International IP Protection for Startups: Protect What You Can’t Afford to Lose
When a startup begins thinking about international expansion, the instinct is often to protect everything, everywhere. Expenses from trademarks, patents and other forms of intellectual property can add up quickly when multiplied across countries. For a growing company, every dollar spent on IP protection is a dollar that isn't being spent on product development, marketing, or expansion.
So where should a startup spend its limited IP budget?
Focus on the Business, Not the Map
Instead of asking, “Where might we eventually sell?” start with three more practical questions:
Where are we making money?
Where are we making the product?
Where are we about to invest?
Those answers usually produce a much shorter and more affordable list of countries that actually matter.
Consider a company doing $3,000 in annual sales in a particular country. Spending $2,000 to obtain a trademark there may not make sense. But if the company is about to spend $60,000 on an advertising campaign in that same market it may be prudent to protect that investment.
Don't Forget Where Your Products Are Made
A country can be strategically important even if you have zero sales there. If your products are manufactured in China, Vietnam, Mexico, Thailand, or another overseas market, your factory may have access to your name, logo, designs, specifications, and other valuable information. That creates a different kind of IP exposure. For example, China follows a first-to-file system for trademarks. Waiting until you're ready to sell there can create problems if someone else registers your mark first. Consequently, manufacturing locations deserve a place on the IP priority list.
There Is No "Worldwide" Trademark or Patent
I am often asked to filed for an "international trademark" or patent. Unfortunately, there is no such thing. The Madrid System can streamline international trademark filings, while the Patent Cooperation Treaty (PCT) can give a startup additional time to decide where it ultimately wants patent protection... but these systems don't create a single worldwide right. They are simply tools for managing international protection rather than substitutes for country specific rights. Every application in a foreign country or region comes with its own application and prosecution costs and these can add up quickly!
Have the IP Conversation Before the Launch
Some of the most expensive IP problems are the ones discovered after a company has already invested heavily in a product or brand. A startup that receives a cease and desist after expanding into a new market may suddenly have to change its name, packaging, website, and marketing. Patent rights can be even less forgiving... publicly disclosing an invention before filing can destroy patent rights in some countries. That means the patent conversation should happen before the trade show, crowdfunding campaign, or product demonstration, not afterward.
Your IP Is Only as Valuable as Your Ownership
There's another issue that startups sometimes overlook:
Does the company actually own the IP it's trying to protect?
Founders, contractors, freelance designers, developers, and overseas vendors may create some of a company's most valuable assets. If there is no appropriate written assignment from that individual to the business, ownership can become surprisingly complicated. This issue often surfaces during investment or acquisition due diligence, when discovering an ownership problem can be particularly painful. Getting ownership documentation in place at the outset is one of the relatively inexpensive things a startup can do to protect the value it is building.
Overseas Manufacturing Requires More Than an NDA
If you're manufacturing overseas, don't assume a standard NDA is enough. Depending on the circumstances, a country specific NNN agreement (non-disclosure, non-use, and non-circumvention) may provide important additional protections. Furthermore, it is imperative that the agreement is signed by the actual factory, not just a sourcing agent or trading company.
As production grows, a more comprehensive manufacturing agreement should address issues such as tooling ownership, subcontracting, confidentiality, and what happens to your IP when the relationship ends.
Be Careful With Distributors, Too
International distributors can be invaluable partners, but be cautious when a potential partner suggests registering your trademark in their name because it will be "easier." Trademark ownership, local-language versions of the mark, and what happens when the relationship ends should be addressed before the relationship begins, not after it falls apart.
Protection Is One Thing... Enforcement Is Another!
Obtaining IP protection is only half the equation. IP owners also need to ask a less comfortable question: If someone infringes my rights, am I prepared to defend them?
IP litigation can be extraordinarily expensive, time consuming, and disruptive. And while the law may give a smaller company a strong claim on paper, litigation is rarely fought on a level financial playing field. A larger company may have substantially greater resources to devote to attorneys' fees, discovery, experts, and years of litigation. This gives the opposition the ability to keep fighting long after a smaller business can afford to.
That doesn't mean a smaller IP owner should simply surrender its rights. It means enforcement strategy should be part of the IP strategy from the beginning. Before investing heavily in a patent, trademark, or other IP asset, owners should consider the commercial importance of that asset, the likelihood of infringement, and what resources they realistically have available if a dispute arises.
For an entertaining illustration of just how difficult that fight can become, watch Flash of Genius, the 2008 film based on inventor Robert Kearns' legal battle with the automobile industry over his invention of the intermittent windshield wiper. The movie is a good reminder that having the right to protect an invention and having the resources (and stamina) to enforce that right can be two very different things.
Protect What Matters Most
International IP protection isn't about putting a trademark or patent in every country on the planet.
It's about understanding where your business has real exposure and real opportunity. Think it over carefully and spend your business's resources accordingly. For a startup, the right IP strategy may be less about protecting everything and more about protecting the things you can't afford to lose.
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