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Keep Your IP Inside The Tent

 

 

You’re working for a large company and see an opportunity in the market for a new product.

It’s got big potential, if you can get investment to turn the idea into a successful global offering.

What could possibly go wrong?

There are many sad stories of bad outcomes for unwary entrepreneurs in this situation. The latest involves the Dunedin inventor of something the world really needs right now, a machine that recycles unwanted plastics into building blocks. This could be a win/win solution to plastics pollution and the high cost of building. However it appears that an international investment company has walked away with the intellectual property(IP) rights to the invention, and the entrepreneur is faced with starting again (at age 69). It’s sobering to contrast the recent media coverage with the optimistic reports from 20102016.

Such opportunities come to few people and may only occur once in a lifetime. Would it be possible to wind this story back and create a happy ending? If the entrepreneur had kept his IP for the invention “inside the tent” more effectively, would he have avoided this unfortunate outcome?

Let’s consider another example, this time in the software industry. This story starts with Julie, in-house accountant for a large dental practice. Julie could see that the dentists’ practice system was highly inefficient, but knew her employers didn’t want to spend money on improving it. She thought that if a better system could be created, there might be a potentially lucrative international market. Julie chatted to her software developer friend Lawrence about the prospect of developing a dental practice software platform that would be the launching pad for a new business. They were both bored with their jobs and felt ready to take on the risk of a new venture.

They decided to set up a company to exploit the opportunity, and brought in friends, Ben as office manager and Shelley as head of sales. It was agreed that as the project was Julie’s idea, she should be the managing director and majority shareholder with Lawrence, Ben and Shelley also as directors, splitting the rest of the shares equally. They contributed startup capital according to their shareholdings, adopting a Company constitution and shareholder agreement, the first steps towards protecting the Company’s IP. As well as chief strategist and cheerleader, Julie was a tough CEO, ensuring that everyone was fully committed to their tasks and roles and nothing slipped through the cracks.

An appropriate business name which inspired customer confidence was created, and the first software product (which was to be the beginning of an extensive suite) was developed and branded. The team was growing and employees were offered the chance to buy shares in the Company.

Potential markets and overseas partners were scoped well in advance, and the Company filed for strategic trademark registrations in target markets around the world. All software was supplied on strict license terms to ensure optimum protection of the Company’s IP rights. By the time a takeover offer from an international investor came, the Company’s IP was bulletproof. The Company is now part of an international group listed on the ASX.*

The gift of hindsight is a wonderful thing; however the underlying lesson that can be taken from both these stories is the value of trust and teamwork. If your opportunity is a really big one, your chances of making it on your own are low. The odds are greatly improved if you’re supported by the right team, take good, trusted advice and stick to the plan.

* [Names & other details changed for privacy reasons].

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