VCs will include intellectual property questions in their due diligence when considering investments and you want to be sure that you are ready.
Why does protecting IP matter in seed stage or early-stage companies?
IP protection shows your investors that you not only focus on the product that you’re building but that you are serious and committed to it’s future. VCs also want to know that the company can continue to operate even if there is a change in leadership. This is why it is important to assign the intellectual property to the company rather than to founders or CEOs.
Protecting intellectual property can be confusing. We find it easiest to think about IP protection in two spaces: the internal protection you may need with employees, other founders, etc. and the external protection you may need to keep your product out of the hands of your competitors.
Internal IP Protection
VC’s are often looking for three things when reviewing the IP of a company:
· Your employees have signed the proper contracts
· You keep records of all documentation signed
· IP has been assigned to the company rather than to any individual(s)
External IP Protection
There are many ways to go about protecting your work from being stolen or used by the public. The best way to do so depends on the type of IP you are protecting, how long you want to protect it for and how much money you are willing to spend.
As seen in the table above, protecting your intellectual property can be expensive and time consuming. Some types of IP protection, like filing for a patent, can take up to 4 years and tens of thousands of dollars to complete. It is important to consider the competitive landscape and to ask questions to determine your IP protection needs.
Here are a few key considerations:
· Are there other companies trying to make the same product as you are? If so, then consider filing as soon as possible. The United States gives patents to the “first to file” so it is important that you file for a patent before your competitors, if possible.
· Is the technology space you are working in changing rapidly? Will it change within the 4 years it may take to get your patent complete? If so, maybe a patent may not be the right decision.
· Does the success of your company rely on your product staying private? Filing a patent makes knowledge of your product public. Consider keeping your IP as a trade secret until you are ready for the world to know about it.
Securing your IP may seem simple when it is laid out plainly in tables and charts but protecting your hard work should not be taken lightly. It is important to discuss how to best protect your intellectual property with an attorney that specializes in intellectual property. They will be able to guide you through the best practices and appropriate steps you should be taking to make sure that your original idea stays yours.
by Emily Thompson