We bring to you a guest post by Sonia Chauhan, an associate at Talwar Advocates. In this post she discusses the benefits of having an IP strategy in place for start ups at an early stage and the pitfalls of leaving it for too late. Not only can an effective IP strategy aid in securing funding, no IP protection at all can result in copy cat models invading the market and a significant loss in market share. Read on for Sonia’s entire analysis below.
Backing Up the Start-Up: Benefits of a Sound IPR Strategy
With the Indian horizon set ablaze with start-ups, the opportunity of building a full-fledged business out of a mere idea is much closer to reality now than it was a couple of decades ago. The rule of thumb in the entrepreneur industry is that two things are precious – time and money.
This is the reason why most start-ups leave it for later to develop an IP strategy, thinking it to be the last step of setting-up shop. But, not only is it dangerous to float unprotected IP in the market but it could also invite a lawsuit right at your doorstep. Start-Ups must solidify their IP strategy in place while at a nascent stage, even if it takes a week of just reading up and educating the core team on IP.
Lately, majority of start-ups are innovation based ventures, their core idea being commercial exploitation of an innovative product or service, i.e., some form of IP. Keeping this as the base, it then becomes mandatory for an idea based start-up to have a defined IP strategy in order to grow and reach out to the public without compromising their trade secrets.
Most start-ups struggle to define an IP Strategy because they do not understand it correctly. Put in simple words, an IP Strategy is coming up with a set course of action that enables a start-up to maximize the potential of their product/service, by the three-fold approach of:
- maintaining lower costs than their competition by generating original cutting edge technology;
- achieve higher selling prices due to uniqueness of the technology; and
- in turn, augment their market share
An effective IP strategy ensures that the start-up maintains low cost prices as it is self-reliant in terms of technology and product creation. This leads to the conception of a unique product which will assure higher selling price as well as garner greater market share by cutting down competing products present in the market.
Taken the other way around, when a start-up holds an original product/service but does not adequately safeguard their respective IP; then markets such a potent product without developing a strong IP strategy to monitor and back up sales, not only does it expose the product to plagiarism but also loses out on precious market share and boosted sales due to loss of originality.
Securing IP gives a start-up the freedom to operate in showcasing their unique products or technology. For example, Google patented their Page Rank patent way back in 1998 when they didn’t even have a sustainable development plan to commercialise the patent. Had Google not thought of patenting this core idea of ranking pages as per their document citations, it would have been hit by copycats across the World diluting the service and capitalising on Google’s ὰ la mode system.
Another significant pre-production aspect that is directly linked to IP strategy is venture capital. Generally, start-ups are found bootstrapping their way into setting up and are on a constant look-out for capital investment. Here, a neat IP strategy goes a long way in attracting sound investments, as investors tend to rely on patents and other IP in evaluating the potential of a start-up.
Investors mostly see patents and other IP as valuable assets that can fetch future gains. To them, protected IP equals the faith of a start-up founder in their product or service. This does not mean that a start-up must have granted patents under its sleeve to fare well at a VC funding, but must have made patent applications before looking for funding.
In the same breath, where a start-up has not taken any steps to secure IP or have not formalized an IP strategy, the investor can be put off in pouring capital into such an unguarded product. Further, venture capitalists are known to pull out funding at the last moment as a result of unsecure IP, which can prove lethal for a start-up.
The brief history of start-ups has amply demonstrated that it is as valuable to develop an effective IP strategy for start-ups as it is to generate new and exciting technologies. Start-Ups have changed the face of corporate set-ups on an international level, but only with the help of safeguarding and protective measures that are no more just vague notions but solid and well-defined concepts.