This entrepreneur has a business idea which he believes will be profitable. He is not sure who to talk to or how to go about starting up a business based on his idea. He asks if it is possible to secure a patent or other protection to prevent others from taking his idea.
This is a common situation for many would-be entrepreneurs with a great business idea. To develop the idea, service providers and funders must be approached and this brings a risk of someone using the idea.
Intellectual property protection through patents, designs or copyright may provide some of the answer, but are not always applicable.
For instance a patent applies to something that can be represented by a drawing, model or prototype. It must be new and involve an inventive step. Patents do not apply to computer programs and the presentation of information. Copyright covers written or artistic works and images, but not the ideas underlying them. A legal action against a patent infringer is likely to cost hundreds of thousands of rands, and could take years to complete.
Davis Gilson, a partner at intellectual property law firm Spoor & Fisher suggests that a good option is to register a company name which describes the product or concept as explicitly as possible, and then to register the name as a trademark.
This will limit imitators from passing themselves off as this company. Gilson suggests that entrepreneurs who are uncertain of what protection is available for their idea should approach an appropriate
intellectual property specialist for an initial chat, which could be inexpensive or even free.
In this case the entrepreneur has a creative idea for an Internet-based business, and would probably not be able to rely on patent protection. Nevertheless there are some steps he could take:
- Deal with trustworthy suppliers. Established financiers and advertising agencies hear thousands of ideas and respect confidentiality. So do many other service providers. Check references carefully before choosing, especially their clients who had new ideas.
- Use a Non-Disclosure Agreement. There are plenty of free templates on the Internet, but he must be sure they are correct for South African law. Banks and financial houses will generally not sign these, but for developers, resellers and technical service providers they are routinely used.
- Do it yourself. Entrepreneurs are often too quick to involve financiers and service providers. Starting small and using family finance may be better. Equally, learning how to manage the unknown is not as difficult as it seems. We live in this wonderful age of blogs, advice forums, eBooks, webinars and other educational and knowledge sharing facilities.
The best option
Hiding ideas from the world at large is extremely difficult to do, and even if the entrepreneur is successful in keeping confidentiality until launch, once he puts it on a website he exposes the idea to around two billion people. And yet there are many creative websites, services and products launched by entrepreneurs and not copied by others.
A key step in achieving this status is to launch with immediate benefits to consumers. If it is a website it needs to have a lot of content so that the innovative idea becomes immediately useful to consumers and develops a loyal following. Two very different ideas, the Cape Town Waterfront, and the consumer website Hellopeter.com were wonderfully creative ideas that became leaders in their class. They, like all similar success stories, offered immediate benefits and innovation, and became top of mind market leaders. First mover advantage, if well used, is probably the very best form of protection. Consumers who love and respect the product or service are unlikely to switch.
All this means sound business practices with good planning, a clear understanding of where customers and profit will come from, measurable milestones and a great launch strategy. This should be true for all new businesses. Secure and loyal customers, gaining good value, are the best protection of all.
What You Should Know About Copyrights For Your Business
Your business and how the proposed amendments to copyright laws will affect it.
For those of you who run your own business, whether you are aware of it or not, copyrights are a primary mechanism to protect your intellectual property. For example, whether you are writing a blog post, designing a logo, writing the source code of a computer programme, or creating a piece of music, all these works are subject to a copyright. A copyright does not need to be registered in South Africa, but arises automatically upon its creation, preventing others from copying the contents of what you’ve created.
Copyrights can provide a very useful means to ensure that others don’t unlawfully compete with you, and can also be licensed for royalties. With the plethora of technological developments of the past decade or more, copyright legislation is fundamentally in need of an update.
The 2017 Copyright Amendment Bill recently published by the Department of Trade and Industry for comment, has been widely criticised.
Related: How to Register a Copyright
We’ve set out some of the proposed amendments that we believe to be unfair, lacking common logic, or that may affect your business if the 2017 bill becomes law.
Copyrights funded by the State
One of the most contentious introductions is the advent of state-funded copyrights. The bill stipulates that the state will own all copyrights it has funded, but does not define what it terms as ‘funded’. Accordingly, this may include grants, subsidies, loans, tax incentives, equity investments and the like.
Further, the bill does not set any minimum threshold to constitute state funded. This could mean that if the state provided 0,5% of the capital required to develop software, or certain educational course content, it would own copyrights flowing from the works.
The state is not permitted, by way of contract, to transfer back the copyright to the person who obtained the funding from the state. Contracts are the primary mechanism by which copyrights are transferred under the current Act.
With the Department of Trade and Industry introducing some great funding initiatives for start-ups, the risk is obvious in that any start-up that is part funded by the Department of Trade and Industry would not own the copyright to anything created as a result of that funding.
Should private investors be looking to provide a company with any later stage funding, a simple due diligence would reveal that the company simply does not own any of its ‘own’ copyrights. This would discourage most investors, which could curtail private funding for businesses that were initially state funded. These businesses are primarily owned and run by previously disadvantaged individuals, and hence, may have the effect of further curtailing transformation in our fragile economy.
The 25-year assignment
In a previous article, we touched on the fact that independent contractors tend to own the copyright to works they create on behalf of businesses (think outsourced web development and logo creation). Under the current law, independent contractors may permanently transfer a copyright, by written agreement, back to the company that instructed them to perform the work.
The 2017 bill proposes a 25-year limit on this transfer. Unless you are the independent contractor creating copyrighted works on behalf of others, this provision is severely prejudicial to most businesses that tend to outsource a number of their works. An independent contractor may assign the copyright back to the business that outsourced the work, however, the copyright will automatically revert to the independent contractor after 25 years.
If you’re looking to sell your business, or raise funding, for example, the value of your business is inextricably linked to the intellectual property owned by it, such as copyrights, trademarks, and the like. With your business lacking the ability to retain a copyright that was assigned to it beyond 25 years, this could detrimentally impact the valuation of your business.
Unenforceable contractual provisions
As mentioned above, copyright assignment agreements are currently used to ensure that copyrights have been validly assigned from an independent contractor — for example, back to the company that outsourced the work. The 2017 bill provides that any contract that purports to take away a right, prevent or restrict any act in terms of the bill will be invalid and unenforceable. This means that, for example, a copyright assignment agreement, as mentioned above, would be void.
While the bill is not law yet, there could be far-reaching and detrimental impacts to your business should it become law. One can only hope, for the sake of our entrepreneurial community, that the concerns we raise are heeded, and the bill amended.
If proposed copywrite amendments are passed, it could severely impact the valuation of businesses going forward. Have a look at Legal Legend’s free copywrite assessment.
What’s Setting You Apart From Your Competitors?
Tick these boxes and you’ll attract funding attention. An investor is interested in two things — what are the barriers to entry in your industry, and can you keep potential competitors out of your market?
“There are only two ways to establish competitive advantage: Do things better than others or do them differently.” — Karl Albrecht, German entrepreneur and 2nd richest man in Germany.
Getting a start-up company on its feet can be a very daunting task. There might be many big dogs out there that potentially threaten a start-up business. Competition is healthy, but it could also be costly and catastrophic for a fledgling business.
Who are you?
Before a start-up company enters the marketplace, guns blazing, it’s important for the company to first know itself. By knowing your company it creates surety and confidence in the team, which in turn directly reflects on potential investors.
Start-ups should therefore consider what makes them unique in terms of their products and/or services, who the target market is, who the competitors are, what their strategy is and whether they have a suitable team to meet the company’s requirements.
One mechanism by which a company can gain a massive head start from their competition and solidify their position in the market is through the strategic use of intellectual property. Intellectual property provides a mechanism by which exclusive rights can be obtained to specific goods or services that the start-up has developed.
Should your company be in the business of exploiting niches in the industry, intellectual property will enable you to solidify the unique value proposition you provide through your services or goods offering.
A start-up that creates a product or service that is not easy to replicate, obtains absolute ownership over how and when that product or service is replicated (through the strategic use of intellectual property) and creates a long-standing network that leads to a sustainable competitive advantage.
A start-up should make use of these legal tools that are available and build their own ‘Great Wall of China’ by being defensible. This automatically turns the competitors into inferiors.
Another aspect of perhaps equal importance is a company’s reputation. A start-up’s reputation lies in its product and/or service. If a company produces or delivers a poor or disappointing product or service, this mirrors the company itself and detrimentally affects its reputation. Reputation is everything, it’s invaluable and ever-lasting.
Maintain your reputation
In order to improve an undesirable reputation, the focus should be on strategic planning. A successful start-up has a strategy in place that includes a detailed business plan and model. An eager, ambitious and fruitful strategic plan is also a favourable indication to potential investors.
By keeping up with the competitors and maintaining a desirable reputation, a start-up has already laid down its roots and can only grow upward.
It’s important to identify the target market as it is beneficial to obtain feedback from clients and customers in order to establish your reputation and status, and build on it.
Know your competition
Further, and most importantly, it’s paramount to know your competitors. By knowing your competitors you learn from their weaknesses and build and improve on their strengths. Investors can observe a start-up’s comparativeness by considering whether it’s ‘a step ahead’ and whether it keeps up with, and creates, trends.
A start-up may identify and better their views on their target market and competitors by placing themselves in the shoes of a customer or client. More specifically, by considering and evaluating the positive and negative aspects and experiences the customer will experience when engaging with the start-up, and acting on insights gained.
An investor is likely to have a similar mindset to a potential customer or client and can provide a start-up with a differentiation factor that sets it apart from others in the industry.
Related: 5 Steps To Protecting Your IP
The future is yours
It’s also important to keep in mind that a start-up is not generally only novel but it’s young and formless, a mere piece of clay that may be formed into anything. Start-ups should use these strengths as advantages in developing an outstandingly unique and unforgettable business.
Additionally, start-ups do not necessarily have the overheads that many competitors might have. A start-up can therefore provide products and deliver services more flexibly, which is a magnet for customers.
3 Things You Must Put In Place To Protect Your Invention
Jaco Theunissen, Director at KISCH IP, gives you three ‘abilities’ you need to consider when patenting your invention.
For the entrepreneur looking to launch an invention, it is vital that patent protection is in place before given the world access to its brilliance. This protection is decided around 3 factors – the patentability of the invention, the commercial viability of the invention, and the enforceability of the patent.
To qualify for patent registration, the invention must satisfy the extrinsic patentability requirements of novelty, inventiveness and industrial applicability, and must not fall foul of any of the intrinsic patentability requirements, being a set of exclusions listed in section 25 of the Patents Act 57 of 1978. Section 25 includes inventions that would not qualify for patent protection, such as, discoveries, scientific theories, mathematical method, literary, dramatic, musical or artistic works, schemes, rules or methods for performing mental acts, playing games or doing business, computer programs, the presentation of information, varieties of animals or plants and methods of treatment or diagnosis of the bodies of humans or animals.
Any invention that falls outside the scope of these, and satisfies the extrinsic requirements, would qualify for patent protection.
Related: How do I register a patent?
2. Commercial viability
In order to successfully recuperate the time, effort and investment of ingenuity and money into the research, development and protection of an invention, an invention needs to be commercially viable, or in other words, capable of being reduced to a form in which it can be utilised to generate returns on your above-mentioned investments.
By merely filing a patent and sitting on it for the entire 20 year protection provided in terms thereof, a patentees risk doing a doing a disservice to themselves by not reaping the rewards that befalls their innovation.
The object of the patent dispensation is the allocation of a 20 year period of exclusivity to a patentee in return for a full disclosure of the invention so as to enable others to replicate it after the patent term has expired. This ultimately rewards and stimulates innovation.
An effective trade mark strategy may further be of immeasurable value to further promote the commercialisation of an invention so as to ensure that maximum exposure and goodwill in the invention is obtained.
To be effective as a deterrent to potential competitors, a patent must be enforceable. A patentee must therefore be able to prove in a court of law that a person or other body has infringed its patent, and caused the patentee to suffer damages.
Some patents may be infringed by third parties, but proving the infringement may be difficult. An example hereof would be where a person patents a very effective method of drying biltong.
The patent holder would, however, not be able to determine whether or not a particular piece of biltong being sold was dried using his method, and he would not be able to effectively enforce his patent.
Had he however patented the device with which the biltong is dried, he would have been able to stop others from making, using, importing and offering his patented biltong dryer for sale to consumers.
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