At its core, entrepreneurship is about the monetization of an idea. That idea emanates from the process of identifying a problem that someone or some business faces and finding a solution. That idea is the very heart and soul of your start-up.
This “idea” is the foundation of your Intellectual Property (IP).
IP refers to the creations of the knowledge, invention or process for which rights can be assigned to specific owners by law. These are Intellectual Property Rights (IPR). Recognized Intellectual Property Rights encompass discoveries and inventions (Patents); words, phrases, symbols, and designs (Trademarks); and music, literature, and other artistic works (Copyrights).
One of the key considerations for investors is whether a company can protect its unique characteristics or processes that generate revenue, its Intellectual Property. Therefore, an important step in the funding process is to build safeguards for those characteristics.
This process starts with the formation of your startup organization.
When a company applies for a charter for its organization through the Secretary of State for the state in which it is formed, they will find out if the business name is available. At this basic level, the granting of the charter provides some degree of protection for their unique name. However, there are limitations:
- It only marginally protects the company’s legal name. It’s possible that someone else may use a similar name by using a dba (doing business as) name.
- It does not protect any process, product or service.
- The protection is confined to the state in which the company is chartered.
The Next Safeguard.
This level stems from the nature of the business concept, economic conditions, and the regulatory environment. The two relevant ideas are:
- Barriers to Entry
These are the impediments to other businesses entering into direct completion with your company. These typically derive from high startup costs, regulatory restrictions, limited access to key resources, and other factors.
The greater the Barriers to Entry, the greater the protection. However, these factors are generally not under your control (for example, governments change rules). This creates uncertainty about the true level of protection.
- First to Market
There is a competitive advantage gained by being the first to enter a specific market or industry. This allows a company to build brand recognition and potential customer loyalty. Unfortunately, success tends to spur competition and the First Mover advantage can be short-lived.
Another Limited Form of Protection.
The last notable form of protection comes from registering your Domain Name. An adequate search of available names is important. It can be useful to acquire similar names and identical names with a different suffix (for instance: .com .net .org). There are numerous useful name search tools available on the internet.
Unfortunately for many startups, it can be difficult, complex and expensive even to find out if their product or service is unique enough to qualify for protection. While these factors confer some degree of protection to your IP, there are more formal steps that can be taken. The relevant IPR protections to most entrepreneurs are Patents and Trademarks. For more information read the following materials: