AB and David Law Firm: From Mind To Market, Startups Building Business On Ideas

The greatest inventions that have revolutionized the way we live, work and do business have originated from the minds of people. It all starts in the mind as an intangible idea. With rising competition, organizations are developing innovative strategies to develop more business and attract investments. The value of intangible assets (a non-physical asset such as patents, trademarks, copyrights, industrial designs and trade secrets, etc., that a company owns) are increasingly proving to be game changers in business competitiveness and growth.

It is important for businesses and startups in particular, to recognize intellectual property (IP) as a valuable corporate asset. However, as an intangible asset, steps must be taken to protect such asset to mitigate the potential risks associated with unauthorized use within domestic and international markets. Generally, IP refers to creations of the mind such as inventions, literary and artistic works, designs and symbols, names and images used in commerce. Regardless of size and sector, a business loses the immense potential of its innovation and ideas, if it fails or neglects to protect its innovations.

Startups drive real innovation and growth, new products, services and solutions that can propel business growth and ultimately economic growth and development. As is to be expected, startups invest their energy in the first few years on gaining credibility with their target market and seeking additional capital and investments to grow their business. Innovative ideas of startups require resources for their development. However, in the quest to seek funding, startups risk disclosing ideas to investors without the required protection. This is attributable to the fear that, hesitation to disclose may lead to loss of interest of investors. Due to this fear, startups thus end up disclosing without required protections. Whilst new businesses navigate the challenges of starting a new enterprise, they must not be oblivious to the need to protect their IP assets. Big organizations such as Apple, Samsung, Microsoft, Metro-Goldwyn-Mayer and Google spend huge amounts of money in research and development and ensure that their inventions, literary works, applications, designs, images, etc., are legally protected (to gain maximum value from their creations). Established organizations, therefore, unlike startups do not face the same challenges in protecting their intellectual property rights (IPR) as startups.

This article by Vera Owusu Osei and Akosua Akowuah of Pan-African business law firm AB and David, discusses the importance of IPR protection for startups, the modes for the protection of IPRs in Ghana, enforcement of IPRs and the strategies that a startup can adopt for the protection of their IPRs.

Importance of Protecting IPRs for Startups

The success of Ghanaian startups depends on their ability to protect their IP assets. Though protection of IP in Ghana at the initial stages of an organization’s life may involve time and costs, the future benefits are numerous. For startups to scale up and commercialize their ideas, protection to gain IPRs is key for a number of reasons including:

• Protection against infringement of their IPRs.
• Safeguards against exploitation by potential investors.
• Competitive advantage when market share translates into brand reputation and increased income.
• Leverage in negotiations with potential investors.
• Sale, lease, assignment or transfer for value.
• Realization through valuation of assets of the company in the event of acquisition.

Protection of Intangible Assets in Ghana

Generally, ideas cannot be successfully commercialized if not legally protected. Where an IPR can be used by anyone and everyone, there will be no need to pay the originators of the idea. It is for this reason that IPRs are deemed to be assets or properties of the originator. Under Ghana’s IP laws, IPRs may be acquired specifically for the following categories of intangible assets:

a) Inventions (patents) – A patent can be a design, process, an improvement or physical invention that provides a new way of doing things. Technology and software companies often have patents for their designs. An example is Alan Emtage’s, creation of the world’s first search engine which provided a solution to easy access to information. Also, IBM’s invention of the smartphone, the portable device that combines mobile telephone and computing functions into one unit enabled a new way of doing things.

b) Cultural, artistic and literary works (copyright) – This provides authors and creators of original material the exclusive right to use, copy or duplicate their material. For example, one of Africa’s prominent writers, Ama Ata Aidoo whose works comprise of plays, novels, short stories, poetry and essays, has her works copyrighted and only grants limited access for research or for study.

c) Symbols, names and images used in commerce (trademarks) – This protects business names, logo, shape, slogan, image, color, etc., of goods and services that distinguish it from the goods and services of others. Trademarks are often associated with a company’s brand. For example, the logo and brand of “Coca Cola” is owned by the Coca Cola Company.

d) Trade secrets – It involves a company’s process or practice that is not public information which affords a business a competitive edge. These are typically the result of a company’s research and development. It could be in the form of a design, pattern, recipe (think of Burger King or KFC), formula or proprietary process.

e) Unique designs for commercial use (industrial designs) – This focuses on the physical appearance and functionality of the product including textile which is a product of industry or handicrafts.

f) Geographical indications – These are products that are synonymous with certain locations for their quality. For example, the cloth weaving patterns of Kente which are unique and attributed to the Akans and Ewes. The traditional smocks associated with people in the northern part of Ghana, shea butter (with medicinal benefits), handicrafts such as beads by the Krobos and the local baskets and hats from the North.

There are specific legislation in Ghana protecting each IP. These include the Copyright Act, 2005 (Act 690) which protects copyrights in Ghana. The Industrial Designs Act, 2003 (Act 660) for the protection of industrial designs. Patent Act, 2003 (Act 657), for the protection of inventions and the Trademarks Act, 2004 (Act 664) for the protection of trademarks. In addition, there is the Protection Against Unfair Competition Act, 2000 (Act 589) which regulates and sanctions persons causing confusion with respect to another’s enterprise or its activities, damaging another person’s goodwill or reputation, misleading the public, discrediting another person’s enterprise or its activities, unfair competition in respect of secret information, and unfair competition in respect of national and international obligations.

For obtaining protection for each IPR, there are requirements under the specific laws that must be complied with.

Some of the Strategies to be Adopted by Startups for the Protection of IPRs

As a first step, startups must protect their ideas. While they may be excited about the prospects of partnerships and investors, prudence is key. Prior to disclosing an idea to third parties these must be considered:
i. physically ensuring that the idea is kept safe from unauthorized access.
ii. where disclosure is required, that there is first, some due diligence on the recipients of the IP information and where the outcome of the due diligence is positive that there is a confidentiality or non-disclosure agreement in place which must restrict the use of information disclosed.

Startups should register their ideas with the relevant statutory entities to provide protection from infringement. For example, it is necessary to recognize that, although we live in a globalized world, the registration of some ideas like trademarks are territorial. According to the principle of territoriality, intellectual property rights are limited to the territory of the country where they have been granted. This is despite increased globalization and the ease with which products protected by IPRs can cross national borders as a result of technological advancements. It is therefore important for Ghanaian startups to register their trademarks in Ghana and other key jurisdictions.

Additionally, since Ghana is a member of ARIPO, an IP protection may be obtained in other ARIPO member states by filing a registration application through ARIPO and designating any member state to protect your IP rights.

Startups may seek to protect their IP through well drafted legal contracts which must include the following:
• ownership and use of the IP rights.
• monitoring mechanism to ensure compliance with rights of use.
• restriction of IP access to essential parties, contractors or supply chain partners.
• prohibition of unauthorized use or copies of IP, e.g., on devices, shared network drives, etc.

Enforceability of IP Rights

Under Ghanaian law, there are civil and criminal sanctions for the infringement of IPRs. Additionally, Ghana is a signatory to international treaties/protocols for the protection of IP including the World Intellectual Property Organization (WIPO) and a signatory to certain WIPO-administered treaties, the Berne Convention for the Protection of Literary and Artistic Works and the Paris Convention for the Protection of Industrial Property. These international treaties afford additional rights for persons (from member states) whose IPRs are infringed.

Conclusion

People will always try to replicate a unique idea for their own commercial gains. In Ghana, even protected ideas are replicated illegally, as such, failure to protect an idea only opens a floodgate. Hence, before any third party infringes on a startups IPR, it is very important for the startup to protect their IP. Startups must therefore prioritize the need to protect their IP assets to position them well for any potential merger or acquisition, a valuation of their company, or a dispute on the ownership, use or infringement of their IPR. IPRs can be protected irrespective of the kind and size of the business. Consequently, after evaluating the business needs and circumstances, appropriate action for IP protection must be taken. It is crucial to note that, it is the complete responsibility of the proprietor to protect its IP from infringement.

The competitiveness of the business environment requires investment in research and development. To fully utilize innovations from research and development, organizations must recognize the proprietary nature of their ideas, take necessary actions to protect such IP and aggressively enforce unauthorized use or any infringement of their IPR.

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