Joe Sekhon, founder of the Intellectual Property Advice Support Service (iPass)’, discusses the importance of Intellectual Property (IP) in the tech industry.
Do you fancy yourself as the next Zuckerberg or Musk? Well, you’re not alone. The number of budding tech entrepreneurs is growing at a rapid rate, especially in the UK. In London alone, according to some estimates, there are currently more than 4000 startups. That’s over 4000 new ideas.
Now in some cases, these ideas will have formed in seconds, in others they will have taken shape over a matter of hours, while others still will have taken days or even months to crystallise.
But once the entrepreneur finally has that ‘eureka’ moment, the hardest part is over, right? If only. For tech entrepreneurs and startups alike, protecting those ideas — IP — is absolutely critical. The idea really is just the start.
What Exactly is IP?
IP, or Intellectual Property, is a form of legal protection that basically tries to stop a person’s or a company’s ideas from being ripped off by another person or company. It’s way more complex than this in practice but that really is the basic thrust.
So, whether you’ve come up with the latest niche dating app or the next go-to social media platform, ensuring your ideas are protected for example by patents, copyright or trademarks (known as intellectual property rights) can help you reap the full financial and brand rewards of your business ideas.
Why is it crucial?
Firstly, protecting your IP enables your company to differentiate itself from other businesses and can act as its unique selling point, often helping it to secure future investment.
In fact, many VCs may not back a business at all if its IP isn’t protected. It can be seen as vulnerable to competitors — especially larger, cash-heavy companies who can swoop in and replicate it — and therefore too risky to scale. Put it another way, IP effectively ensures that the ‘new’ Zuckerberg can exist.
But understanding and securing IP protection for your idea is no easy feat: the process can be long, arduous and also expensive. Very expensive.
This, of course, is far from ideal for young entrepreneurs who are not only bootstrapping but looking to get their ideas and businesses off the ground as quickly, and as cost-efficiently, as possible.
As a result, and in my experience, these entrepreneurs tend to make two key mistakes. The first is doing nothing whatsoever to protect their IP, which makes them a sitting duck commercially and less attractive to potential investors.
The second mistake is at the complete opposite end of the spectrum: some companies shell out silly money in the very early days on IP protection that could realistically be spent better elsewhere, e.g. on growing and promoting the business. So they have a business that is watertight IP-wise, but dead in the water commercially because the marketing budget was decimated by legal fees.
So how do young startups help to ensure their ideas are safeguarded without breaking the bank? One route is through something called ‘Passing off’.
What is ‘passing off’?
‘Passing off’, in its simplest terms, is a common law right that prevents someone representing their own products or services as being those of someone else’s — and vice versa. It is most commonly used in IP circles to protect a company’s brand such as its logo.
As well as being a far less expensive alternative to making an application for a trade mark, and so long as you can of course prove that you have goodwill in your brand, passing off can provide you with a useful alternative by which to protect your start-up’s identity from your competitors, particularly at the outset of your entrepreneurial journey when finances may be tight.
Now whether you have the money to actually defend your corporate brand via passing off is another thing entirely but there’s no doubt that it can sow the seeds of doubt in the mind of a predatory competitor. That doubt in itself is a form of protection.
How can startups benefit from IP?
It goes without saying that if you want a successful startup, especially in the tech industry, you need IP and you need to protect it. But at the same time, and accepting that many businesses are bootstrapping, with ‘passing off’ you can at least save some money while still protecting your corporate identity to a degree.
In an ideal world you would want to register every element of your brand as trade marks; however in the real world this may not be possible in the early days of your cash strapped startup.
In the increasingly saturated tech world, protecting your intellectual property from the outset could give your startup an indispensable advantage for years and years to come — and get you ahead of the game. Which is where you want to be.