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Catalyzing a breakthrough moment to accelerate business growth for 1,000 startups.
www.boomstartup.com
3
IP Strategies for Startups
Presented by Marc T. Rasich
Boom Startup
May 11, 2021
Marc T. Rasich
Partner z
801.578.6901| marc.rasich@stoel.com
3
INTRODUCTION
Intellectual property (IP) drives a large segment of today's
global economy. Valuable IP rights may exist in products
and services we see, hear, and use every day.
This presentation provides anz overview of:
• Why IP rights matter
• How to develop an IP strategy to fit your business
• What types of IP you may wish to protect
• How you can protect and monetize that IP.
4WHY DOES IP MATTER?
Intellectual property:
• Builds brand awareness and loyalty among consumers.
• Establishes protectable legal interests in the goods and services sold
and the technology and know-howz used to produce them.
• Has intrinsic value that may be sold, licensed, or leveraged for profit.
• Provides a competitive edge.
• Increase value for future investment or acquisition.
• Leads to faster growth.
5WHY DOES IP MATTER?
z
6WHY IP MATTERS
Rank Company Sector Total Intangible Share of
Value (USD bn) Enterprise Value
1 Apple Technology & IT $2151 94%
2 Amazon Internet & Software $1694 98%
3 Saudi Aramco Oil & Gas z $1651 84%
4 Microsoft Internet & Software $1598 93%
5 Alphabet Internet & Software $838 74%
6 Facebook Internet & Software $704 84%
7 Alibaba Internet & Software $693 86%
8 Tencent Internet & Software $610 90%
9 Tesla Automobiles $433 96%
10 VISA Banking $427 100%
*Source: Brand-finance GIFT 2020 report, p. 34
7WHY IP MATTERS
Rank Company Sector Total Intangible Share of
Value (USD bn) Enterprise Value
11 Johnson & Johnson Pharma $417 102%
12 Walmart Retail & Food Retail $372 78%
13 Procter & Gamble Cosmetics & Personal Care $362 99%
14 Mastercard Banking z $356 99%
15 Nestle Food $347 91%
16 AT&T Telecoms $333 82%
17 Nvidia Technology & IT $331 97%
18 TSMC Technology & IT $316 82%
19 Verizon Telecoms $312 84%
20 UnitedHealth Group Healthcare $312 97%
*Source: Brand-finance GIFT 2020 report, p. 34
8WHERE DO I START?
Technology
IP
& Market
Monetization
Assessment
z
Protect IP to
Formulate IP
Defend
Strategy
Business
Establish IP
9WHERE DO I START?
• Technology and Market Assessment
• What is the problem your solution solves?
• What is/are the alternative solution to the problem?
What are your competitors/potential competitors doing
How are they protecting their solution
• Formula broad strategy z
• Offensive or Defensive or both
• Cost benefit analysis
Develop v. partner or license
License and litigate or mitigate risk of litigation
• Potential Goals
Freedom to operate
Reducing R&D expense and time to market
Create barriers to entry for competitors
Monetization
10WHERE DO I START?
• Practical steps when considering an IP strategy include
• Education: Building awareness of the IP importance
• Identifying existing solutions before starting a new
project z
• Capturing all current and potential IP
• Maintaining confidentiality
• Conducting competitor analysis to avoid infringement
of their IP
• Plan and routinely revise startup’s IP portfolio
11WHAT DO I PROTECT?
Technology
IP
& Markets
Monetization
Assessment
z
Protect IP to
Formulate IP
Defend
Strategy
Business
Establish IP
12WHAT DO I PROTECT?
• There are four main types of IP:
• Patents. (Protects rights in useful inventions and discoveries, like
machines and processes).
• Copyrights. (Protects expressive works, like art, music, dance, and
literature, and also software). z
• Trademarks. (Protects product, service, and company identifiers, like
brands, logos, and package designs).
• Trade secrets. (Protects commercially valuable confidential
information, like business and financial plans, formulas, recipes, and
customer information).
13WHAT AM I TRYING TO PROTECT?
Patents Trademarks Copyrights Trade Secrets
• Protects • Protects • Protects • Protects
functional or Brands z works of secret
ornamental • E.g., Apple authorship; information
features for cell expression • E.g., New
• E.g., swipe phones • E.g. books, undisclosed
feature or movies, invention, or
iPhone drawings process Coke
design • Software formula
14WHAT IS A PATENT?
A patent is a right granted by the US government to an inventor for a limited
time to exclude others from:
• Making, using, offering for sale, or selling the invention in the US.
• Importing the invention into the US.
Utility patents are the most common types of patents.
z
• Microwave oven
• Sewing machine
• Eyeglass retainer
• Process for curing rubber
• Certain software
Protect patented inventions through registration.
15WHAT IS A TRADEMARK?
A trademark identifies the source or origin of goods and
services and distinguishes the trademarked goods and
services from those made or sold by others.
Trademarks may take the form z
of:
• Names (e.g., CALVIN KLEIN® apparel and GEORGE
FOREMAN® grills, COKE® soft drinks and APPLE® products).
• Designs and symbols (e.g., Nikeʹs "Swoosh" design on
footwear in the “Apple” for APPLE® products).
• Slogans (e.g., Wendyʹs slogan WHEREʹS THE BEEF).
16WHAT IS A TRADEMARK? (contʹd)
Trademarks may also take the form of:
• Color (e.g., the color of Owens-Corningʹs pink fiberglass
insulation).
• Sound (e.g., NBC Universal Mediaʹs
z
chimes and Yahoo!
Inc.ʹs yodel).
• Scents.
• Package, product, or store design (e.g., the shape of a
fragrance bottle or the interior design of a restaurant).
Trademarks consisting of colors or package, product, or store designs, or
combinations of these features are commonly referred to as "trade dress."
17TRADEMARK REGISTRATION
Registration is not required (common law rights)
Federal trademark gives the trademark owner many
benefits, including:
z
• The exclusive right to use the mark nationwide in
connection with the goods or services covered by the
registration.
• The right to use the registered trademark symbol ® to
discourage infringement.
18WHAT IS A COPYRIGHT?
Copyright protects works of authorship that are:
• Fixed in any tangible form or medium of expression.
• Original in the sense that they are:
z
• Independently created by the author (or authors).
• At least minimally creative.
19WORKS PROTECTED BY COPYRIGHT
Copyright protects both published and unpublished original
works of authorship, including:
• Literary works (e.g., books, periodicals, manuscripts, film, tapes,
and computer programs).
• Musical works, including accompanying words.
• Dramatic works, including accompanying
z
music (e.g., scripts and
screenplays).
• Pantomimes and choreographic works.
• Pictorial, graphic, and sculptural works (e.g., fine, graphic, and
applied art and art reproductions, photographs, prints, maps,
models, and technical drawings).
• Motion pictures, video games, and other audiovisual works.
• Sound recordings.
• Architectural works.
20WORKS NOT PROTECTED BY COPYRIGHT
Copyright does not protect:
• Ideas, systems, methods, or processes.
• US government works.
z
• Typefaces (although copyright protection is available for
computer programs that generate fonts and typefaces).
21COPYRIGHT REGISTRATION
Registration is not required to establish federal copyright
ownership. However, registration in the US Copyright
Office because registration provides substantial benefits,
including:
z
• The ability to bring an action for copyright infringement.
• Recovery of attorneysʹ fees and special categories of damages
not otherwise available in an infringement action.
22WHAT IS A TRADE SECRET?
A trade secret is:
• Business, financial, and technical information.
• Kept confidential by its owner through reasonable efforts.
• Economically valuable becausez the information is not
generally known.
For example, the formula for Coke, KFCʹs fried chicken recipe,
and the source code of Adobeʹs PHOTOSHOP® software.
23TRADE SECRET PROTECTION
Trade secrets are not registered
Trade secrets are protected by reasonable efforts to keep
them secret through:
• Agreement
z
• Password protecting access to the information.
• Keeping hard copies of trade secret information in locked files
or cabinets.
• Never giving confidential information to customers or other
individuals outside of the company unless:
• Authorized by management.
• The recipient has signed a written Non-Disclosure Agreement.
24Do we think this idea is No
Use trade secret protection
worth at least $1MM?
Yes
Is similar technology already Yes
patented by many
File for Patent
companies
No
Have we already started Was it less than 12 Patent is helpful but not
File for Patent Pending
sales or marketing Yes months ago? required
Yes
No
No Yes
Consult a Patent
Do we plan to do fundraising Attorney
from VCS or Funds
Are we ready to spend No
$15,000 - $100,000 on
patents and IP protection
Yes
*Source: AJProtechHOW DO I PROTECT MY IP
Technology
IP
& Markets
Monetization
Assessment
z
Protect IP to
Formulate IP
Defend
Strategy
Business
Establish IP
Position
26HOW DO I PROTECT MY IP?
• Principles
“Innovation without protection is philanthropy”
(Max Blahill, Ralph Eckardt: The Invisible Edge)
• Steps z
Triage your knowledge assets
Convert your knowledge assets into IP
Manage your IP & keep it current
27HOW DO I PROTECT MY IP?
• Understand what differentiates you from your
competition
• Use IP to capture the differentiation and
monetize the value-add margin
z
• Manage your IP: keep it current
• Protect the margin/prevent commoditization
through
• Information sharing protocols
• Appropriate agreements
28HOW DO I PROTECT MY IP?
• Register copyrights and trademarks.
• Apply for patents on inventions and discoveries.
• Keep trade secrets confidential and limiting their disclosure.
• Obtain signed Non-Disclosure Agreements
z from vendors and other
business partners.
• Employment Agreements: NDAs, Assignment Agreements, work for hire,
(non-solicit and non-compete provisions).
• Engage watch notice services to monitor new IP application filings by
other companies.
29HOW DO I PROTECT MY IP?
• Mark packaging, advertising, marketing materials, and
websites with appropriate IP notices. For example:
• Copyright notice of electronic and printed publication:
© 2021 [COMPANY]
• Trademark notice for products,zpackaging, and other material:
[BRAND]® is a registered trademark of [COMPANY]
• Or, if the mark is not registered:
[BRAND]™ is a trademark of [COMPANY]
• Mark product, packaging, advertising, marketing material etc.
with issued Patent #s or “Patent Pending”.
30HOW DO I PROTECT MY IP?
• Patents are important but accept that you cannot afford to patent
everything (and not everything is patentable)
• Single U.S. Patent costs about $25k (filing à issuance assuming little office
action)
• Broad international filings for that patent cost about $150k
• Enforcement through trial averagesz about $2.0M+
• IP dollars should track R&D dollars
• Realistically assess barriers to policing and enforcement
• Don’t underestimate the value of trade secret protection
31HOW DO I MONETIZE MY IP
Technology &
IP
Markets
Monetization
Assessment
z
Protect IP to
Formulate IP
Defend
Strategy
Business
Establish IP
Position
32HOW DO I MONETIZE MY IP?
• Monetization depends on goals and definitions:
• Freedom to operate à in-bound licensing, cross
licensing, acquisition
• Save time and money à inbound
z
licensing, cross-
licensing, acquisition
• Barrier to entry/ Market Shareà patent portfolio
• Traditional Monetizationà outbound licenses, sale of IP
33LICENSE AGREEMENTS
• There is no such thing as a form Agreement
• U.S. law grants ownership automatically to the inventor
unless modified by contract
• Standard CDA/NDA terms modify ownership rules assigning
rights to the owner of the confidential
z
information
• Once your patent application is published, the contents are
no longer confidential information
• If you disclose the ‘value-add expertise’ that is not apparent
in the patent application, what do you have left?
• Consider the risk of your competitor becoming an inventor
in your technology space
34ANATOMY OF A LICENSE
• Grant of Rights
• Consideration
• Intellectual Property (ownership of licensee
improvements) z
• Termination provisions
• Legal
• Representations and warranties
• Indemnification
• Confidentiality
35LEGAL STUFF
• Reps and Warranties
• Allocates risk between parties
• Risk allocation rationale is meaningful if parties have
comparable bargaining power z
• Indemnifications
• Can impact effectiveness of reps and warranties
• Survival provisions can also impact effectiveness of reps
and warranties
36LEGAL STUFF
• Definition of IP
• If any category is omitted, risk may not be expressly allocated
• Seller
• Risks that Seller should know, risks
z
that cannot be reasonably
uncovered during buyer DD, risks created by Seller negligence
No obligations exist that are inconsistent with contract
Freedom-to-Operate: trade secret misappropriation
Actual or threatened claims of infringement
• Buyer
• Risks that may be uncovered in DD
Search prior art
Potential infringement: request information relating to Seller FTO searches/opinions
37SUMMARY
• Monetization requires more than technical solutions; it requires that you have some
currency which people are interested in buying
• Use and Manage your IP tools carefully to create, maintain, and exploit your currency
• The first step in selling is protecting
• Remember that when it comes to Agreements:
• Understand the Facts z
Use the right agreement at the right time
Consider whether other IP protection is appropriate
• There are no “form” agreements; one size does not fit all
Understand the terms and customize them to align with the business value proposition
• You must know the parties and their respective motivations
• With respect to NDAs, don’t overlook use provisions (it is not just about confidentiality)
• With respect to Licenses, spend extra time on the grant and carefully think through
termination
38Marc T. Rasich
Partner z
801.578.6901| marc.rasich@stoel.com
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