Intellectual Property, Five Crucial Mistakes Australian Small Business Start-ups Can’t Afford To Make: Legal Matters
Five intellectual property mistakes start-ups must avoid
By Oliver Milman
Toiling away at a business only for a competitor to steal your product idea or brand may be the nightmare of many entrepreneurs, but research out this week shows that worryingly few are prepared to do anything about it.
According to the Australian Bureau of Statistics, 67.1% of businesses with zero to four employees use no form of protection when it comes to intellectual property.
Slightly larger businesses aren’t much better. More than 60% of businesses employing between five and 19 employees use no IP protection methods.
This alarming state of affairs should send start-ups scurrying to their IP lawyers. Before you do so, however, make sure you haven’t committed any of these five common IP mistakes.
1. Not realising the value of your IP
If you think that registering your business name and a decent trading history is enough to protect your IP, you’re wrong.
If, on top of that, you fail to realise that your brand, logo, processes and products can all fall under the IP banner, you are compounding your initial error.
“Most businesses think they don’t generate IP but they actually do,” explains an IP Australia spokesman.
“Tradesmen are always inventing things that solve little things. Unless they protect their IP, they’re not going to benefit from that.”
“A classic example is [appliances retailer] Kambrook – the guy developed a multiple power adaptor board. He invented that and didn’t patent it.”
“He lost millions of dollars of potential income. Other companies copied it because he didn’t realise the IP had value.”
Analyse your brand and product names, slogans, taglines and logos – can you trademark these in Australia at least?
Also look at the reproduction and distribution of your product – you may be able to copyright it. In some cases, you may even be able to get a patent.
Don’t be in the dark about the IP you create – it’s the very essence of your business’ proposition. If you’re unsure where you stand, speak to an IP lawyer as soon as you can.
2. Not safeguarding your brand name properly
The recent introduction of a National Business Name Register may have given you the impression that you merely have to register your business name with ASIC and it is protected across Australia.
Alas, this isn’t the case. A trademark is the only way that you will be able to prevent another business infringing upon your brand, even with a decent trading history behind you.
It may cost around $1,600 and take seven months to process, but that initial outlay will be more than worth it if you’re faced with the prospect of having to tear up all of your marketing material because someone else got there first.
Lawyer James Omond explains: “The only way to secure a ‘proprietary interest’ in a name that you are using [i.e. an ownership interest] is to register it as a trademark.”
“This not only means that other people cannot stop you from using that name, it also allows you to assert your ownership rights in the name against someone else.”
“Using a business name will give you ‘common law’ rights to that name, but if you want to sue someone else for using the same, or a similar name, you can only succeed if you can prove that you have built a reputation in the name, and suffered actual damage as a result of the other person using it.”
“This can be very a difficult and expensive exercise in court. These requirements do not have to be fulfilled if you have a trademark registration.”
“So let me bang the drum again – you need to register your business name as a trademark if you want to truly own it, and be able to protect it.”
3. Discussing your idea carelessly
When you concoct an idea for a start-up business, it’s natural to be excited and blurt out your concept to family and friends. Indeed, many successful businesses have been shaped by the early advice and support of people close to the founder. However, tread carefully.
“I’ve seen a few cases where someone has told friends and family an idea and the idea has found its way to a competitor,” says Joe Seisdedos, senior associate at law firm Griffith Hack.
“You have to be careful even when talking to friends and family. Once an idea is out there, you can’t really draw it back in. Generally, the law says that if you disclose an invention to others, even if they are friends and family, your ability to get a patent may be seriously compromised.”
Seisdedos advises start-ups to talk to an attorney before discussing any innovative business idea and demand that non-disclosure agreements are signed by potential business partners.
Even if they won’t sign NDAs, an agreement in principal, agreed over email for example, should be enough to protect you.
4. Failing to see the global picture
The internet may be a wondrous tool for businesses, but it can create countless headaches in terms of intellectual property.
Where once you would merely worry that a rival in the next suburb may copy your brand and business model, IP theft can now take part in any corner of the world, by anyone who has the ability to log onto your website.
IP law is slowly playing catch-up, with the Madrid Protocol allowing businesses in 80 countries – including Australia – to file a common trademark across different international markets.
It’ll cost you around $800 initially, with individual fees for each country or territory you hope to trade in.
After making sure you are protected in Australia, it’s worth looking into how your IP can extend overseas.
5. Selling yourself short
Some start-ups can get sucked into the web of larger rivals that promise to expand their business. Without proper IP protection, the start-up can find that their ideas are stripped away without recourse. Even a patent won’t deter some large corporates.
Paul Brennan, of Brennan Law, says: "Some large companies say to a small firm 'come with us, we'll take you with us and franchise you’. You can get merged in and once you lose everything else, all you have is your IP."
According to Seisdedos, big business will usually attempt to get your product or idea under license rather than crush any patent entirely.
“Many larger companies would rather talk to you with a view to licensing the technology,” he explains.
“If they knock over the patent entirely, then it’s available to all of their competitors, so it’s in their best interests to work with you rather than against you.”
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