IP strategist: How IP strategy is different for start-ups

While start-ups can be exciting and chaotic, they need to design an IP strategy just like any other business. Yet although the development process will be similar to that used by large corporations, the content and implementation will be quite distinct

Ihave invented for one of the most patent-prolific technology companies worldwide and been involved in developing an IP strategy for one of the world’s largest telecommunications companies. However, for the past few years I have defined and implemented IP strategies for an innovative technology start-up, and the contrast between IP strategies for start-ups and large corporations is striking.

The process for developing an IP strategy – whether for a start-up, small or medium-sized enterprise or large corporation – is very similar. In order to develop a meaningful and aligned IP strategy, the goals of the wider business must be well understood, the IP activities that may align with these goals must be identified and the potential value of these activities must be evaluated against resource constraints.

However, while the development process is largely the same, the content of the IP strategy will be very different between start-ups and large corporations. One reason for this is the availability of resources. More limited cash flow and lower headcount mean that the scope of a start-up’s IP strategy will always be narrower and therefore more focused on activities likely to generate the most business value. While all businesses face budget controls, the economies of scale in large corporations will probably result in lower-priority activities being included in the IP strategy.

Another reason for the differences in the content of an IP strategy is business complexity. Large corporations might have multiple product lines and divisions, each with very different IP needs, whereas start-ups are likely to be much more focused. Internal conflict can increase complexity further – for example, one division might seek to bolster revenue figures by licensing out non-core patents, but to competitors of another division. To ensure consistency across the entire business, large-corporation IP strategy either must be less aggressive to balance the needs of all divisions or must prioritise the strategy of some divisions.

IP strategy content can also be affected by the stability of a business and the certainty of its objectives. By definition, the start-ups are still searching for a repeatable and scalable business model; the inability to fully commit will mean that flexibility takes high priority – for example, deferring patent filings or adding subject matter, rather than securing dates. Also, while ‘success’ in a large corporation is probably easy to define, start-up investors may hedge their bets against multiple exit strategies. IP activities necessary to support acquisition opportunities may be very different from those needed to support long-term growth and initial public offerings.

One last factor that affects the content of IP strategy is the maturity of IP portfolios and processes. Unless start-ups invest in the acquisition of third-party intellectual property, they will have fewer enforceable assets and therefore fewer available options. This is especially true in the existing patent climate, with transactions usually carried out in bulk and increasing opportunities to challenge validity. The mature portfolios of larger corporations mean that a granular understanding of asset value is harder to maintain and will therefore require internal analysis projects before activities such as monetisation and divestiture – activities which are increasingly important given current economic conditions. The maturity of IP processes will also affect IP strategy; start-ups are more likely to create and refine processes and policies, and large corporations may have historical baggage and less of an appetite for change.

“A well-funded IP department may have access to a diverse in-house team … A start-up may be lucky to be able to dedicate just one person to intellectual property”

As well as content, implementation of IP strategy is a key area in which start-ups will differ from large corporations. One reason for this is the types of resource available. A well-funded IP department may have access to a diverse in-house team, including attorneys, licensing experts, researchers, analysts and administrative staff. A start-up may be lucky to be able to dedicate just one person to intellectual property. This lack of in-house resources not only affects the quantity of activities, but also removes the luxury of being able to balance the advantages and disadvantages of outsourcing, as recruitment is unlikely to be cost efficient for start-up workloads. Start-ups are likely to outsource foreign counsel relationships, docketing and record management and perhaps even activities such as invention capture.

Another factor affecting the differences in IP strategy implementation is organisational complexity. IP decision making in large corporations is often influenced by the number of stakeholders, complex reporting lines and an unclear distribution of responsibilities. With simpler organisational structures, start-ups are less susceptible to the kind of indecision, disagreement and office politics found in large corporations. Having complete control over day-to-day operations can result in efficient and effective decision making. A smaller organisation means that it is simpler for start-ups to identify and collaborate with the correct stakeholders, as well as maintaining these relationships for future efficiencies.

Finally, culture may have an effect on the way in which IP strategies are implemented. Start-ups are often associated with open culture; and while this is not necessarily at odds with intellectual property, mindful education and encouragement are useful for employee participation. Given the perceived risks associated with working for a start-up, a larger percentage of the workforce is likely to be committed to the company vision and there is perhaps less need for incentives such as inventor rewards (without overlooking legal obligations). In large corporations, communication can be difficult, which can increase the value of formal training and messaging.

Start-ups and large corporations differ in many ways that can affect IP strategy content and implementation. These fundamental differences mean that start-up IP strategy will always be distinctive. 

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