How to protect your business from intellectual property theft

Disclosing business plans, pitching new ideas and proposing new designs are well-trodden routes for startups and small businesses to encourage a new client to buy and an investor to invest, but they come with a constant risk of IP (intellectual property) infringement.

Protecting IP, by excluding others from using your creations, can give a huge commercial advantage. However, it can be expensive for small businesses, and if third parties breach protected IP the difficulties of proving that breach and the costs of bringing a rival to court can put smaller firms off pursuing a case.

There are, however, cost-effective and practical tactics a small business can implement to discourage IP infringement:

Make sure clients know you own the IP

Before presenting to a new client or investor, ask them to sign a non-disclosure agreement, which also confirms that you are the owner of the design or idea. If making a presentation, ensure the trademark or branding is across all content.

Watch out for self-employed contractors

Usually IP rights developed by an employee in the course of employment will belong to the employer. However, increasingly people are employed as contractors and the rules are not the same. If a self-employed contractor leaves a small business, they could claim ownership of IP created during the time they worked for the company. If contested, this could lead to investor or supply chain problems or, in the worst case, extremely costly litigation. Always ensure there is a clause in the contract that transfers ownership of IP created during the contractor’s tenure to you.

Contacting a perpetrator directly

At times a legal letter to a competitor highlighting the infringement and requesting a cessation of all activity in this area could be enough to discourage any further IP breach. Small businesses can also use a mediation service from the Intellectual Property Office if the company accused of infringement agrees to take part. However, cases involving trademark disputes may not be suitable for mediation.

Look before you leap into a new market

If a business has a good idea where it will trade internationally it should consider how IP rights are protected in those markets and whether it risks infringing someone’s IP in that country. Costs to translate all relevant documents into the local language to secure IP registration will need to be considered.

Think of IP as an asset

Money is tight for most startups and some may think IP protection is a luxury, particularly when they’re considering production costs, hiring more employees or paying taxes. However in the long term it’s worth protecting as it can be considered a lucrative asset if there are plans to sell the business, merge with another company, secure funding or embark on a joint venture.

There are a number of ways to value IP. Each has its limitations and no method is applicable in every case. The stage of the IP’s development, the availability of information and the aim of the valuation will influence the method used. More information can be found here.

Simon Deans is a partner at B P Collins LLP

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