Startup IP Mistakes That Can Cost You Everything – Part Two
In Part One, we covered two early IP mistakes that can quietly undermine a startup’s potential: treating IP as a “tick-the-box” task and failing to confidently communicate your IP position to investors or stakeholders.
In this follow-up, we’re looking at three more traps that Australian SMEs and startups often fall into—and how seasoned operators stay clear of them.
Mistake #1:
Assuming You Automatically Own What You Paid For
It’s a common misconception: if you paid for it, you own it. But in IP law—especially in Australia—that’s not always true.
Why it’s a problem:
Hiring a contractor or engaging an agency doesn’t guarantee you own the resulting IP. By default, independent contractors retain copyright in their work unless there’s a clear, written assignment of rights. This applies to everything from code to design assets, marketing materials, branding, and product prototypes.
This mistake can derail product launches, investment rounds, or even result in a third party claiming ownership of a core asset.
What to do instead:
Use strong IP assignment clauses in contractor and collaborator agreements from day one.
Ensure assignments are executed in writing, ideally before work begins.
Conduct regular audits to confirm that all critical IP is actually owned by the business—not just assumed to be.
If IP was created without clear assignment, take steps to remedy the gap proactively—not when you’re already under pressure.
Mistake #2:
Neglecting Trade Secrets and Confidential Know-How
Startups are often laser-focused on patents and trademarks—but forget about what isn’t registered: their trade secrets.
Why it’s a problem:
Your unregistered IP—things like processes, algorithms, customer data, and business methods—is often your most commercially sensitive material. But if it’s not treated properly, it can lose its legal protection.
For example, if you casually share internal processes with a strategic partner, or allow former employees to take source materials with them, you may have no legal recourse—even if the material is copied or misused.
What to do instead:
Identify your trade secrets early. Not everything needs a patent—some things should remain confidential by design.
Use NDAs strategically—not just as formality, but with purpose.
Apply strict access controls: who can access what, and under what conditions.
Train your team. Most leaks come from within—not through malice, but from lack of awareness.
“Trade secrets are only as strong as your ability to demonstrate they were protected. Treat them with intention.”
Mistake #3:
Treating IP Strategy as a Legal Task—Not a Commercial One
Some founders park IP decisions with their legal advisor and move on. But strong IP strategy is deeply commercial.
Why it’s a problem:
IP rights are not just about protection—they’re about leverage. They impact market positioning, licensing revenue, funding readiness, exit value, and more. If you treat IP as an afterthought or leave it to lawyers to “just handle,” you risk missing its broader strategic value.
What to do instead:
Align IP decisions with business goals. Are you growing domestically, planning to license, targeting international markets? Your IP strategy should match.
Engage your legal advisor as a partner, not a reactive service provider. Bring them into strategic planning conversations.
Keep a living IP roadmap—one that evolves with your product, team, and commercial direction.
When treated right, IP is an active enabler of competitive advantage, not just a legal checkbox.
“When treated right, IP is an active enabler of competitive advantage, not just a legal checkbox.”
Think Like an Operator, Not Just a Founder
Avoiding these pitfalls isn’t about being paranoid—it’s about being prepared. By treating IP as a dynamic, commercial asset and not a static legal task, startups can unlock leverage, avoid disputes, and build with confidence.
Still not sure where you stand? Consider an IP health check—because the earlier you uncover risks, the easier (and cheaper) they are to fix.
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The content given herein is provided for information purposes only. It is general in nature and does not constitute legal advice and should not be used as such. Formal legal advice should be sought in particular matters.
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