What is Intellectual Property? A Guide for Start Ups (Part 2 of 2)

In this second blog post for ambitious start-ups during global entrepreneurship week, I focus on names, copyright and designs, as well as know how.

In the first blog post, What is Intellectual Property? A Guide for Start Ups (Part 1 of 2), I looked at patents and trade secrets. 

There is much a well-informed start-up can do to protect its IP without spending a lot of money. The trick is having an IP strategy and knowing how to manage IP issues.

IP issues for names

As mentioned in an earlier blog, a start-up is not free to choose whatever name it likes. There are legal considerations to take into account. Finding a name that is available to use can be difficult due to the sheer volume of existing trademark registrations, and the fact that similar names are a problem.

For example, as discussed in our blog post, Facebook Users Mourning the Removal of Scrabulous, the name “Scrabulous” was too similar to “Scrabble”. As a result, the Scrabulous Facebook App which had attracted thousands of followers had to rebrand.

Trademark clearance checks are necessary to avoid infringing on the rights of others. While you can do some basic checks yourself, you need advice from a good trademark lawyer before you settle on a name. Names are an important way in which the law protects a business, so it is worth taking time to pick a good, legally effective one.

Once the name is picked, and checked – this might involve international searches if your business is going to be online – you need to register a trademark. You also need to be ready to extend that registration internationally.  Registration can be costly, so a business without a budget for IP would do well to delay choosing its ultimate brand name.

Disasters due to ill-advised name choices

Trademark disasters can befall any business, even multinationals such as Microsoft. Microsoft was forced to rename its cloud storage service SkyDrive to OneDrive following a trademark infringement dispute with BSkyB. Start-ups face similar problems all too often, they just don’t attract media attention. An important difference between start-ups and the Apples, Amazons, and Microsofts of this world is that start-ups lack the resources to get themselves out of trouble.

If a start-up has to rebrand for infringing on the rights of others it could sink altogether. As I explained in my blog post, Rebranding: Legal Issues you can’t afford to ignore, don’t shrug off the risks by assuming you will just rebrand if it comes to it. A rebrand involves changing everything at short notice and it will rarely be possible to divert customers from your old URL to the new one. Taking a risk over your name is a gamble – not a sensible business decision.

To avoid problems it is best to go with a temporary name initially. The time to focus on finding a permanent name is once the business concept is proven and there is a budget for IP checks, registrations and designs.

One strategy might be to start off using a descriptive name. As descriptive names cannot be registered as trademarks, you’re on safe ground using them. You can choose a distinctive brand name later, when resources allow. You can always keep your descriptive name at that stage by making it your tagline.

Businesses that need a budget for names from the outset

On the other hand, you may be starting a business where it is essential to build a brand. In a blog post a few years ago, I explained how Zumba’s success is due in part to its name. Zumba is a distinctive name that in no way describes its dance fitness business.

If yours is such a business – one that needs an effective brand name in order to succeed – then you would not be able to use a temporary name. You would need to find funds to consider trademarks before embarking on the business.

If Zumba had chosen its name but failed to register a trademark before the dance took off, its rapid success could have meant the founders were no longer able to register ‘Zumba’ as a trademark. This is a peculiarity of trademark law. Zumba’s wild success might have made the name generic and therefore incapable of registration.

It is generally advisable to register a trademark, as that is how you own the rights to a name. By registering their name, Zumba were able to capture the value that their success generated. Without it they would not have been able to exploit their brand for categories such as videos, clothing, books, and so on. And, the business would be worth only a fraction of what it is worth today.

So, if your success hangs on creating a brand, and licensing others to use your name, you won’t make it big unless you spend on international trademarks.

Copyright and designs

It may be that the key to protecting your business is not patents or trademarks, but copyright of a piece of software or other item.

According to research by the IPO, 40 per cent of business owners think they automatically own the copyright if they commission work which is capable of being protected by copyright.  This is the single biggest mistake businesses make. Paying someone to create work does not automatically make you the owner of the copyright in it.

So, it’s important to understand what types of material are protected by copyright. That way, you can secure the rights over anything that matters to your business.  For example, logos are protected by copyright. As the owner of a business, you need to ensure you own the copyright in your logo.

If you are using another company or a freelancer to develop your software (or other items that are protected by copyright) then make sure ownership in the work is transferred to you in writing. This should be done before you engage their services, for example in the contract you enter into with them. But this does not need to be done in a formal contract. It could be dealt with in an email. See my blog post: Why use a lawyer when you can buy a legal agreement? for further guidance.

If you have a design created for you such as a cartoon character, logo, surface designs, or an unusual shape, (such as the coca cola bottle) make sure you obtain the rights. But note that there is a limited time to register these as designs. There are official fees to pay when you register designs, so be clear whether the design in question is going to give you a competitive advantage or not. If you think it might, then try to find the money for design registration.

Know how

Finally, bear in mind that you may want to exploit any know how you develop. This will be discussed in a later blog post, Licensing and franchising: what is the difference and does it matter?

Say you are a car wash that has developed a successful process for getting its customers to buy for hot wax and other optional extras. You might decide to license this process to other car wash businesses in return for royalties. This involves a legal agreement whereby you license your know how and ensure the other party uses it under strict conditions of confidentiality.

Conclusion

If you are thinking big, you need to understand IP and how it applies to your business.  If you have the funds from the start, you can use IP to protect your competitive position straight away. If not, you can position your business so that you secure your IP once it grows and you have the resources in place.

For more information about trademark registration and protecting your brand, visit our dedicated trademark website www.azrightstrademarkregistration.co.uk.