There are many reasons a business may not formally register their intellectual property (IP). Perhaps you’re breaking into an industry that is rapidly evolving so the IP would have a short effective lifespan. Or you could have created a kind of software which falls outside the definition of what may be patented. Maybe it’s simply a financial decision. Whatever your situation, there are still ways to protect your business without registered IP.
There are always ‘trade secrets’, like Coke’s recipe or KFC’s 11 secret herbs and spices, but secrets can make it difficult to build up investment in your business. Two of the more common ways businesses protect their unregistered or undisclosed IP are by using the ‘first to market’ approach and maintaining secrecy with non-disclosure agreements (NDAs).
First to market
The ‘First to Market’ or ‘First-Mover Advantage’ approach is often seen as a simple commercialisation strategy for cash-strapped and agile start-ups. It’s easily justifiable if you can confidently enter and capture a new, lucrative market before any potential competitors develop their own product and challenge your market share. However, if you choose this strategy your continued commercial success may depend more on having an established presence in the market rather than the exclusivity registered IP rights can offer. This, in turn, may put more of a burden on marketing your brand in the long term by being the ‘original and best’.
It’s also possible that this ‘First to Market’ strategy may be forced on an IP-based venture as some IP can only be protected through secrecy. In some industries, registered protection (such as a trade mark or design) isn’t enough to deter competitors. Unfortunately, this is often coupled with IP that is not patentable.
Costs and timeframes are natural drivers in these commercialisation strategies. In an industry that is rapidly evolving, the time it takes to ensure patent protection could delay a product right out of competition.
In practice, most IP can only be kept secret for a short period. In these circumstances, the ‘first to market’ strategy may be the only effective option.
Maintaining protection with non-disclosure agreements (NDAs)
NDAs, also known as confidentiality agreements, legally oblige the ‘disclosees’ (recipients) to keep the IP provided by the ‘discloser’ a secret for a specified period of time.
Setting up NDAs are often one of the first steps taken in collaborative commercialisation. In the case of undisclosed IP, an NDA can be essential in order to proceed in commercialisation. They give potential participants in a venture the best chance to consider the impacts and value of IP before it is publicly revealed. NDAs can also help establish whether a potential venture participant is genuinely interested, rather than simply accepting free information about potential opportunities.
In many cases, NDAs need only apply until the IP is disclosed; for example in a patent application publication or when the product is released to market. In any case, a prudent IP owner will reveal only the minimum information necessary to meet the terms and objectives of the NDA.
NDAs can also be ‘two-way’, when each party exchanges confidential information with the other. It’s important for both parties, but in particular for a smaller business, that the definition of what is being disclosed in the NDA is accurate and well defined to avoid problems should it be breached.
Regardless of whether you aim to register your IP, it’s important to understand your IP protection options in order to make the best decisions for your business. Don’t forget, it’s important to seek professional advice, especially before entering into a legally binding contractual agreement with others.
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- Published as part of IP - your business edge magazine issue 01 2017.