Startups

How to Protect a Great Startup Idea

The answer: Research, research, research.

So you’ve got a great startup idea and you’re ready to launch the next Instagram or FitBit. The question is, how do you protect your startup idea? The answer is intellectual property, often referred to as IP. IP protection includes a range of laws that can both help and hinder entrepreneurs. But patents, trademarks and copyrights are crucial to a startup’s success. Remember, too, that investors will expect startups to have their IP protection in place before doling out any venture capital.

Intellectual property law is complicated and constantly evolving. Consider these tips a starting point and not a substitute for legal advice. Your best bet for protecting your startup is an experienced IP lawyer.

Patents, copyrights, trademarks and trade secrets

Start by figuring out what type of intellectual property you need to protect. In the United States, there are four primary ways of protecting intellectual property:

  • Patents protect inventions, whether it’s a type of software or a physical object. Patents last for 20 years, though periodic fees will be required.
  • Copyrights cover creative works such as novels, films and songs. There are several variables about how long a copyright will last. For “made for hire” work, which is generally the type of work created for small businesses, a copyright will last either 95 years from the year of its first publication or 120 years from its creation, whichever will expire first.
  • Trademarks, which can be a word, symbol, design or phrase used to brand a company, are renewable indefinitely for 10 year terms.
  • Finally, there are trade secrets, which is anything that gives a company an advantage over its competitors, whether it is a data set, a formula or a manufacturing process. By definition, trade secrets are protected for an unlimited amount of time, provided that they remain secret.

Where to begin?

“The biggest question to ask is, ‘What can I offer that other people can’t?’” says Mark Lemley, a professor at Stanford Law School who teaches intellectual property law. “For some companies, that’s a cool but simple idea. If so, and if that idea will be evident once your product goes on the market, you need patent protection,” Lemley says.

Lemley also says, “If it’s an internal manufacturing idea, detailed knowledge about how something works, or something else not easy to see, trade secrecy may be a better bet (and it’s cheaper and quicker to get).”

Andrea Hence Evans, a patent, trademark and copyright lawyer, and owner of Evans IP Law, says, “The first thing to do is research. That’s the most important thing.” Evans stresses that startup entrepreneurs need to identify what they are trying to protect and whether they should be looking to file a patent, trademark, copyright or all three.

Contracts: Sign on the dotted line

In addition, before you start down the legal path of protecting your startup’s intellectual property, make sure you have your contracts in place for any partners and employees. “Do not start a business on a handshake deal,” says Evans. “Sit down with an attorney; do not just Google a template from the internet.”

Your contracts should define what is considered intellectual property at your company and to whom it belongs. For example, you may hire a developer to help you implement your idea and she may come up with a new variation on the software to improve your platform. Without a clear contract in place, this code (and invention) will belong to the developer and not to your company.

Conversely, you need to be aware of other contracts that you, your partners, and employees may already be bound by. Non-compete agreements or other contracts may restrict your work or the work of your employees. As a result, the work done for your company may still be the intellectual property of another employer. “There should be no gray areas,” says Evans.

The lawsuits and counter-lawsuits between dating apps Tinder and Bumble, (which was started by a Tinder co-founder with some of the same key original employees) show the intellectual property complexities that companies may have when creating similar businesses with some of the same employees.

How to obtain patents, trademarks and copyrights for your startup idea

Evans, who is also a former United States Patent and Trademark Office patent examiner, has written two books, All About Inventing and All About Trademarks. They are designed for the lay person who is overwhelmed by the maze of language and paperwork surrounding intellectual property. She emphasized the importance of seeking a qualified attorney to help you file your paperwork.

“There are so many misconceptions about filling out the paperwork,” she said. “People assume it’s a simple document, but it’s not.” Evans also points out that though it is possible to recoup damages from copyright infringement with a copyright registered after infringement occurs, the best financial and legal protection is to have a registered copyright prior to the copyright infringement. 

Copyright: Copyrights are filed with the Library of Congress. Confusingly, software applications, in addition to being something patentable, can also be considered an expression of authorship, and thus can be registered under a copyright.

Copyright.gov has an extensive FAQ section that is worth reading. It includes answering the question, “How do I protect my sighting of Elvis?” (Short answer: You can’t).

For a standard, straightforward filing of a copyright, Evans estimates that it should take an experienced attorney somewhere between one to three hours. Depending on the attorney’s hourly rate, this is probably the cheapest type of IP protection to file, costing an attorney’s fee of somewhere between $300 to $1,500, and can take anywhere from a few months to a year and a half to obtain the registration certificate from the Library of Congress.  

Trademark:  Trademarks and patents will be filed with the USPTO, the United States Patent and Trademark Office. The USPTO strongly suggests hiring an attorney to help you file a trademark. There are many small steps for a successful trademark registration that may not be obvious. For example, you must show proof that you are using the trademark within 36 months of the trademark application being allowed. Evans estimates that attorney’s fees for trademark filing are generally in the $1,000 to $2,000 range.

Patent: Filing for a patent is the most difficult, time-consuming and expensive one of the three primary IP protections, but also necessary for many kinds of businesses. Only active patent practitioners who are registered with the Office of Enrollment and Discipline at the USPTO are allowed to represent inventors in any dealings with the office. Though American inventors are allowed to represent themselves, the USPTO strongly recommends you hire a registered patent practitioner to help guide you. This can cost anywhere from $5,000 to $20,000 or more in attorney fees. The process can take from two to three years.

What if I Can’t Afford the Fees?

Filing for patents and trademarks can be cost-prohibitive for small businesses. The USPTO has programs for inventors to work with law school clinics to help file for patents and trademarks, a patent pro bono program for under-resourced inventors, and assistance for inventors who try to file on their own.

Social apps: Share it, use it or lose it

For many startup apps, particularly apps that depend on a critical mass of users, protecting your idea using intellectual property laws can be very difficult. The similarity of many ideas also increases the difficulty of filing a patent.

Get a critical mass of users

For social apps, the question of survival is often less about patent law and more about the user base. A company that has a large and devoted user base is more likely to survive. Lemley, the Stanford law professor, says, “For some companies you may not want IP protection at all, preferring to release code under open source licenses or to share the idea widely in hopes of boosting adoption.” 

Ravelry, a social media website for knitters and crocheters, has more than 8 million registered users and has no significant competitors in its online space. It is a prime example of a company that chose to share the idea widely instead of focusing on patents. Casey Forbes, a co-founder of Ravelry, said, “We hold no patents.” Yet Ravelry remains the dominant site among its users, due to its large library of patterns and its tightly networked group of users.

Strong and weak trademarks

“Whatever your company, though, the one piece of IP no one can do without is a brand,” Lemley says. He adds, “Trademark protection is critical to distinguish your product from competitors and to build name recognition.”

Evans points to the importance of branding as well, saying that startups need to focus on creating and protecting strong trademarks. In the language of IP, the strongest type of trademark — one that will easily pass muster when registering, as well as prove easy to defend from use by third parties — is a category called “fanciful or arbitrary.” Fanciful is a mark that is not in the dictionary. Think Xerox. An arbitrary mark is a real word that is applied to a completely different category of goods and services: Apple Computers is one of the most famous examples.

Once a company has trademarked its name, it must not only use it, it must vigilantly enforce any infringement. The New York City-based chain of arcade bars Barcade filed for a trademark for the name in 2007 and the trademark is now considered incontestable — that is, it has been in use for five years and has not been made generic. Defending the trademark is a full-time job: Barcade not only has an in-house employee tracking infringement, it also has a law firm on retainer to follow up with others who do not cease and desist with their use of the word “barcade.”

Intellectual property is your biggest asset

Intellectual property is part of what makes any business unique. And protecting your startup idea is essential for success. For any entrepreneur ready to launch a startup, make sure you have all of your intellectual property bases covered, and future you will thank past you for getting the details right.

Claire Lui grew up in San Francisco, but now lives in New York. She is a design, business and culture writer.