Most startups are not well-heeled at the outset, save for the few fortunate enough to be supported by wealthy benefactors. Most are small operations, starting out in a garage or spare office. Their tangible assets aren’t usually much to speak of: basic supplies and some prototypes — accompanied by guile and the exhilarating mix of excitement, confidence and fear that besets most entrepreneurs. But despite the lack of physical resources, every small business possesses considerable intangible assets (aka intellectual property).
Thanks to accounting rules, many entrepreneurs overlook their intangible assets when considering their balance sheets.
But intellectual property can be one of the most valuable items that a startup has. Your intangible assets are your ideas, knowhow and processes — the foundation of your business. They are the thing that sets you apart from your competitors.
Unfortunately, too many businesses fail to recognize their importance, and as a result, they fail to capitalize on their company’s full value when it comes to seeking investments or financing.
Entrepreneurs rarely struggle with identifying and protecting their tangible assets. Your intangible assets, though, are harder to pin down. Here are some examples of the different types of intangibles, or intellectual property (IP), that every business has but rarely considers.
Trademarks
If you have a business name, a name for any of your products, or a logo, then you may have a protectable trademark.
A trademark is a word, phrase, symbol or design that identifies your product and distinguishes it from your competitors.
They represent your brand and the reputation you have built (or are hoping to build) with customers and clients. As such, you want your name and logo to represent you — and no one else.
That’s why it’s important to make sure the marks you’re using aren’t infringing on anyone else’s. It can be tricky to avoid doubling up on a particular name, given the sheer number of businesses that operate. And many who do infringe upon another’s mark likely do so out of negligence rather than malice. Nonetheless, it’s a good idea to do some searches when you’re devising your branding to make sure that what you’re creating will be unique in the marketplace (and possibly consult with an attorney).
Copyrights
Any original work that you have created that exists in a fixed, tangible medium falls under copyright protection. Usually, we think of things like songs or films when it comes to copyright, but it can apply to business materials as well.
If you have original website copy, marketing materials or other creative works that you’re using in your business, you have a copyright on them.
The caveat is they have to be your work or work that you’ve paid for; you can’t take the work of others from elsewhere online and attempt to repurpose them as your own. While that seems like a fairly straightforward directive, ownership on the Internet can be difficult to determine at times. With social media, images and videos get passed from person to person, until a work’s origin becomes lost to the web’s relatively short memory. Before putting something on your site or using it in other media, you should make sure it’s something owned by you, and not someone else.
Patents
Patents are an oft-misunderstood part of the intellectual property catalogue. Using the word “patent” has become shorthand for legally protecting an idea, regardless of what it might be. In reality, a patent is the right to exclude others from creating or selling your invention; it doesn’t confer upon the holder the right to make or sell that particular invention. So, getting a patent doesn’t mean you can just put your feet up and wait for the money to come rolling in; you still have to do the work to get your product made.
But that doesn’t diminish the importance of having a patent. If you have something you think you can patent, it’s advisable to sit down with a patent attorney to discuss it. While some may balk at the cost of lawyer’s fees, it’s better to spend the money to get the insight of an expert and to have things done correctly.
Trade secrets
If you use anything in your business that is known only to you, you could have a trade secret.
A trade secret can be a process, formula or method that you use in creating your product, as well as any contact lists you might have.
The most important part of maintaining trade secrets is, unsurprisingly, keeping them secret.
Trade secrets should only be known by those who need to know them, and should be kept under lock and key to avoid theft. You also should make sure you have agreements in place with those who know your trade secrets to keep them confidential under threat of legal action.
And one more thing: Just like your tangible assets, you want to make an inventory or list of all your intellectual property early on to ensure you’re taking the proper steps to protect and monetize these valuable assets. Onward.
