When new companies are moving forward with a product at a rapid pace, some of the last things on their minds are details like patents, inventorship, and other intellectual property matters. Most times, however, these oversights can have dire legal consequences. Other times, they can lead some to take some crazy measures to cover up their missteps or protect their pocketbooks. Check out this story from my early days as a patent litigator.
In the very first patent infringement case that I worked on right out of law school, I represented the defendant in a case where the plaintiff’s CEO was caught falsifying his engineering notebooks in order to prevail in an inventorship and prior art dispute that was raised as a defense during the case.
During discovery, we had the CEO’s original handwritten notebooks ink-date tested by forensic scientists to prove that they were doctored and he actually did not have exclusive rights to the technology. Turns out the ink used to create the notebook entries at issue was not manufactured until more than 10 years after he claimed he made the entries at issue (think old school meta data). . .The case only got crazier from there.
After losing a multi-day evidentiary hearing to determine the admissibility of the notebooks, the judge in the civil case determined that the CEO (and others) had committed fraud on the Court and referred the issue to the U.S. Attorney for criminal prosecution. While attempting to flee the country, the CEO was arrested, his passport revoked, and he was thrown in jail while awaiting trial on the fraud charges. He lost and was sentenced to an extended jail term.
But wait, it gets better. In a move straight out of a Hollywood drama, the CEO tried to hire a hitman while incarcerated to kill the judge in the underlying case. Unfortunately for the CEO — and fortunately for the judge — the prison contact he approached for the hit turned out to be a confidential informant to the FBI. Doh! As far as I can tell he is still serving his initial 17-year prison sentence.
I know it is an extreme story, but it is a cautionary tale about the importance of protecting your IP from the get-go and paying attention to those often overlooked but legally impactful aspects of inventorship and ownership. Startup founders and entrepreneurs are often worried about the here and now. Being able to adapt and change with zero money is part of the startup philosophy. Meanwhile, intellectual property protection is more of a forward-looking, long-term vision.
What are some of the issues that arise due to this disconnect? More importantly, how can you avoid making IP protection mistakes in your own startup? I’ll break down four common mistakes startups make with their intellectual property and how you can avoid them.
1. Missing Unextendable Deadlines
Say you’re in startup mode. You go through an accelerator, you tell the whole world about your great idea, you have a product and customers…but you haven’t filed a patent application. Nine months have passed. Soon, you won’t even have the chance to protect your IP, due to hard and fast deadlines that are embedded in the patent statutes. Once those deadlines pass, you can’t buy, lie, or muscle your way out of that situation and you seriously risk dedicating your invention to the public domain. No one — including you — will ever be able to patent it.
For some startups, intellectual property protection doesn’t even come up until it’s a legal issue or an investor asks the inevitable question about whether you have already filed those applications. As some startups discover too late, there are very black-and-white deadlines within IP law that require you to protect your innovations by a certain date. If you fail to do so, you can’t ever get that chance back.
Not sticking to deadlines for protecting your IP is one of the biggest mistakes that startup companies make.
2. Inventorship: Not Crediting the Right People
In accelerator-style programs, lots of people with very philanthropic motivations come together to help young companies thrive. It is a hyper-collaborative environment. These mentors might casually mention an idea or a suggestion for tweaking your product over a cup of coffee and next thing you know, the startup founders run with an idea that was conceived by someone else.
A version of this happened in another patent infringement litigation that I worked on some years back. During the development of our client’s technology, there were collaborative efforts between the company that owned the patent and an inventor who was part of another company. Originally, the company who filed the patent application acknowledged that the separate inventor contributed to the technology. They reached out to him to file the correct paperwork, but he hesitated, saying that he felt the idea wasn’t patentable and that he alone was the only inventor on the technology. While there are rules to specifically deal with this type of recalcitrant inventor situation, the company instead moved forward and filed the patent application on their own without attributing inventorship to this individual.
Years after the patent issued, it was asserted against a number of companies in that industry including that same “other company.” The case was won based on the fact that the attorneys writing the patent application at the time had encouraged the company to not properly deal with the inventor and his statements about collaboration and inventorship.
Inventorship is a legal definition and it’s very important to get it correct. So, if you file a patent application and the invention has contributions from others that are not listed as inventors on the patent, the patent can be held invalid and you can expose yourself as a company to ownership issues. Deal with these problems up front and it tends to be a matter of simple paperwork. Monkey with the rules for personal gain or to keep the cap table simple, you may lose your IP.
Related: Pitfalls to Avoid When Collaborating on Intellectual Property
The proper inventors always need to be named, even if a collaborator or contributor isn’t part of the company — and yes, even if it’s just a mentor who mentioned an innovative idea over a cup of coffee.
Now, I know what you’re thinking — does this mean that I can’t have coffee with someone to brainstorm? Do I need to credit everyone who provides even the slightest bit of input?
No, that doesn’t mean that at all. Ninety percent of these mentoring environments aren’t providing specific advice that could have legal implications later. Most of your discussions aren’t going to be about core technology or code functionality; they’re more likely to be about marketing or customers.
You only need to involve an outside individual like a mentor in your patent filing if they conceived of a critical idea associated with your invention and those concepts made it into the claims of your patent application.
3. Looking for an Easy, Cheap Option
IP protection can also be a turn-off to some entrepreneurs or inventors because it is initially perceived as both expensive and time-consuming. Some startup founders tend to shy away from IP protection due to the cost or try to find a way to get IP protection for free. Some look for volunteers to provide IP services.
Thankfully, there are new, more streamlined and inexpensive ways to get IP protection, particularly in the early phases of a company where all you may need is a simple provisional patent application and a single trademark application to cover the basics. You will likely still need to invest some of your own time but don’t be steered away just by the perceived financial costs.
Related: What Lawyers and Clients Need to Know About the Use of Artificial Intelligence
Inventors are often embedded in the day-to-day aspects of launching their company and getting it off the ground at a rapid pace. IP protection doesn’t interest them. Their attention, though, is crucial to ensure their IP is protected.
4. Not Filing a Trademark Registration
If you have a name for your company or key product, file a trademark application. There’s really no excuse not to. It’s cheap, it’s straightforward, and it only takes a moment of your time and you get a lot of benefits by having an early filing date for your brand.
Related: Did You Get Punk’d By a Trademark Spammer or Patent Troll?
Your Future Growth Is in Your IP
Being a startup is exciting and busy, but you need to keep your future in mind. Your IP is part of that. During the next phase of your company, when you’re looking for money or talking to investors, they’re going to want to know that this stuff was already taken care of.
Make no mistake — 100% of the time you’re going to get those questions from people wanting to put money in your company: “Have you filed patent applications? Have you filed trademark applications? Have you protected your IP?” If you can’t answer yes, you’re going to be scrambling to get it done. That’s not a good situation for anybody.
Don’t fall victim to one of these potential mistakes. It might take you a little extra time, cost, or inconvenience to do the right thing. But when you have your IP protected properly from the beginning, your IP protection work should take a back burner for a while. You can breathe easier and sleep a little better, knowing you’re protected as you head into the next phase of your company.