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How Business Incubators Help Startups Protect Intellectual Property

Post By: Greg Bullock
April 28, 2015, 8:15 PM

Ideas

Business incubators provide numerous services for entrepreneurs; they provide valuable mentorship and advisement at all stages of a business from validation to commercialization and growth; they typically offer high-tech infrastructure that nurtures innovation and collaboration; and they also offer tremendous guidance in the area of intellectual property. As Mary Juetten, founder/CEO of Traklight - a software-as-a-service (SaaS) company that helps entrepreneurs identify and protect their intellectual property - has stated: IP is the most valuable asset of your business. So here are a few ways in which incubation centers can keep it that way. 

Education 

Incubators broadly educate entrepreneurs on the best practices related to starting and operating a successful business. They provide the toolkit that helps side-step the landmines of failure – including IP-related issues. Incubation programs hold public workshops on specific aspects of IP such as copyright protection and patents, and many have dedicated legal mentors to provide IP consulting at no- or reduced-cost fees. Although some may question the success of these types of educational offerings, a 2012 World Bank study of entrepreneurial training programs found improved business execution among potential entrepreneurs AND practicing entrepreneurs in various areas; furthermore, those programs that were additionally paired “with activities such as internships and mentoring services have higher impacts than simple training programs” (Entrepreneurship Education and Training Programs around the World, Valerio, Parton and Robb). While there is no guarantee of long-term success (also demonstrated by the study), these services do increase the opportunity for the sustainable growth of start-up ventures.

Initial Evaluation of Intellectual Property

A proper selection criteria and process can help an incubator not only determine if there is a good match between itself and the potential client but also where the gaps are within the startup. The National Business Incubation Association (NBIA) cites that solid incubation models will have a stringent and comprehensive screening protocol for selecting clients who offer promising indicators of future success. Many programs will do a deep dive into these businesses to determine its needs and subsequently how it can fill those deficiencies with its menu of resources. For example, EvoNexus, a technology incubator in San Diego, has a self-described “rigorous” selection process that examines everything from the founding team and business model to a full evaluation of the technology, and applicants go through a well-defined process from application to due diligence and finally selection.

As part of its scoring, EvoNexus also evaluates the intellectual property position of potential clients; this in-depth analysis can expose weaknesses in an entrepreneur’s IP strategy, and therefore be an immediate “action” item for the incubator to address upon entrance into the program. Moreover, the entrepreneur may not even be aware of vulnerabilities in his/her intellectual property, and the simple of act of going through an incubator selection protocol can illuminate these issues regardless of whether they join the program or not.

Development of IP Strategy at Critical Stages

Although it seems like every day or week is a “critical” stage for a new business, there are certain times in the evolution of a startup that require particular attention to intellectual property. Incubators and their network of advisors and mentors can help solidify IP strategies prior to:

1) An investment pitch and/or crowdfunding campaign
Potential investors like to know your company has patented innovations that are owned exclusively by the entrepreneurs. Additionally, crowdfunding campaigns pose IP risks due to the public disclosure of how a product or technology functions, thus requiring the need to protect it.

2) The launch of new website, branding standards or marketing efforts
New logos, web design, or company name all should be legally protected. The cost of infringement on another company and thus being forced to re-brand can be a significant financial set back for a startup. Entrepreneurs should work with legal advisors within the incubation network to secure copyrights and trademarks.

3) The hiring of new employees and/or contracted labor
Particularly for startups that are still in the product development phase, well-drafted employee agreements are vital to clearly outlining IP ownership. No longer can an entrepreneur rely on a handshake; again, the incubator team can help draft these agreements that keep the best interest of the company and inventor(s) in mind.

Navigate Tech Transfer

For most business incubators, technology transfer is the process of transferring the innovations and research from within an academic or university setting to the incubator environment in order to be further developed or commercialized by one of their clients. As a result, ownership of the associated intellectual property can be muddled. Let’s take a look at a hypothetical company that has developed a medical device within a university. The related IP may be retained by the university and therefore licensed to the entrepreneur for use in a SPECIFIC medical application; however, if the company pursues a commercial application outside of the medical industry, it is possible that they would have rights to the IP. Incubation centers can sort through these ownership issues and assist entrepreneurs in the development of a strong business and commercialization strategy.

Disclaimer: The information contained in this post are provided for general education purposes only and are not intended to be legal advice.

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Topics: Business Incubators, intellectual property

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