In brief
You've built the product, refined the pitch and even found a few likeminded individuals to come along for the ride. You perhaps even have a healthy obsession with AI. But is one of, if not the most valuable assets you have, properly protected?
While we are of course here to help when things go wrong, many of the challenges we deal with on behalf of clients can be mitigated or entirely avoided with some early planning.
Here are five IP issues every tech founder should get right from the start.
Key takeaways
- Start with a clear runway
- Document ownership
- Collaboration without complications
- The internet is not a free buffet
- Beware the non-human author
In depth
1. Start with a clear runway
You've picked the business name. The logo is ready to go. The domain has been secured. Then someone points out a small problem: another business already has a similar trade mark or get up, or even worse, a patent that appears to cover your technology.
At that point, what looked like a minor administrative issue can quickly become a major commercial problem. Rebranding after launch is expensive. Redesigning is even more expensive. Explaining either of those things to investors is nobody's idea of a good time.
The good news is that many of these issues can be identified before they become problems. Freedom to operate searches can help you understand whether your proposed brand, product or technology can be used and commercialised without infringing someone else's intellectual property rights. Conducting those searches early gives you the opportunity to adjust course before you've invested significant time, money and effort.
It's also important to think beyond where the business is today. Many startups begin with a purely Australian focus, but successful tech businesses are designed to scale. A brand that works in Australia may not be available in the United States, Europe or Asia. A product that can be commercialised locally may face IP obstacles in key overseas markets. Building with expansion in mind from the outset can save significant cost and disruption later.
2. Make sure the business owns what it builds
A startup's most valuable assets are often its intellectual property. Founders should make sure that measures are put in place to ensure that IP developed for the business – e.g., software code, algorithms, documentation or branding materials – is owned by the business.
Problems commonly arise where work is created by contractors, where employees bring pre-existing materials into the business, or where a founder builds key parts of the product before the company is even incorporated. In each of those situations, ownership may not end up where you expect.
As discussed in our employment law guidance in Part 1 of this series: make sure your employment and contractor agreements clearly address IP ownership and contain appropriate assignment provisions. It's much easier to sort this out at the beginning than explain the gap to an investor during due diligence.
3. Collaboration without complications
When working with third parties such as software developers, designers, marketing agencies or technology partners, it pays to look carefully at the scope of any intellectual property licences or joint ownership provisions being granted or received.
If you're licensing IP from someone else, make sure you can actually use, modify and commercialise it in the way your business needs. If you're licensing your own IP to a third party, be careful not to give away more rights than necessary. Broad, exclusive or perpetual licences can limit your ability to commercialise the same IP elsewhere, partner with others or maximise the value of what may become one of your most important assets.
Where IP is created in collaboration with a third party – be cautious of agreeing to joint ownership. If valuable IP ends up being jointly owned with a third party, you may need their permission before you can license, commercialise or otherwise exploit it. That's not an ideal position to be in when you're trying to move quickly, raise capital or strike a deal. Sometimes the simplest solution isn't joint ownership at all, but a carefully structured ownership and licensing arrangement that keeps everyone clear on who can do what.
As with most things in the start-up world, the devil is often in the details. A few lines in a licence or collaboration agreement can make the difference between retaining control of a valuable asset and finding you've given away far more than you intended.
4. The internet is not a free buffet
Open source code, publicly available datasets, scraped content, stock images and other third-party materials often come with conditions attached. Those conditions may restrict how the material can be used, modified, commercialised or incorporated into your product. In fact, much open source code is licensed on "copyleft" (as distinct from "copyright") terms, meaning that any software incorporating that code must be distributed on the same terms, making it essentially useless if the aim is to build and commercialise a proprietary product.
Just because a dataset is publicly available doesn't mean it's free to use however you like. Datasets can still contain copyright-protected material, so it's worth understanding where the data came from and what rights attach to it before you build it into your product. It's a lot easier to check the provenance upfront than defend an infringement claim later.
Stock images pulled from the internet for use in marketing materials are also a common trap for start-ups. Make sure any images used in your marketing materials are properly licensed before they find their way onto your website, pitch deck or social media channels.
5. Beware the non-human author
If you're using wholly automated processes to generate work product, there is a risk that the output will not attract copyright or patent protection. In Australia, copyright only protects works that are created by a human author so works created entirely by AI are unlikely to be protected. Similarly while an AI system cannot be an inventor of a patent, it remains unclear how significant a role AI can play in the development of an otherwise patentable invention.
That might not sound like a major issue at first, but if key components of your product, content library, training materials, marketing assets or customer-facing content are created without meaningful human involvement, you may have fewer legal rights to stop others from copying them and less proprietary IP to point to when engaging with investors, acquirers or potential commercial partners.
This area of law is still evolving but for now, where possible don't let the robots take the reins completely. At the very least, be prepared to identify with precision what role human authors played throughout the development process and where human skill was required.
Related content
- Australia: Five Things Every Tech Founder Must Nail
- Australia: Three Things Every Tech Founder Must Nail (Part 2)
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Grace Patrick, Senior Associate, has contributed to this legal update.