By Mehr Sokhanda
When it comes to early-stage investing, few assets can differentiate a startup more than intellectual property (IP). Yet, for many investors—and even some founders—IP remains poorly understood, inconsistently managed, and dangerously under-leveraged.
In a recent Brampton Angels’ Angel Investing 101 series, Rishika Dhir and Stephen Beney of Smart & Biggar unpacked what IP is, why it matters, and how to mitigate its many associated risks. Dhir, a patent lawyer, agent and Principal, and Beney, a seasoned IP lawyer and Principal, covered both the fundamentals and the deeper strategic dimensions of IP—insights every startup founder and angel investor should understand.
What is Intellectual Property?
IP refers to creations of the mind that are legally protected to support innovation and commercialization. It’s not just patents—though those are often the most discussed—but also includes trade secrets, trademarks, copyrights, and industrial designs.
Beney emphasized the functional value of IP as more than just a legal formality. “Property is business as well. It’s a business tool,” he explained, reinforcing the idea that IP should be strategically integrated into a company’s overall business model—not treated as an afterthought.
Too often, Beney noted, early-stage founders rush to file patents simply because they feel it’s expected. “You never want to be filing IP just because someone told you to file IP,” he warned. “If the clients can’t answer where they want to be and how IP is going to help get them there, then why are you applying for IP?”
This kind of unfocused filing not only wastes time and money, but can also expose companies to legal risks and undermine their value proposition to investors. Instead, Beney emphasized the need to align IP strategy with a company’s commercial objectives. IP should be a forward-looking tool that maps to tangible goals—whether it’s market entry, product launches, licensing, or M&A activity.
He suggested building an IP roadmap that aligns with one, three, and five-year business milestones. This planning ensures that IP supports the company’s strategic direction, whether it’s scaling in a particular region, defending against competitors, or attracting funding.
The Four Major Types of IP: A Strategic Toolkit
Maximizing Value with Patents and Design Rights
Patents primarily guard the internal mechanics, structure, and function of an invention. “Most people won’t encounter the patents—except from the outside lawyers,” Beney pointed out, emphasizing that patents often operate behind the scenes. Despite this, they play a critical role in licensing, negotiations, and deterring infringement. Beney strongly advised against relying on just one patent, cautioning: “You don’t want to license one single patent. You want to license all the technology that’s covered by patents one, two, three, four, five, six… If you only have one brick and it falls, you’ve got nothing.” For startups, this means thinking beyond a single filing and building a strategic patent portfolio that forms a layered, defensible wall of protection.
By contrast, industrial designs safeguard the visual aspects of a product—its shape, style, and overall look—rather than how it functions. These rights are especially valuable for consumer-facing products where aesthetics matter. “If the aesthetics of your product are important, consider filing a design,” Beney recommended. “It’s a good secondary protection on top of patents… and design rights are often underused because they’re so subjective.” He added that industrial designs last for up to 15 years in Canada and the U.S., and the process is “much less stringent in terms of examination… a great secondary line of protection to add around your wall.” However, their limitations are clear as per Beney: “You can’t protect functional aspects in designs. It must be purely aesthetic—the appearance and orientation you can protect.”
Taken together, patents and industrial designs provide two complementary forms of IP protection. Patents lock in the technical foundation of innovation, while design rights secure its public-facing identity.
How Trade Secrets Protect Business Value
Trade secrets are a powerful but often misunderstood form of intellectual property protection. Unlike patents, which require public disclosure, trade secrets safeguard information that remain confidential—such as formulas, manufacturing methods, customer lists, algorithms, or internal processes. These assets can be incredibly valuable precisely because they are not made public. As Beney, in his wittiness, remarked “So trade secrets… What are trade secrets? Of course we don’t know. Because if we knew, then it wouldn’t be a secret.”
However, the strength of a trade secret lies entirely in a company’s ability to keep it secret. That means there’s no formal registration process; instead, businesses must implement rigorous internal controls. Beney stressed that “the cost of a trade secret is vigilance,” and that companies must be “hyper around security—software, and access to information.” This includes using access controls, encrypting sensitive files, training employees, and ensuring that only those who truly need to know specific information have access to it.
He illustrated this point with the example of Coca-Cola, one of the most famous global trade secrets:. “Even Coca-Cola,” he said, “doesn’t let everyone know the whole recipe. They’ve compartmentalized it and ensured strict agreements are in place internally.” That kind of compartmentalization—dividing up knowledge across teams and requiring employees to sign non-disclosure agreements (NDAs)—can help prevent internal leaks and protect competitive advantage over time.
But trade secrets also come with risk. If information is leaked, whether intentionally or inadvertently, the protection is lost. Beney emphasizes, “The worst leak of information is usually a split between two founders, and then all of a sudden this information is spread between two companies.” And unlike patents, which provide a clear right to exclude others, trade secrets offer no recourse if someone independently discovers or reverse-engineers the information. That’s why the decision to maintain a trade secret rather than file for a patent must be strategic, based on how easy the information is to reverse-engineer and how well a company can realistically protect it over time.
Brand Distinction: How Trademarks Give Your Company a Competitive Edge
Trademarks are essential for protecting a company’s brand identity—this includes names, logos, slogans, taglines, and other distinctive signs that signal to consumers where a product or service comes from. As Beney explained, “Trademarks are the things that identify your company and your brand to the world.” While patents and trade secrets guard technology and processes, trademarks protect how a business is perceived by the public and can ultimately become some of the most valuable assets a company owns.
One of the most strategic aspects of trademarks is their flexibility. Unlike patents, which must be filed and approved before they offer legal protection, trademarks can begin to offer limited protection through use alone. Beney noted, “You can actually start using a trademark before you file, and if you’re using it before it’s registered, you use the TM designation.” This means startups can establish brand presence in the market early on, even as they begin the registration process. Once the trademark is formally registered, businesses can replace “TM” with the ® symbol, indicating full legal protection under trademark law.
Trademarks also offer long-term value and adaptability. As companies grow and evolve, their trademarks can evolve too. Beney highlighted that a trademark doesn’t need to stay static: “You may extend your trademarks… reapply for the same trademark under different topics and services.” For example, a company that starts out in mobile apps may later apply to use the same brand name in education, gaming, or hardware categories. This ability to expand trademark coverage makes it an important part of scaling a business and entering new markets.
Ultimately, trademarks help distinguish your product or service in a crowded marketplace. As Beney put it, “Your trademarks can become the most valuable form of your IP over time, because it takes a long time to build strong customer loyalty, satisfaction, and brand recognition. If I mention names like LEGO or Apple, you already know the quality of their products and services—you trust them.”
From Creation to Control: How Copyright Safeguards Your Original Works
Copyright is a form of intellectual property that protects original creative works—such as written content, software code, artwork, videos, websites, and packaging. As Beney noted, one of the key characteristics of copyright is that it arises automatically as soon as a work is created. “Copyright exists automatically. There’s copyright in this talk—as we’re seeing, it is being created as we speak,” he explained, emphasizing that creators don’t have to file anything for basic copyright protection to begin.
Ownership vs. Authorship
However, for startups and businesses, merely having copyright isn’t enough. Legal clarity about who owns the copyright is essential—especially when work is created by employees, contractors, or third-party designers. Beney pointed out a common misconception: “The person who creates the work is the author. But ownership doesn’t automatically transfer just because you paid for it—you need to make sure the rights are properly assigned.”
This distinction between authorship and ownership can lead to confusion and disputes if not explicitly clarified in writing. That’s why contracts matter. A founder cannot assume that paying for creative work automatically transfers ownership. Instead, legal agreements must clearly state that the creator (the author) is assigning full copyright—and any associated moral rights—to the company. “You want to make sure the author acknowledges you’re the owner and signs over their copyright and the moral rights,” Beney stressed and noted that without this step, a startup may be unable to reuse or modify its own branding or digital assets. Taking time to get this right from the start can prevent costly legal issues later.
The Risks: What Investors and Founders Must Watch For
Patent ≠ Freedom to Operate
Founders are often excited to secure a patent, but as Reshika Dhir explained, a patent alone doesn’t guarantee you can legally sell your product. She explained: “Someone might try to sell a cup with a handle, but if someone else already has a patent on the cup itself—with the sidewalls, a base, and space to hold liquid—then all the key features are already protected. So even if you add the handle, you could still be infringing. You can’t just go to the market—you could be sued.”
In other words, improving on a product doesn’t mean you’re in the clear. As she emphasized: “Getting a patent yourself doesn’t mean you’re free to operate in the marketplace.”
That’s why a Freedom to Operate (FTO) analysis is essential—it determines whether your product might infringe on someone else’s patent. But this process can be resource-intensive: “Freedom to operate can be a very expensive undertaking—or it can be narrowed down. You need to review all the existing patents and monopoly rights that exist and compare them to your product,” explained Dhir.
For early-stage companies, a focused approach can help manage cost and complexity: “If there’s a known competitor, you can target that company’s patents to reduce cost and manage risk.”
However, FTO isn’t foolproof. Risks can still emerge from patents that haven’t been granted yet: “There could be a patent application that’s still pending, and we wouldn’t know what claims might eventually be approved, ” says Dhir.
Ultimately, getting a patent is only one step. To truly protect your business, you need to ensure you’re not infringing on others’ patents—which means performing a targeted and strategic FTO analysis as part of your path to commercialization.
Employment Agreements: Your First Line of Defense
One of the most common risk areas is IP developed by employees, contractors, or third-party collaborators without proper agreements in place. Startups often fail to lock down these rights early on, leaving themselves exposed. “Every employment agreement needs to have an IP clause… and strong confidentiality clauses,” Dhir cautions.
Strong employment or contractor agreements should include:
- IP Assignment Clauses: These ensure that any IP created during the course of employment or engagement is legally transferred to the company. Without this, an employee or third-party developer may retain ownership, even if the work was completed for the company.
- Confidentiality Obligations (NDAs): These must be clear and binding, extending beyond the term of employment or contract. They protect sensitive information from being disclosed or misused—even after someone leaves the company.
- Non-Compete and Non-Solicitation Clauses: These provisions (tailored to the laws of each province) help prevent former employees or collaborators from directly competing or poaching team members or clients.
- Clear Carve-Outs for Prior Inventions: Employees and contractors should be required to list any pre-existing IP they’re bringing to the company. This avoids confusion and disputes over who owns what if the relationship ends.
“If you foresee a situation where you may no longer be employed with the same company—which is likely at some point—you need to think about what happens to your original ideas, and what you can or cannot do after you leave,.” advises Dhir. Whether it’s content creators developing monetizable material or engineers designing patented systems, having these protections in place from day one is essential to avoid difficult conversations later. In many tech sectors, disputes arise when contributors attempt to reuse or profit from work, they assumed they owned. “Clearly carving out those exceptions for yourself is important. Otherwise, it can get quite complicated.”
Failure to include these terms can lead to IP misappropriation, unintentional leaks, or loss of control over innovations that are core to your company’s value.
Maximizing Patent Value: Strategic Budgeting and Effective Enforcement
Patents are a valuable form of intellectual property (IP), but they can be costly. Filing a single U.S. patent can cost upwards of $70,000 over its lifetime, and the process often takes 3–5 years to complete. However, this delay can benefit startups by allowing them to defer costs and spread them over time as the business grows. This staggered expense model aligns with the financial reality of early-stage companies that may not have significant cash flow at the outset.
Dhir explained that once granted, a patent offers protection for up to 20 years from the date of filing, provided maintenance fees are paid. Importantly, this protection doesn’t just come from holding a single patent. Successful companies often build “patent walls”—a strategic collection of related patents that collectively guard a core technology. This multi-patent approach makes it more expensive and complex for competitors to challenge or design around the IP and strengthens a company’s negotiating position.
Still, as Dhir emphasized, the true value of IP protection often comes down to enforcement: “The benefit of having any of this sort of protection is only as good as the amount of money you want to spend enforcing it.”
Litigation isn’t always necessary. A well-structured IP portfolio enables alternative forms of leverage—like licensing deals, technology negotiations, or strategic partnerships. These options can be particularly useful in capital-intensive sectors or where full-scale lawsuits are cost prohibitive. For example, in high-profile cases like Apple vs. Samsung, years of legal battles ultimately led to mutual licensing agreements, allowing both companies to maintain operations while asserting the value of their innovations.
Founders should view IP not just as legal protection, but as a strategic business asset. With the right advisors and foresight, IP can unlock significant commercial opportunities and help position startups for growth, partnership, or acquisition.
Public Support and Funding
Governments are stepping up to make IP strategy more accessible to startups. Recognizing the gap in IP literacy and resources among early-stage companies, both federal and provincial programs have been developed to address the challenge.
Two standout initiatives in Ontario are ElevateIP (federal) and Intellectual Property Ontario (IPON) (provincial). Together, these programs can provide up to $200,000 in combined funding—$100,000 from each source. These funds can be used for various IP-related activities such as strategy development, legal opinion letters, trademark and patent filings, and even agreement reviews.
Importantly, founders can stack these programs—using one for filings and another for searches or licensing support—allowing them to optimize the use of public funds depending on their stage and IP goals.
Some additional support may also be available through Industrial Research Assistance Program IRAP’s IP Assist program, offering around $20,000 for startups that are already IRAP clients to engage law firms in strategic IP development.
These initiatives not only provide the much-needed funding, but they also focus on education, outreach, and awareness to help founders better understand their IP landscape and make informed decisions. While some programs like ElevateIP and IPON are in the final year of their four-year funding cycles as of the transcript, there is an expectation for renewal due to their impact on the innovation ecosystem
For angel investors, IP is no longer a nice-to-have. It’s a due diligence essential—one that reveals the strength, scalability, and survivability of the business you’re about to back.
To find out more information about intellectual property, please contact mail@smartbiggar.ca or info@bramptonangels.vc
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