whoever is the first to apply for registration. It is not compulsory for a patent to be registered. Your invention can be kept as a trade secret. The implication of not registering your invention is that when anybody registers this invention before your startup, the person becomes the statutory inventor and enjoys the protection and exclusivity that comes with the right.

Trade Secrets

The most famous example of a trade secret in the tech industry is Google’s search algorithm, although, in the wider world, Coca Cola’s formula for the Coke drink and Kentucky Fried Chicken’s secret recipe would probably take that prize. In each case, the trade secret is information regarding the company’s processes that have been designated as such and actively protected by the company. Trade secrets cannot be registered because the process of registration of IP Rights typically involves disclosure to the regulatory body and/or the general public, to avoid the possibility of double registration.

Hence, the responsibility for protecting trade secrets rests with the startup. This can be done with the aid of non-disclosure clauses and agreements in relevant agreements such as those with employees, vendors, partners, and other entities. Although an NDA will not guarantee that the trade secret will not be leaked, it will entitle the startup to bring against the disclosing party and to claim for damages, among other remedies.

How to Protect Your Startup’s IP Rights

Most products and services can be protected by a combination of intellectual property rights. For example, computer software can be protected by patents, copyrights, trademarks, and trade secrets. Apple protects certain features of its iPhones and other products with patents; it uses copyright to protect the actual code of its macOS and IOS operating systems; it uses trademark law to protect the “Apple” name and logo trademarks which identify its products, and it uses trade secrets law to protect the design and components of its upcoming devices.

The particular steps needed to protect IP Rights will be dependent in large part on the type of IP in question, as highlighted above. Generally, startups must use NDAs to ensure that they can restrict the appropriation of confidential information regarding their innovations by staff or third-parties. Also, it’s important to commence the process of registering trademarks and patents quickly, to prevent others from registering them first and thus getting ownership.

Even after taking the foregoing steps to establish your IP Rights, including registration, it’s possible that they may still be infringed upon by other companies. It’ll be important, in such instances, to act swiftly to get them to stop and to recover damages for any losses their breach may have caused and for the very act of breaching your rights. This process is referred to as IP defence and can span from a simple demand letter from your lawyers to the infringing party to a lawsuit to enforce your rights, depending on the circumstances.

Conclusion

The importance of the protection of IP rights in Nigeria cannot be overemphasized. A startup is simply unlikely to survive unless its IP is securely under its control. Some of the more common errors startups make, such as failing to get IP assigned to the company, can be incredibly difficult to fix if not resolved early on. Registration is also often tied to timeliness as highlighted above, and failure to register in time might result in another company securing the rights in question. Clearly, the protection of IP must be an integral part of every startup’s business strategy, to facilitate growth, prevent infringement, and increase revenue.


Ademola Adekunbi.

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