IP for Founders: A Conversation with Mike Perez of Touchstone Strategic Law

When you’re building a startup, “intellectual property” might not be the first thing on your mind. Between product sprints, customer calls, and investor decks, it can feel like a problem for future you. But according to Michael Perez of Touchstone Strategic Law, that’s exactly when founders should start paying attention.

Because the truth is, IP isn’t just about patents and legal paperwork - it’s about ownership, protection and setting your company up to scale without nasty surprises down the road.

We sat down with Mike to unpack the essentials: when founders should start thinking seriously about IP, what’s actually worth protecting, and how to avoid the most common (and costly) mistakes early-stage startups make.

Let’s dive in

When should a founder start thinking seriously about IP? 

There are a few key moments to stop and think serious about IP. First, consider it as soon as the first light bulb appears above your head. That’s the case even if you haven’t done anything yet and especially if you’re working for other people. As soon as you start scribbling or sketching your big idea, it’s important to make sure you will own it, not your current employer. Check your employment agreements, consider explicitly carving out your personal project(s), and work on your idea on your own time with your own equipment.

Next, stop to think and prepare when you’re ready to involve other people. To protect the idea and retain its value for you or your venture, founders need to consider if and how they share it with others. You can protect the IP with agreements between collaborators like NDAs and IP assignment agreements.  

Next, before you form your business entity, slow down and think about your branding. Branding is a part of a venture’s intellectual property “estate.” It’s a pain in the arse to change it later. I always recommend slowing down to not only check the name availability in the state of formation but also to do thorough google and trademark searches for similar names and slogans, especially in your industry or related industries.  

Next, take the time to do the paperwork when you formalize your business entity. For your business entity to be valuable it has to own the IP behind the business. The founding team will likely want to assign the IP they’ve developed to the business entity right away. If you wait until it really matters, e.g. due diligence during a fundraising round, original cofounders might be hard to track down or less friendly and prone to create friction. 

What parts of a startup can actually be protected under IP laws, and what parts can’t? 

You can generally think of IP in three categories - Patents and Trade Secrets, Trademark, and Copyright. That covers a surprising chunk of a business venture, but not all of it is worth worrying about, especially at first. 

Patents and Trade Secrets are legal mechanisms that protect inventions, broadly speaking. If you don’t want someone else to steal your invention, you either keep it a secret or get a patent. An invention in this context is something substantial enough to have practical value, more than a concept.

A Trademark helps protect your brand assets, but getting your branding out there before other similar branding is also a factor, whether you’ve applied for the trademark. 

Copyright protects original works of authorship, like writing, music, and film. You’ve got the copyright as soon as you create the original work. That covers a lot of what you do in a new venture, but a lot of it isn’t that important to worry about protecting.

How can founders make sure IP created by co-founders, contractors, or employees legally belongs to the company?

This is done through boring, meticulous legal work. Have your IP assignment agreements for co-founders and employees ready and get them executed. Make sure contractor agreements include IP assignment provisions. 

Some aspects of startup success are not sexy or fun. They’re just formalities that require good housekeeping. This is one of those things. 

What are the biggest mistakes early-stage startups make when it comes to IP?

I’ve observed three potentially painful scenarios worth mentioning: 1) developing IP while working for someone else; 2) forgetting to get IP assignments up front; and 3) approaching patents as all or nothing. 

If you have a startup idea or have even started working on it and that idea is potentially competitive with your employer’s business model or might be valuable to your employer, stop and assess your situation. Figure out what you’ve assigned (or hopefully not) to your employer and identify a path forward you can have confidence in. Everyone’s friends until there’s something to fight about. If your venture gets big enough a few years later for your former employer to notice, they’re likely to assess whether what seems like yours is actually theirs.

Conversely, you don’t want your team walking off with your key IP or leveraging your IP to create a competitive idea. You want to dominate your space, and for someone else to want to invest or acquire your company they have to be confident you own the IP to do it. 

Lastly, patents are expensive to get, and it will likely take years. It’s a big leap to get started, and I’ve observed startups hesitating either because they don’t have the full budget for it or the invention doesn’t feel ready. They end up getting beaten to the punch or don’t have that patent pending as soon as they’d like to tantalize investors.

Patents can be started and then amended, and they can be targeted on a key aspect of an invention that ends up protecting the larger space because it’s key to the rest. It’s like occupying one outpost that allows you to control the surrounding landscape. Think about your technological space and what strategically essential spot you can conquer, and have conversations with patent lawyers to suss out how to do within your budget. 

Is filing for a patent always worth it, or are there times when it’s unnecessary or even a distraction?

This is a great question. Despite what I just said above, working up diagrams and descriptions for your patent application takes bandwidth from your team that is probably racing to get the product to market. And it’s certainly not cheap to get a patent, even if you can spread the cost out over time. 

As with all startup decisions, founders balance cost and benefit. How important is having a patent in my industry and to my unique business model? How important is it for my potential investors to know I’ve applied for or have a patent? Are those benefits worth the strain on my budget and bandwidth to go out and get one. It can be a close call – one of many, you’ll have to make!

And don’t forget, some software startups don’t worry about patents or trade secrets at all. Their advantage is a loyal and lively community that sticks with their sticky product. They share their secrets widely and encourage others to copy, and that’s what keeps the users around. 

What should startups know about trademarks when picking a name, logo, or brand?

There’s a lot to know, more than anyone can say in a blog post. (As a lawyer, I’m obligated to provide that disclaimer.) But here’s the key concept. Someone else can legitimately threaten your branding if an average customer of theirs is likely to get confused between you and them. 

Do a google search and trademark search for the same word(s), similar words, different spellings, and longer phrases containing those words. Figure out if any of them belong to someone who might feel threatened by you coming around waving your flag. Hopefully, you’re doing this before you’ve committed to branding, and if not, keep your fingers crossed. Of course, there are ways to deal with it if you discover danger.

How do investors and acquirers evaluate a startup’s IP during due diligence?

There are two main places they will go digging. One is the long trail of contracts your venture has entered into. They want to make sure you haven’t accidentally signed away the thing of value that they’re interested in, licensed it perpetually for free to someone, or anything else that devalues what they’re considering investing in.

The other is your technology, especially any trade secrets. Savvy investors and especially acquirers will want to confirm the magical widget you’ve invented or working on inventing actually exists and does what you claim. 

When should founders start thinking about international IP protection—and how do they know where to file?

As a general rule, you’ve got to be actively doing business in a jurisdiction to apply for IP protection there. (There is sometimes reciprocity to leverage.) So, if you started in the U.S. market, your impending growth into other countries is a good moment to get your ducks in a row on this. It’s not always necessary to jump at it. Consider whether going international is an aberration or likely the start of a growing market for you in a particular country. 

Even earlier, talk with your U.S.-based IP attorneys about your plans in this regard. They’ll be able to help set benchmarks for taking action, and they’ll have relationships with firms elsewhere that know the IP system and can handle the filings. 

Closing Thoughts

IP may not be the flashiest part of startup life, but as Mike makes clear, it’s one of the most foundational. Protecting your ideas, your brand, and your ownership early on can save you from messy disputes, lost opportunities, or major due diligence headaches later.

As Mike puts it, “Some aspects of startup success are not sexy or fun. They’re just formalities that require good housekeeping. This is one of those things.”

And in a world where ideas move fast, that’s one piece of housekeeping founders can’t afford to skip.

About Touchstone Strategic Law, a proud sponsor of Startup Boston: Touchstone Strategic Law is a boutique law firm providing sophisticated legal services to startups and investors, from launch to exit, including entity formation, contracts, M&A, tax, and investment structuring. We bring decades of experience from large law firms, in-house roles, and our own entrepreneurial experience, and we do it at a boutique price point with personal service.