Outlook Ventures is a firm believer in creating and using IP for competitive advantage and has consistently invested in companies which have robust and defensible IP strategies for the long term. This article has been contributed by Maureen Dorney, Senior IP Licensing Partner at DLA Piper Rudnick Gray Cary, an Outlook Ventures' partner.

In today's post-bubble economy, entrepreneurs and venture capitalists know all too well that success depends on attention to the fundamentals.

For a technology company, a winning intellectual property (IP) strategy is a critical component of those fundamentals. For many technology companies, the value of their IP rights (i.e., patents, copyrights, trademarks and trade secrets) greatly exceeds the value of their tangible assets. Thus, developing and managing a company's IP portfolio can provide crucial value to the early stage startup. A well protected and leveraged IP portfolio can significantly increase the value of a company to its shareholders, whether the exit strategy is a merger or an IPO. Too often, however, in the rush to get to market, while also trying to conserve costs, the early stage startup cuts corners, assuming that there will be time to manage IP issues once the company is successful.

Each type of IP right confers on the owner a different set of exclusive rights that can be leveraged to give a company a competitive advantage in the marketplace and/or a meaningful source of revenue. It is useful to understand the basic types of IP before looking at how IP issues arise in the life cycle of any early stage company.

Patent rights are powerful tools because they entitle a company to absolutely exclude others for 20 years from using, making, selling and importing the invention claimed in a patent. Because this is such a powerful right, the claimed invention must be a significant improvement over what was previously known in the relevant field (i.e., over the "prior art"). A significant amount of law exists to help determine whether a specific invention meets this standard. It is important to remember that the public disclosure and/or sale of the patentable invention limits the time period to file an application. The goal with patents is to only file for protection where there is a strong potential to obtain strong patents in key areas. It is better to file fewer applications that result in defensible patents in strategic areas for a company. Patent applications are relatively expensive and time consuming to prosecute. This is another reason for carefully determining what to patent.

A trade secret is any information that derives independent economic value from not being generally known to others; provided that the company can demonstrate that it took efforts that are reasonable under the circumstances to protect the confidentiality of the trade secret. Typical trade secrets include financial and marketing information, customer lists, industrial designs, new product plans, software source code, personal information of customers, know-how, etc. Unlike patents, if kept secret, trade secret protection lasts forever. Therefore, trade secrets can be some of the most important assets of any company. Maintaining trade secret protection for any company requires that the company establish a reasonable trade secret protection program. This is true even for a newly funded start-up. Too often, start-up companies ignore this critical component of IP protection until it is too late. This is especially disturbing because a basic trade secret program is not that difficult or expensive to design and implement.

Copyright protects the copying or use of the creative expression of an idea, not the idea itself. In other words, the idea of a software application to manage sales efforts is not protectible; the actual computer code may be subject to copyright protection. Factual information is not subject to copyright protection. As with trade secret law, copyright protection does not protect against independent creation, only copying. Copyright registrations, while not essential for copyright protection, are necessary to obtain key remedies in any enforcement action. Unlike patents, a copyright registration program is relatively straightforward and inexpensive.

A trademark or service mark ("Mark") is used to identify the goods and/or services of a company and distinguish them from those of others. Marks can be words, graphics, sounds, symbols, logos, and slogans in a manner that serves or even smells. The trademark or service mark ("Branding") functions to distinguish the origin of goods and services in the mind of the consumer. This association is known as "good will." Good will can be a very valuable business asset. In fact, for many consumer oriented companies, the Branding and brand protection strategy can be the most valuable asset of the company. Think about the value of brands like Amazon, eBay or Google, for example. Companies who wait too long to implement a Branding strategy, can find that others have registered their Marks in key jurisdictions, a difficult and costly problem to deal with.

The goal for any early stage company is to determine the mix of patent, copyright, trade secret and trademark protection that will protect their business in light of the realities of the relevant industry and technology. It requires a concerted ongoing effort at each stage of a company's development, from formation, through product development, to full commercialization of a company's products or services

During the formation phase of a company and the initial development of the company's key technology, there are three critical areas where companies often fail to adequately take IP into account: (i) performing adequate IP due diligence on the company business model to decide what is protectible and what other competitors are doing; (ii) ensuring that critical IP is really owned by the company; and (iii) establishing a plan for identifying and securing the right mix of IP assets.

A classic and costly mistake made by countless early state companies is failing to ensure that the corporation actually owns all of the IP rights in the technology that forms the basis of the company's products and services. Often founders or other individuals developed foundational IP before the company was formed, or while working as independent contractors. In those situations, this foundational IP may not actually be owned by the company unless the right assignments have been executed.

Next, once a company is formed and receives its first funding, the company typically enters into an intense period of product development. During this period, a company should develop the basics of a protectible IP portfolio. A company must identify protectible IP and obtain defensible protection, whether patent, copyright, trade secret or trademark.

Finally, the company has a product ready for market. IP rights issues also commonly arise at this stage of a start-up's life cycle. At this point, hopefully, a company has done a good job of developing and protecting a strong IP portfolio. This IP portfolio will do a company little good; however, if the early stage company fails to intelligently leverage this IP as it commercializes the company's products and technology. The terms of the first key commercial contracts, whether they are license agreements, distribution agreements or joint development arrangements will all contain critical clauses concerning license rights to or ownership of foundational IP. The wrong terms regarding ownership of IP (or overly broad grants of exclusive rights to the company's IP) can greatly impact the future value of the company.

There is no one size fits all IP strategy. Each technology company will need to analyze which combination of patent, copyright, trade secret and trademark rights will give them the best competitive advantage. A good strategy will vary depending on the business model, the technology, and the relevant industry sector.

By asking the right questions, investors and other Board members can play a key role in helping early stage companies to develop and implement a winning IP strategy. The goal is not to secure every possible type of IP protection; this would be too costly and time consuming. Instead, careful attention should be paid to obtaining the right IP protection and then leveraging those assets successfully.