Startups IV: Protection of content (trade secrets and intellectual property rights)
One of the main features of startups is innovation, in other words, solving current problems with groundbreaking ideas. The novelty of these ideas is the added value that these types of business offer the market and society at large. Consequently, in order to ensure the success of a business, it is essential to skilfully, sensibly and cautiously handle the protection of a startup’s most important asset: trade secrets or know how.
Many trade secrets cannot be patented, so their protection and use must be strategically analyzed. This key aspect can provide a competitive edge in the market. In this regard, protection of this intangible asset must be addressed from two angles: internally (workers) and externally (investors).
Contrary to popular opinion, the protection of trade secrets should start from within the startup itself. This means that strategic use should be made of the protection of trade secrets, firstly by setting in place internal measures, following up with external measures.
Internal measures of protection
The protection of trade secrets in respect of the startup’s employees is one of the most arduous tasks faced by a startup, since in most cases the unlawful disclosure of confidential information is carried out by employees on the company’s payroll or by former employees.
Bearing in mind how important know-how usually is for a startup, the first step that should be taken is to limit access to the confidential information strictly to the people necessary to develop the product or service and establish the appropriate parameters in this regard.
Secondly, companies can also protect their confidential information by including contractual clauses in the contracts they sign with their employees.
Confidentiality clauses also exist that oblige both parties not to disclose the confidential information acquired in the course of their duties (“Non-Disclosure Agreements” or “NDA”).
NDAs are (hence the name) agreements or clauses regulating secrets, knowledge and disclosure of information obtained by the parties pursuant to a certain legal relationship which must be kept secret.
Another clause that is widely used is the non-competition clause, which prevents employees from working in a similar position in compteting companies and even from carrying out private business activities using the company’s information. Caution should be exercised when regulating this type of clause, since in order to achieve greater protection of their confidential information, startups often overstep the mark. For example, not establishing a specific term in the non-competition clause, is contrary to the constitutional principle of freedom to work and the right to work, which would be highly likely to be questioned in court, probably leading to the loss of the protection that was initially sought.
External measures of proteciton
The subject matter of this post acquires particular relevance as far as investors are concerned. In order to avoid potential problems with the new shareholders, it is essential to lay down clear rules through an NDA which should clearly identify the information to be protected and demand standards of diligence from the other party in safeguarding the confidential information.
The above notwithstanding, before we end, we should mention the means of protecting industrial property and copyright. While industrial property is focused on protecting creations related to industry (i.e. patents, utility models, trademarks and industrial designs), copyright protects creations that somehow reflect the author’s personality (i.e. literary, audiovisual and musical works; this category now also includes certain works related to digital content, such as software or data bases).
It should be borne in mind that the Spanish Patents and Trademarks Office and the Copyright Registry, for industrial property and intellectual property respectively, which are divided into regional districts, can help protect these rights.
In view of all the foregoing, by way of conclusion, we urge you to take the appropriate steps to protect trade secrets and industrial property rights and copyright which are essential for the development of a startup, in order to avoid setbacks that may distort the viability of the project. The Spanish legal system offers us various tools to meet this objective, and the eloquent phrase by Sun Tzu also comes to mind: “Making no mistakes is what establishes the certainty of victory, for it means conquering an enemy that is already defeated.”
Garrigues Corporate/Commercial Department