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According to statistics, Nigeria currently has more than 28,000 startups across the country[1], making it one of Africa’s strongest destinations for building within the startup ecosystem. Within the last five years alone, 3,735 new companies have been founded and over $213 million in funding has been raised. Additionally, startups in Nigeria have witnessed 203 acquisitions and 247 Initial Public Offerings[2]. These are not just numbers; they show that despite the complexities and difficulties experienced within the country, entrepreneurs are silently building under these very difficult circumstances.
However, one major aspect that most startup owners and founders have often neglected is their IP portfolio. A comprehensive study highlighted by BusinessDay revealed that while 86% of ecosystem stakeholders are aware of intellectual property, only 36% possess high or very high functional knowledge of IP registration and monetization processes[3].
What is an IP Portfolio?
An IP Portfolio simply refers to the collection of intellectual property rights and other intangible assets owned or controlled by a company. This means that an IP that is unprotected cannot form part of the IP portfolio of a company or individual. This is because, in the event of infringement, there is no protection that can limit the possibility of taking enforcement actions against the infringer.
So, ranging from an innovative product, a brand name, a trademark, etc. These are all intangible assets that can form part of the IP portfolio of a company. For example, if a startup company in Nigeria invents a new product called SUNFLY, there are quite a number of intangible assets that could be available to that company, including:
The above is what we refer to as an IP portfolio, and the process of effectively utilizing it for the commercial goals and benefits of the company is referred to as IP management. So, beyond just protecting your startup, a good understanding and utilization of your IP portfolio could be a game-changer in scaling your startup sustainably.
In Nigeria, the above-mentioned IP assets are the most common forms of IP and are protected under Nigerian law.
Why startups should protect their IP early
Startups are most unlikely to survive if they fail to protect their IP assets early enough. At the early stage of the lifecycle of a startup, most founders are often carried away by the need to raise funds and solve real problems, such that they forget how crucial IP protection can be to giving the startup a solid foundation for growth.
Even the funds that founders are chasing can significantly skyrocket with a “simple” and detailed IP management structure. IP rights are key economic assets in today’s knowledge economy. A solid IP strategy built by a startup founder in the early stages of the development of their startup enables them to leverage their IP assets for growth[4].
In the modern economy, IP assets often drive current and future revenues, so investors like to see that entrepreneurs have integrated IP rights into their business plans. Evidence of some kind of convincing approach to IP will, at the very least, mean that companies are better aligned with investors on the big question of how to sell the company for billions of dollars one day[5].
Since IP rights are territorial in nature, ensuring the early protection of IP assets owned by a company is a strategic form of ensuring future expansion into foreign markets. In the case of early-stage startups that may not be financially capable of protecting their IP in foreign markets where they intend to expand, a solid IP strategy will also be an indicator of future viability and therefore attract investors.
The Nigerian IP Protection Legal Framework
Building an effective IP strategy
An IP strategy is a company’s plan of action to manage and protect its intangible assets[7]. The following is a step-by-step process on how to develop an effective IP strategy:
a. Identification of all existing and potential IP assets: This stage includes outlining all intangible assets owned by a company.
b. Determination of ownership of each asset: This stage involves determining who owns the intangible assets identified in the first stage. Companies should always ensure they enter into appropriate agreements with developers or employees regarding any design, code created, or invention, to ensure that any intangible asset created as a result of engaging them is retained by the company.
c. Registration of IP that requires registration: After determining the assets owned by the company, the next stage is to register the rights that are registrable. In the case of an early-stage startup still struggling to build, the strategy should be detailed in such a manner that priority is given to IP assets that are critical to the startup’s business and commercially valuable.
d. Protection of confidential information through contracts and internal controls: For trade secrets that are not registrable, adequate internal control mechanisms should be set up to ensure that they are adequately protected, including signing NDAs and restricting access to confidential information. This is particularly important because the value of a trade secret depends significantly on the measures taken to preserve its confidentiality. Protecting confidential business information helps to ensure that a startup can scale sustainably without unnecessarily exposing its competitive advantage.
e. Commercialisation and monitoring of the IP portfolio through licensing, assignment, partnerships, and enforcement: This stage ensures that the intangible assets of the company can now be leveraged for its commercial goals and objectives including scaling, fundraising, and cross-border expansion.
For early-stage startups that may be unable to afford the cost of the necessary registrations, priority could be given to intangible assets that are most critical to the business and most likely to contribute to its future value. However, it is often important to have a strategy for future registrations and expansion into other markets so that the startup can progressively protect its IP as the business grows.
Conclusion
Most often, founders think that incorporating their company and probably trademarking their brand name is all they need to know or do regarding IP. However, they do not understand that protecting and sustainably scaling their ideas, company, and product is hugely dependent on how well they are able to appropriately identify and properly manage, through a detailed IP strategy, the various intangible assets which they own.
So, the questions you should ask yourself as a founder are: Do I have a thorough understanding of the IP assets that I own? Do I have an IP portfolio? And do I have an IP strategy that enables me to leverage my portfolio for sustainable growth?
[1] https://tracxn.com/d/geographies/nigeria/__aRcH8lYOC74CSa9mr7vgyDsrJwlraqmlU3-gQ9qUxb0
[2] Ibid.
[5] Ibid.
[6] https://aluko-oyebode.com/insights/key-highlights-of-the-copyright-act-2022/
[7] https://www.wipo.int/en/web/business/checklist
Written by Chinaza Eneh for The Trusted Advisors
Email us: info@trustedadvisorslaw.com
Telephone Number: +234 810 159 9159