how to protect startups against fraud

Six Ways Startups Can Protect Their Intellectual Property

As an entrepreneur, you may be experiencing too many daily struggles to even think about protecting intellectual property (IP). The truth is, you can’t put off dealing with IP issues until they undermine the very foundations of your business. As a startup, you need to start thinking about protecting your intellectual property/copyright before investing a single dollar in your digital product development.

Below, we will focus on negative ramifications of IP loss and copyright infringements and explore how you can protect your business idea and avoid falling prey to fraud and shenanigans in the future. First, let’s figure out the difference between the two often confused concepts: intellectual property and copyright.

In plain language, ‘Copyright’ means exactly what the name implies: the right to make copies and otherwise make use of the work of art (literary or musical piece, etc.). All of your creative work protected by copyright after January 1st, 1978 is protected for your lifetime and, moreover, for 50-year timespan after you die.

‘Intellectual property’ is, essentially, an umbrella term encompassing copyright, trademark, patents, etc. As Wikipedia states, the term refers to “intangible creations of the human intellect”. You may assume that the concept of intellectual property includes an app or startup idea. However, in real life, things tend to get a little bit trickier. To understand the basic principles of intellectual property protection for startups, let’s look at the following examples.

How To Protect Your Business or Technology Idea

Let’s assume that you share your startup idea with a colleague during a friendly chat on a coffee break. Your colleague finds your idea excellent and starts working secretly on bringing it to life faster than you. As a matter of fact, you’ve just been screwed and robbed.

Is there any way you can protect your idea in this situation?

Unfortunately, there isn’t any. There’s a popular notion that ideas don’t belong to anyone – they kind of ‘circulate in the air’ and people from different parts of the world can come up with the same idea simultaneously. The first to implement it will be the lucky one; hence, protecting an idea is quite tricky.

Moreover, legal authorities tend to share this notion, since they can’t protect an idea unless it’s been given a particular status: either of a subject of copyright (a literary or music piece or artwork), or a patented invention (a trademark or an industrial prototype).

As you may remember, Mark Zuckerberg has borrowed the Facebook idea from the Winklevoss twins, who had sued him in 2004 and lost. You may try NDA agreements to protect your idea, but the best thing you can do is start implementing it as fast as you can, mum’s the word, and hope no one outpaces you.

However, what if you have already implemented your idea and want to protect it from being duplicated or stolen?

How To Protect Authorship

Geoff is a developer who has just written a cool app he was damn sure was 100% unique. However, after he uploaded his app on Google Play, he was disappointed: someone has already uploaded exactly the same application with exactly the same features! Geoff goes to court to prove his authorship, but his competitor claims he had developed the application out of his own idea and had even protected parts of code with copyright. So what can Geoff do to win the suit?

In this case, the court will look at the chronological order, and Geoff has to prove he was the first to have developed the app. Some experts advise going the old-fashioned way: sending a flash-disk with a code to your physical address via snail mail and storing a sealed envelope with a date. If Geoff can prove he was the first to upload his app on Google Play and all his competitor has is just a copyright-protected piece of code dated later than that, then Geoff wins.

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We would recommend storing an application code with authorship indication in a cloud repository or protecting the source code with copyright (which is exactly what Geoff’s competitor did) as if it were a piece of literature. Strange as it may seem, copyright rules apply here since the code can be treated as an original text.

But doesn’t copyright emerge automatically, as soon as the author creates a particular piece of work? It does, according to the Berne convention signed by almost every country in the world, except for countries like Bhutan and Afghanistan. Yet, to eliminate disputes, we would still recommend early registration of IP.

Let’s now look at one more example of what may happen to a startup that fails to secure its intellectual property appropriately.

Another assumption: a group of friends launches a b2c web app and protects the source code with copyright. Later, they have an argument, and one of them leaves and launches a similar service, with the same functionality, but written in a different programming language. Can web app developers now sue their former friend for copyright infringement?


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Unfortunately, they can’t, since the Berne convention applies only to the exact pieces of code. The convention is simply too old to operate in terms like “functionality” and “algorithms”. If the friends had been precocious enough to sign an NDA agreement, they could have sued their ex-colleague for a breach. One more thing they could have done is to register a patent – unlike copyright, it requires registration and may or may not be valid depending on the country.

How Startups Can Protect Copyright

Wrapping up all of the above – what can startups do to protect their intellectual property? The general rule of thumb is to start thinking about it in advance. After all, ideas do circulate in the air, and friends tend to turn into fierce competitors. All in all, it totally makes sense to start taking Below are some IP protection methods you may apply to secure your work.

1. Develop your startup IP protection strategy

Talk to lawyers and explore carefully laws and regulations existing in all of your target countries. Make sure you are aware of all legal means of protecting your intellectual property before you launch.

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2. Register copyright

Having exact pieces of code protected by copyright will never hurt, after all. Should any disputes arise, this will speak to your benefit. In the USA, you can do it through a government Copyright Office. Alternatively, you may turn to trusted private copyright depositors. The registration fee will range from $50 to around $200.

3. Have direct proof of authorship, with a timestamp

Yes, copyright applies automatically to everything you do, but how can you prove it was you, in the first place? Work on means to provide proof: a snail mail envelope, a cloud repository – anything that stores your data and your name will help you prove authorship.

4. Use blockchain

With this respect, think if it would be best to use a distributed ledger. Once the data is in the blockchain, it is there forever, along with all agreements, dates and authorship proofs. It’s cheaper than conventional ways of copyright registration and, most importantly, will secure your authorship for good.

Think of using services like PatentBot, Proof Of Existence, for registering your trademarks, put timestamps or sign contracts right on the blockchain.

5. Sign an NDA

If you think this is being paranoid, think again. In today’s highly competitive environment, even giants like Apple have trouble proving their authorships. There are all kinds of non-disclosure agreements: between business partners, employees, service providers, and outsourcing vendors. Sign them to protect your sensitive data and have something to fall back on.

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6. Register a patent

If you are sure your idea is patent worthy, i.e., is innovative and potentially disruptive on a global scale, go ahead. Patenting is a complicated procedure; moreover, a patent registered in one country may not work in another. It’s also quite costly, so, if the idea is not unique, think if it’s best to invest this money in promotion and business development.

Last but not least, think of alternative ways to eliminate competition, like ensuring the excellent quality of your product or service. While this could by no means replace copyright protection best practices, this, as well as a recognizable brand and a positive company’s track record, could work as an additional safeguard against IP issues.

Legal IP Checklist For U.S.-Based Startups

Assigning IP

  • Founder pre-existing IP
  • Employee Confidential Information & Intellectual Property Assignment agreements
  • Independent Contractor/Consulting Services agreements

Protecting IP ownership

  • Licensed IP and modifications/improvements
  • Current or previous employers (see Cal. Labor Code §§ 2780-2782)

Strategic IP Portfolio


  • One-year statutory bar
  • Provisional patent application
  • International protection
  • Software patents under Alice v. CLS Bank
  • Offense and defense against patent trolls

Trade Secrets

  • Preserve confidentiality
  • Limit and control access


  • Check USPTO trademark database
  • Secure federal trademark registration for enforcement
  • Not merely descriptive


  • Original work of authorship
  • Secure federal copyright registration for enforcement
  • Understand ‘Fair Use’

Checklist source: TechCrunch

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