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What is intellectual property?

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What is intellectual property?

If you’re starting a business, especially a software business you’ll need to get a good handle on what intellectual property (IP) is and how you can build it in your business. Ultimately IP is one of the only things of value in a tech business. We live and work in a knowledge-based economy, intellectual property (IP) is a valuable asset that fuels customer acquisition as well as makes your business a valuable target for a future exit. But what exactly is intellectual property, and why is it important for individuals and your business? We’ll have a quick look at what IP is for startups, some different types and why it’s important for you to cultivate and protect.

Understanding Intellectual Property for Startups

Intellectual property refers to non-physical/non-tangible parts parts of your business that are built as it grows. Designs, code, research and development as well as marketing and sales collateral, symbols, names, and images used in running your business all fall into this definition. It covers a very broad range of intangible assets that are protected by law. Allowing creators and innovators to control and benefit from their creations. In your case hopefully benefit financially. Rights grant business owners exclusive rights to use, reproduce, or distribute the IP that they have developed, thereby incentivizing innovation, business and creativity.

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Types of Intellectual Property

There are several types of rights, each serving to protect different forms of property that has been created and innovative works. The most common types of intellectual property include:

  1. Patents: Patents protect inventions and innovations, granting inventors exclusive rights to their creations for a limited period. Patents can cover products, processes, and designs, providing inventors with a monopoly over their invention. And the ability to prevent others from making, using, or selling it without permission.
  2. Copyrights: Copyrights protect original works of authorship, such as literary, artistic, musical, and dramatic works. As well as software code and architectural designs. Copyright grants creators the exclusive right to reproduce, distribute, perform, and display their works. Allowing them to control how their creations are used and monetized.
  3. Trademarks: Trademarks protect brands, logos, slogans, and other distinctive signs used to identify. And distinguish products or services in the marketplace. Trademark rights prevent others from using similar marks. That could cause confusion among consumers, safeguarding the reputation and goodwill associated with a brand.
  4. Trade Secrets: Trade secrets protect confidential information, such as formulas, processes, methods, or customer lists. That provide a competitive advantage to businesses. Unlike patents, trade secrets are not publicly disclosed and can be protected indefinitely, as long as they remain secret and provide economic value to their owner.

Importance of Intellectual Property

The ownership and protection of IP plays an outsized role in your business. Here are some key reasons why intellectual property rights are important:

  1. Incentivizing Innovation: Intellectual property rights incentivize innovation by providing creators and innovators with financial incentives and legal protections for their efforts. By granting exclusive rights to their creations, rights encourage investment in research and development and drive technological advancements and scientific discoveries.
  2. Fostering Creativity: Copyrights and patents protect creators’ rights to their works, encouraging them to produce new and original content without fear of unauthorized copying or infringement. This protection fosters a vibrant creative ecosystem and promotes cultural diversity and expression.
  3. Protecting Investments: Intellectual property rights enable businesses to protect their investments in innovation and branding, safeguarding their competitive advantage in the marketplace. By securing exclusive rights to their inventions, brands, and trade secrets, businesses can recoup their investments and generate revenue through licensing, sales, or partnerships.
  4. Promoting Competition: Intellectual property rights promote competition by providing a framework for fair and equitable competition in the marketplace. By protecting innovation and preventing unauthorized copying or imitation, rights create a level playing field for businesses of all sizes, encouraging entrepreneurship and market entry.

How to Protect Your Startups IP

IP, just like any other asset, is a bit worthless if you can’t protect it. A lot of startups plow ahead without thinking of the legal pieces and moats that they need to build in their business to ensure that their IP will be a valuable asset. Here are some things to look out for:

IP with your employees

You’re employees are generating the majority of your IP. They are coding all hours of the day, producing content for you and building your software product. They, of course, are doing this in exchange for a salary and possibly some equity. This exchange needs to be outlined in the contract to make it clear that anything produced during work time and on work equipment become the IP of the business. It is very important for this to be clear in your contracts.

IP with your customers

When you get a sales contract in place with your customers it’s important for the ownership of your product to be very clearly defined. A number of enterprise customers use generic contract templates that are built for acquiring ownership of IT products. You’ll need to be careful that contracts are not worded this way for you software as a service products.

Intellectual property is a what makes startups valuable, if you don’t own your startups IP then it could be worthless. By protecting what your business builds over the years you’ll be able to grow that asset over time. Whether through patents, copyrights, trademarks, or trade secrets, rights play an important role in shaping our the value of your business for a later exit. Understanding the importance of intellectual property is essential for founders and understanding how to protect it is even more important.


Contract Sent is not a law firm, this post and subsequent pages on this website do not constitute or contain legal advice. To understand whether or not the ideas and guidance on the Contract Sent website is applicable to your business, you should consult with a licensed attorney. The use and accessing of any resources contained within the Contract Sent site do not create an attorney-client relationship between the user and Contract Sent.

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