As a member of the tech or software industry, you may assume that a startup with real potential develops its own intellectual property—end of discussion. However, this can be a lengthy and costly barrier to business. There are, in fact, three practical approaches to intellectual property (IP). Each strategy has pros and cons.

3 options for startups

A startup’s IP approach should depend on the state of their research and development, their funding and the time they have to turn a profit. Companies can pursue three IP options:

  • Apply for their own patents. This can be incredibly lucrative and provide a huge draw for investors. Owning a patent for useful IP can bring in revenue for years to come and make a lasting impact on the industry. However, it’s also a complicated legal process. Filing a patent is expensive and takes a long time. There are hefty regulations and competition is often fierce.
  • License a third-party’s IP. Licensing a third-party’s IP can be a fast and relatively affordable option for startups with less capital and backing. This option is essentially a leasing agreement for the use of another party’s IP. It can create traction for your business and build your company’s portfolio. Licensing may be a good option for a less experienced tech startup, assuming you have good legal representation to verify all the arrangements.
  • Buy a third-party’s IP. Unfortunately, most startups are unable to consider this as a viable option as they do not have the means to buy IP outright. If you can buy a third-party’s IP, you can enjoy the benefits of owning IP without going through the hoops of research and development and patent applications.

Intellectual property pays dividends. However, it can also cost you your business if litigation results from improper use. Ensure you protect your own intellectual property and sign airtight licensing agreements to avoid potential fallout from litigation.