Intellectual Property Rights and Funding

It is well established that intellectual property (“IP”) assets – including patents, trademarks, and copyrights, among others – generate what economists would refer to as “excess profits” to their owners, causing relatively high capitalization compared to other asset classes.

For a Start-up entrepreneur one of the challenges is CAPITALIZATION – raising money in the market. Uniqueness, competitive advantages, barriers to entry and other such factors are significant players. Investors are generally, but justifiably skeptical on the above.

The questions that arise most at the earliest stages include:

  • How will it reflect on our chances of getting funded on favorable terms?
  • Will it build formidable barriers to entry?
  • Is it worth investing in the IP process?

But keep in mind; one of the key considerations for investors is whether a company can protect its unique characteristics or processes that generate revenue. Therefore, an important step in the funding process is to build safeguards for those characteristics. This is the foundation of Intellectual Property Rights (IPR). The relevant IPR protections to most entrepreneurs are: Patents and Trademarks.

In “A Startup’s Guide to Intellectual Property,” the Iowa Innovation Council summed sums up quite well: “A company’s intellectual property portfolio is of significant interest to angel investors, venture capitalists, and during an IPO. Startups need to invest in intellectual property to make the business more attractive to investors. Companies need to take proactive steps to protect intellectual property by filing patent applications where appropriate, registering trademarks and copyrights, and taking appropriate steps to protect trade secrets. By taking steps early on to protect intellectual property, a company provides comfort to investors, builds credibility, and creates a solid foundation that can be capitalized on later.”

Unfortunately for many start-ups, it can be difficult, complex and expensive even to find out if their product or service is unique enough to qualify for protection.

For an outline of the types & processes see our Trademark & Copyright.


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