While entrepreneurs often come up with game-changing products or designs, few first-timers know how to effectively protect their big idea once they’ve had it. Both hardware and software entrepreneurs need to know how to protect their innovations and their fledgling companies right from the start.
One of the most damaging things that can happen to a startup is for it to be sued by a competitor right out of the gate, before the company has enough time to get onto its feet. Even worse, the competitor (or a non-practicing entity) might wait until you’re product is a big market success to send you a cease-and-desist, a.k.a. “Nastygram” because you’re a more valuable target at that point.
While there are a number of things that an entrepreneur can do to protect themselves from the risk of future libel, many of them are better done at the start of and during the potential product’s development. This process of checking is known as a Freedom to Operate Analysis. Once the product is fully developed, you may wish that you’d carried out some simple checks that can save you from cease-and-desist orders and endless legal fees down the road.
Before getting into the specifics, it’s important to know the different kinds of protections you can secure for your products or intellectual property. We covered them all in an earlier post here.
Know Your Competitors
If you are hoping to enter a field with pre-existing and established businesses, it’s essential to have a good understanding of your competitors. They can make great examples of both what to do, and what to avoid doing.
If you’re trying to protect a potentially vulnerable and new product, odds are, your competitors have had to go through a similar process. Start with some research into how they protect their products. Do they file a ton of patent applications? Do they publish a lot of marketing material? Are they involved in litigation over intellectual property? The aim here is to see if others already hold IP that covers similar innovations to yours so that you can evaluate the risk of getting sued as soon as you start marketing your new product. A little research at the start can save you headaches later in the production process.
Now this exercise is not the same thing as a patentability search, which is aimed at determining whether you may be able to obtain patent protection on a particular product or a product feature. Even if your competitors have issued and pending patents surrounding your product, you may still be able to obtain a patent on a specific improvement or a feature.
For example, let’s say your competitor owns a patent on a vehicle with two wheels and a motor (i.e., a two-wheeled motorcycle). You figure out that adding a third wheel such that the three wheels are arranged in a triangular configuration can provide improved stability and other advantages (i.e., a three-wheeled motorcycle). While you may be able to obtain your own patent on the three-wheeled motorcycle, you’d still likely have to go get a license from your competitor for the two-wheeled motorcycle patent because, as far as the patent office is concerned:
A 3-wheeled motorcycle = a 2-wheeled motorcycle + a third wheel.
One important caveat — digging into your competitor intellectual property can open you up to legal risks. That’s why some large, innovative companies have corporate policies preventing their technical staff from doing patent searches or even reading patent documents of third parties. Definitely consult an IP professional before you go down this path.
Know Your Product
If you plan to protect your product as a trade secret, it’s important to consider the reverse-engineerability of your product. If a competitor legally acquires your trade secret related product and discovers the trade secret at its core, it is legal for them to use it. This is not so for a product covered under a utility patent. If your product is easily reverse-engineerable, consider using one or more utility patents to protect those valuable features.
The decision-making process is similar when dealing with software. If the source code your software runs on is easy to acquire and understand, you may need to carefully protect it, or more cleverly hide it.
Know Your Field
Protecting your product with any kind of legal protection requiring an attorney will be expensive. Before beginning to spend your precious capital on this process, you may want to consider how much money you expect the product to make for you, and how that amount compares to the anticipated costs of formally protecting the product. With some products or ideas, it may not be financially worth the costs to consider using formal protection mechanisms — it may be best to get the product on the market, make lots of money, then quickly move onto something else. A lot of mobile apps and “as seen on tv”-type gadgets fall into this category.
Another component of this cost-benefit calculation might consider the probable increase in your company valuation in the eyes of potential investors, if the product is protected using formal mechanisms such as utility patents and registered trademarks. If you are building a company with acquisition as your exit strategy, this metric may be important for you.
Which Protections To Consider Based On The Type Of Company You Are Creating
Software Companies should first consider using:
- Copyrights
- Trade secrets
- Trademarks and design patents (for building a stronger overall brand)
- Utility patents, only if the innovation (firmware for operating new hardware, truly innovative software that performs a function that didn’t exist before) and timing works with the product launch timeline (utility patent prosecution can take 3 to 4 years unless you pay to expedite the process)
Hardware Companies should first consider using:
- Trade secrets, for those product features that are not easily reverse-engineerable
- Utility or design patents, for those features that are visible and readily copied
- Trademarks and design patents (for building a stronger overall brand)
We get it. Patents are hard. This is your big idea, and you want to make sure it succeeds. Our job is to make that process easier. We’re a team of patent experts who will guide you through the whole IP process so that you can focus on what matters most–making your big idea a reality. Ready for a smarter way to approach IP? Click here to get started.
