Start up the Right Way or No Way

Examples of businesses who start up because they have a fantastic new idea but lose their way because they fail to protect the idea and cash in on its true commercial value are all too common. This article explores why this happens and the actions you need to take to avoid losing out.

The scenario

You’ve come up with a great new idea for improving efficiencies in a market you know really well. You commission a website or piece of software that will allow you to exploit this market. The work is completed by your chosen supplier, they send the completed software to you, and you pay them. You demonstrate it to a few people who might help you market your idea - they seem enthusiastic. You speak to a few people about finance. You even decide on a name for the product and register a limited company in that name also taking the .com and .co.uk domain names. Things are looking good. Or are they?

Unfortunately not.

Unless you’ve protected yourself and your business at each stage in the process you are at risk of:

Being unable to sell the product or service you have developed. The creators of the software own the copyright in it. (Read our Fact sheet [Copyright – getting it protecting it and keeping it] on copyright issues for more information). Even though you have paid them for the work you may not actually own the copyright. They will need to transfer it to you in writing and all too often this is missed when commissioning this sort of work. Sometimes this issue doesn’t arise until years down the line – when you’ve made a great success of your business and you decide to sell. As part of the due diligence process a buyer would want reassurance that they would take over ownership of the copyright of something so fundamental to the business. Without this – they won’t buy.
Being unable to obtain a patent (although this is, admittedly, hard to get for software). If you’ve made your innovation public you may be prevented from getting a patent.
Losing the idea—what stops the people you’ve discussed it with from taking the idea on and selling it themselves? Or, less maliciously, talking about it and having someone else steal the idea?
Being stopped from using the name you have chosen. If someone has registered a trademark, they can effectively close you down when they get to hear of you (which tends to be just when you are doing well). Registering a limited company or domain name just means nobody else has registered the same name before you; it does not give you the same rights as a trademark.

The good news is that you can reduce your risk of business failure by taking action early on.

Every situation is different so you should take advice from a lawyer experienced in this field but you can:

Have a software (or other product) development agreement with the developer which transfers the intellectual property to you upon payment and requires their adherence to confidentiality duties.
Sign everybody you speak to (and decide if you really need to speak to them) up to a confidentiality agreement.
Take advice early on about whether you should apply for a patent or trade mark and how to protect your intellectual property. House prices may have been on the up generally over the last few years but nowhere near as much as the value of IP, and the incidence of it being stolen!
Think about registering a trademark or at least check to see if someone else has registered one (or a very similar one) first.

Just a little work now can save you many days of worry and cost later on.

Contact Cousins Business Law for advice on this topic.

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