Over the past few years, a strong entrepreneurial spirit has developed in Australia, leading to a record number of startup businesses. While this is fantastic, a great idea needs to be properly thought through from a legal perspective so it doesn’t hit a road block when it comes time to get it off the ground.
Big corporations in particular watch the new players in the market, what their offering is and if it competes with anything they might be working on. Consequently, I have seen an increase in copyright and IP cases here in Australia over the past two years.
The biggest danger for such businesses is infringement of copyright, trademarks or intellectual property (IP). These terms can sometimes be confused, but it’s important that small businesses understand the difference and why it’s important to understand them. If not, they could end up facing an uphill battle, such as the current dispute between NRMA and Parking Made Easy. While we don’t know the outcome of this yet, there are indeed some lessons that people should take away to ensure they avoid a situation like this.
Intellectual Property (IP) is a general term describing a concept or idea of commercial value. It is a wide umbrella including more specific types of IP, such as copyright, trademarks and patents.
Copyright is the exclusive right to reproduce, publish, perform, communicate and adapt original works, such as literary (written), dramatic, musical and some types of artistic works. True copyright exists at law without the holder having to do anything further to create it, such as registration.
A Trademark is a word, phrase or image used or intended to be used to distinguish the goods and services of one business from those of the rest of their market. Trademark disputes occur frequently, usually between high profile brands and celebrities, on the one hand, and smaller market participants trying to profit from their established brands, on the other. Taylor Swift, for example, uses and enforces trademarks regularly.
Patents and Designs are entirely different forms of IP in their own right.
The intellectual property of every business does not always fit squarely into one of these categories, and sometimes will not be protected automatically by copyright, or even able to be registered. We see this especially in the case of innovative startups, and particularly those with disruptive service concepts. As such, these businesses need to be extra careful to protect themselves.
Four tips for small businesses to stay out of the courtroom:
1. Register your idea: If a patent or design is available, register it. The intellectual property register is much like the real property register – the title says it all. Once intellectual property is registered, the holder has exclusive rights that are generally not able to be infringed or challenged.
Some conceptual ideas will not be capable of registration. In order to remain competitive in those cases, businesses need to look to other means of protection. More below.
2. Develop a contract: A confidentiality or non-disclosure agreement never goes astray. A contract can generally govern anything in theory, provided it is legal and enforceable. If drafted properly and enforceable, it can both create and protect IP not otherwise automatically recognised at law or capable of registration.
Be wary of anyone who was reluctant to sign one and do not disclose anything to them beforehand.
3. Protect the concept: A lot of startups, and particularly disruptive ones, are relying on market lead for their success because their intellectual property is not capable of legal protection outside of contract. Those businesses need to be extremely careful about disclosing their intellectual property prematurely.
Letting small parts of the market know what they are doing before they are in a financial position to go out and capture that market share is dangerous, as without the means to capture and keep it (i.e. money for mass-marketing), and without registration of IP or contractual rights, there may be nothing stopping a competitor to simply steal the idea and put the money behind it. It is usually better to keep silent, with the exception of investors that have actually signed quality, binding confidentiality agreements.
4. Keep records: Where possible, all dealings with third parties such as potential investors should be in writing. During meetings, extensive notes should be taken and, if possible, a small business or startup should never attend a meeting alone. A paper trail and a witness is the best evidence one could hope for.
If you’re not sure, seek legal advice. For a small business, Court is a place you want to avoid. Good legal advice and work at the outset can well and truly pay for itself.
About the author
Dominic Green is the founder and principal of Sydney’s Green & Associates