The Journal The Authority on Global Business in Japan

Startups, by their very nature, face a variety of challenges in the early days of their operations. These range from securing financial support to grow the company to the mundane details of finding office space. And there is a risk that some challenges might slip under the radar and be overlooked.

Harvey Chen, a partner who specializes in intellectual property issues at Seattle-based law firm Perkins Coie LLP, says failing to safeguard the products or services that are at a company’s core is the one detail that a startup simply cannot afford to overlook.

DON’T DELAY
Delivering a presentation, entitled Intellectual Property: What Startups Need to Know, in the boardroom of the American Chamber of Commerce in Japan Tokyo office on December 12, Chen said copyrights, trademarks, patents, and design patents must be applied to a startup’s products or services sooner rather than later. Failure to protect what is effectively the DNA of a company leaves that brilliant idea wide open for someone else to adopt, adapt, and potentially monetize.

“Every company has a different aim. But, when someone knocks on my door and says they want a patent, the first question I ask is always the same: What is the goal of your patent?” he said. “For many startups, the goal is to be able to go to an investor who will talk to them. That is not the only goal, of course, but it is an important one.”

Chen, whose company conducted the initial public offering for Amazon and previously obtained the first patent for Microsoft, detailed the requirements for a patent, a trademark, and copyright, as well as the importance of the protections each provides for a company’s intellectual property.

Having that protection formally registered and legally protected gives the holder both defensive and offensive capabilities, such as the power to demand recompense in the event that another company helps itself to your product or service, or to offer that same technology under license to earn money for your company.

GLOBAL CONCERS
Emphasizing the need for a company with a potentially ground­breaking concept to start the process of applying for a patent as early as possible, Chen said that, including in Japan, the procedure can take a couple of years to complete. But there are further complications when international patents need to be taken into consideration. One tactic is to file a patent pending appli­cation, he suggested, which provides a degree of protection. But Chen’s advice would be to speak with a specialist patent lawyer “who can tailor a strategy that is for your goal.”

An alternative strategy is to protect a product or service as a trade secret—particularly if the end product is extremely difficult to reverse-engineer and make a product that it is identical to the original. A good example of this strategy is how Coca-Cola has managed to safeguard the exact recipe of a drink that is famous around the world, but not yet accurately copied.

He emphasized, however, that a trade secret is only as safe as the way in which it is protected.

COSTS CONSIDERED
Chen admitted that cost is often an issue for a company—particularly one that is just starting out and may not have cash reserves for everything that it wants to do. But, the importance of protecting core assets means patents, copyrights, and trademarks must be very close to the top of a startup’s priorities. Many law firms—including Perkins Coie—offer systems such as deferral fees to help startups overcome the financial hurdles associated with filing applications.

A company must also be ready and willing to revert to the law to protect its intellectual property, he added.

Chen outlined the work of the United States Patent and Trademark Office and the European Patent Office, which he recommended as places for a company with a new product or service to file their patent claims.

Despite the cost, time, and effort required to register a patent, trademark, or copyright, Chen concluded that it is still worthwhile. It serves as a company asset and a generator of revenue, he said, while it can also be transferred and is both “a barrier to and a sword against competitors.”

Julian Ryall is Japan correspondent for The Daily Telegraph.