Appreciate Intellectual Property beyond merely legal concerns

As far as I know, the topic of intellectual property has not yet been addressed sufficiently among small and medium ITO agencies, and even early-stage startups, particularly in Vietnam where my company is located.

As a tech entrepreneur myself, only until recently, I started to give it more decent research. It took me no time to appreciate its significance beyond inherent legal concerns though.

Below, I put together some of my most interesting takeaways about IP. Hopefully it could be helpful for fellow tech entrepreneurs. And as always, feel free to discuss!

In case you haven’t had a chance to learn what intellectual property is in details, I let you check it yourself since there are tons of sources available on the Internet as well as in legal documents.

In this article, I prefer to approach 4 categories of IP (Pre-existing, Foreground, Background, Post IPs) in a way that aims at figuring out:

• How can IPs contribute to our added values to projects with clients and partners, thus establishing our unique selling points (USPs)?
• How could we leverage them for our own technology R&D and product development initiatives?

*Please note that the prefixes “pre-”, “fore-”, “back-”, “post-” mean to be subjected to the timeframe of a specific contractual project, not inherently absolute. In additional, there exist different definitions of each concept, though they are mostly different in wording rather than core perceptions.

1. Pre-existing IP

Pre-existing IP means IP conceived or developed prior to or independent of performance of this Order.

Source: Law Insider

This is a category of IP that we often take for granted. In fact, they contribute significantly in most of our software development projects.

Open sources are prime examples. Or in many cases, pre-existing IP can be found in clients’ resources, including their established know-hows, source code, tools, which give us a head start to proceed our jobs faster and more easily.

2. Background IP

For IT outsourcing agencies who are ever struggling with the question: “What am I left with after all, apart from money?”, I think this topic could help a lot.

Background Intellectual Property means Intellectual Property that has been or is acquired, developed or produced, before the entry into force of the Contract, or outside the scope of this Contract.

Source: Law Insider

To my understanding, the concept of background IP sometimes overlaps with pre-existing IP (in fact, some sources consider them the same).

Without trying to analyse their distinction, in this part I’d like to talk about the work that occurs alongside and contributes to a project but is not explicitly required by clients. They are rather kinds of innovations generated by the team.

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According to my experience, this is the most legally disputable part of the background IP concept. However, they imply a lot of opportunities for technology R&D and innovations in outsourcing projects if being sufficiently recognized.

Let’s say, at the beginning of the project, the level of technology depth and intelligence that both you and the client expect is only X. But eventually you deliver X+. The client is happy with this unforeseeable Plus. The point is that this Plus standing alone has a proper and reusable value, so you’d like to claim ownership for it. This means you transfer it to the client as non-exclusive IP rather than exclusive.

Seems an easy game, doesn’t it? In practice, not really. Some following scenarios might happen:

1. The client wants the exclusive IP. They may ask: If we hadn’t granted this mission to you, how could you have thought of that idea? This is a complicated situation and there’s almost no right or wrong. It depends on the mindset of the clients and some kinds of political rules, I would say. According to my experience: the more open minded and pro-innovation the client is, the more chance you can claim the background IP.
2. You the agency may not even recognize it as a worth claiming property. This situation is quite popular and leads to certain consequences:

• Unfair for your next clients: in future projects, your next clients would not able to inherit your established know-hows in an official way. You may unintentionally charge them for duplicating these jobs. This is often the case in Time & Materials projects.
• You miss a chance to strengthen your unique selling points: With recognized and protected innovations, you could probably deliver better efficiency with lower resources to the market, thereby differentiating yourself.
• Lack of a strategic view over your own R&D roadmap: Beside independent R&D initiatives, innovations accumulated during projects with clients should contribute considerably to your long term R&D roadmap. This is particularly important with IT outsourcing agencies that have a serious vision toward product R&D or startup incubation.

3. Foreground IP

This represents the output that you promise with your clients, for example:

• Technical Design
• UX-UI Design
• Source Code
• Other documented materials that contribute to the delivery of final work

Foreground IP is considered as clients’ asset. If you’d like to use this type of IP beyond the scope of the project, you have to buy or ask for clients’ permission.

4. Post IP

They are IPs that occur in the future, separately from the time of the project. What worth keeping in mind is that post IPs are often made from smaller accumulated IPs from past projects. In other words, taking seriously the other 3 types of IPs would help speed up and consolidate the foundation of post IPs.

Final Thoughts

• In the long run, it’s super important for tech companies of all shapes and sizes to be conscious about IP and work on it properly. This can help avoid know-how leaks, while creating incentives for your team to focus more on R&D. All in all, it does add instant values to your business.
• For early-stage startups in particular, in addition to concerns related to market success of your business, recruiting and creating IP are also worth focusing on. This could make you more attractive in the eye of investors.
• Given the high failure rate of rushing to build new products, as analyzed in my recent post IT Outsourcing & Product Development under the same roof — Never an overnight success!, I prefer to firstly invest seriously in small yet worthwhile background IPs, both independently and during projects with clients.

Let’s discuss if you are interested in this topic!