Research and development and the ownership of intellectual property can provide a distinct competitive advantage. Research and development refers to seeking ways to develop a new product or service or improve an existing product or service.
If the company can successfully secure exclusive rights to a product or service through intellectual property, the company can eliminate the potential for direct competitors and thereby drive higher revenue and profit. The primary forms of intellectual property include patents, copyrights, and trademarks.
Patents give “the right to exclude others from making, using, offering for sale, or selling” an invention.1 This right provides the patent owner with an opportunity to generate superior profits throughout the life of the patent.
Trademarks are primarily used to distinguish a brand name or symbol. While startups have often not built a brand image that is widely recognized, trademarks can still be used to protect the company from competitors seeking to copy their brand image.
Lastly, copyrights protect forms of written or artistic work and do not tend to be of high importance to startups as they typically focus on developing products or processes.
While intellectual property is not necessary for early-stage companies to succeed, research and development efforts are important to develop and improve its product or service offering. Legally securing intellectual property rights can be expensive and time consuming for early-stage companies. At a minimum, the company should secure appropriate assignment of invention and non-disclosure agreements with all past and present individuals who worked on the IP, whether as founders, employees, consultants or otherwise. Florida Funders reviews all relevant intellectual property when vetting a company, and takes into account the potential for securing intellectual property in the future.