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How tech startups should protect their intellectual property assets

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In our legal work, we found that many technology companies tend to neglect to protect their intellectual property assets. It can be embarrassing for founders especially when they’re fundraising.

If it was discovered during legal due diligence by venture capitals or investors, you may also lose some contractual leverage.

I mean, if you are a technology company, what else would be more important apart from your team if it’s not your intellectual property assets?

First, intellectual property (IP) assets refer to a set of legally recognised assets under the law such as copyrights, trademarks, industrial design, and patents, and so on. But in this post, we’ll focus on copyrights and trademarks as they seem to be more common IP assets that generally apply for many technology companies and startups.

Let’s take a look at the simple steps on what to do below.

Do you own your technology?

It is crucial for technology companies to ascertain if they actually own the technology.

For instance, when an early stage company is just starting out, it may have outsourced certain product development to a third party such as an outsourced software developer (as opposed to developing the MVP or prototype in the house).

In this case, everyone needs to sign the necessary IP assignments for the company. This usually includes all developer, service, any business agreements with another party, and in all employment, consulting, or advisor agreements to the company.

Have you protected your technology?

Usually, the most important intellectual property asset for a technology company relates to its source code.

In every country, there is an intellectual property office that is in charge when it comes to filing work. For example, under Malaysian laws, a company can protect its source code by voluntary filing to Malaysia Intellectual Property Office (MyIPO).

Source code such as lyrics or manuscripts falls within the scope of a “literary work” under the Copyright Act 1987.

This is different from a trademark which refers to a sign, design, or expression which identifies products or services. Like copyright, to protect your trademark, you need to do a trademark filing to the regulator. This can be done by engaging a trademark agent or by self-filing.

Before filing, the standard practice is to do a search on the current database and see if they are any similar trademark filing that may have been done over a similar name or logo. A good trademark agent would be able to highlight your prospect of succeeding in a filing application or if it may be better if you change your name.

As a technology company or startup, you also need to decide on the level of protection. The protection is territorial in nature. In other words, you need to file a separate filing in every country that you wish to protect your IP assets.

In Malaysia, previously a company may be required to engage a trademark agent to do filings in every country that it seeks to be legally protected. But thanks to the newly-amended Trade Marks Act 2019, companies can now file worldwide protection over its trademark by a single filing to the regulator.

You should speak to your legal counsel on whether you should do worldwide protection.

How do you monetise your technology?

When it comes to monetising your IP assets, for a technology company, you need to demonstrate proof of your IP ownership. So if you have an unclear IP assignment, it may be more difficult for you to monetise your software or services.

Owning a technology itself does not automatically generate money for a business. A technology company generates income by licensing the use of its certain software such as ‘Software as a Service’ (SaaS) which can be a B2B or B2C solution.

This is where having a licensing agreement or even a term sheet in place can help save cost and time.

This article was first published on e27, on May 20, 2020