Like it or not, the legal system and its treatment if intellectual property rights can impact your startup's success. Photo: State Library of Victoria Collections
The ongoing legal wrangles between Apple and Samsung have resulted in a fierce global debate surrounding intellectual property rights. Questions have arisen over whether the patents horded by established companies can stifle innovation from startups. Entrepreneurs also wonder what they can do to protect their intellectual property rights, if anything can be done at all.
In this article, we examine 10 myths about intellectual property rights, and look at the recourses that startups have to safeguard their interests. The bulk of this article is based on a talk given by Professor David Llewelyn at Techventure 2012. David is the deputy dean at the School of Law, Singapore Management University.
Myth #1: Patents are the most important form of intellectual property rights (IPR).
That really depends on the country you operate in. In China, for example, there aren’t adequate protections for IPR. So people don’t play by the rules. The state and provincial governments often have no motivation to protect IPs, since improving efficiency in companies could lead to less employment, and government officials are keen to portray themselves as job creators. But that is changing, since the country is now facing a labor shortage. Nonetheless, the situation stands in China that acquiring customers and building market share remains far more important than enforcing your rights.
Whether patents are supremely important also depends on your industry. In research-intensive industries like material engineering and biomedical sciences, patents matter a lot more. Not so in the consumer internet space, where branding and distribution takes precedence.
Myth #2: Having IPR in Singapore is enough.
Singapore is a small country, too small to be considered a viable market for many startups. Just because you’ve applied for a trademark in one country doesn’t mean that it is enforceable in another. So, due to the fact that IPRs are bounded by sovereignty, startups that have a regional outlook should apply for IPRs in every country they want to enter.
Myth #3: IPRs restrict the flow of ideas.
As much as we hate the patent battle raging between Apple and Samsung, IPRs are necessary to protect products, processes, and expression of ideas. What needs reform, perhaps, is the bar by which an idea is considered enforceable. Also, disincentives could be introduced into the legal framework to discourage patent trolling.
Myth #4: We should all copy the US of A.
Asian entrepreneurs are well known for taking advantage of IPR arbitrage by copying Western ideas and implementing it in their home countries. While this has worked in many cases (think Groupon and Birchbox clones), blinding implementing Silicon Valley ideas could very well be a fool’s errand.
Myth #5: Getting the IPRs is the hard part.
It’s actually pretty easy. So easy that entrepreneurs frequently don’t think about why they acquire the rights. Startups must think about how getting IPRs fit in with their commercial objectives. After all, with the limited resources startups have, they might end up spending an excessive amount of time applying for patents, trademarks, and so on without devoting sufficient effort to product development, go-to market strategies, and customer acquisition.
Myth #6: IPRs can wait.
This isn’t always true. In many cases, patents cannot wait. Trademarks, on the other hand, can be placed on the backburner. That’s because even an unregistered trademark has legal rights in the eyes of the law. The same applies for copyright.
Myth #7: IPRs are expensive and only for big businesses.
Who says you need a money-grubbing lawyer to enforce your IPR? One cheap trick you can do is to put a little ‘tm’ or ‘sm’ mark next to your logo and in your company website. Legally, these marks have no bite, but perception matters: It makes people think that you know what you’re doing.
Myth #8: All IPRs are the same.
Copyrights last for a very long time, even past the author’s lifespan. Patents, on the other hand, can only last for a couple of decades. And while patents have legal effect only when they’re approved by the patent office, copyright and trademark laws come into play even without you having to do anything (other than to create).
Myth #9: IP infringement is theft.
Technically, if someone steals from you, you don’t own the thing anymore. IPRs aren’t like that. Even if someone copies your idea, you still own it (your company, on the other hand, might be crushed by your ‘lesser’ competition). Instead, IP infringement is more like trespassing. It’s up to you to defend your property (or move house if the trespasser is an Apple or Google).
Myth #10: All registered IPRs are valid.
People and companies are hoarders. But in reality, most patents are never exploited. Further, many patents are not valid because they’ve not been approved — there’s a big difference between ‘patent pending’ and ‘patent granted’. Also, while we treat the law as monolithic things, patent offices are staffed by human beings. They don’t always know what’s novel around the world. You may be able to easily obtain a patent, but whether it stands up in court is another matter altogether.
Some final words
Getting a patent is often a good move, since it’s an essential toolkit of modern businesses. But being overly-possessive about your idea might be counter-productive. Consider the case of Red Bull, an energy drink which was first created in Thailand. An Austrian entrepreneur discovered the idea, modified the formula, and made it a global brand.
To make it happen, he partnered with Chaleo Yoovidhya, the Thai creator of the drink. Although Chaleo owned only 49% of the company, that was enough to make him the third richest person in Thailand.
The lesson here? 49% of a lot is much, much better than 100% of nothing. So pick your battles wisely.
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