CONTENTS
- 1. Small and Medium-Sized Enterprises and Startups | Concept of Intellectual Property Rights and Their Significance for SMEs and Startups
- 2. Small and Medium-Sized Enterprises and Startups | Definitions and Protection Strategies by Type of Intellectual Property Right
- - Patent Right
- - Utility Model Right
- - Design Right
- - Trademark Right
- - Copyright
- - Trade Secret
- 3. Small and Medium-Sized Enterprises and Startups | Main Types of Intellectual Property Issues
- - Response Process for Intellectual Property Infringement Disputes
1. Small and Medium-Sized Enterprises and Startups | Concept of Intellectual Property Rights and Their Significance for SMEs and Startups
Most clients who are small and medium-sized enterprises or startups seek legal advisory across a range of areas in order to support the safe and successful growth of their businesses, including the establishment and structural design of the company, contracts and investment, the protection of intellectual property rights that are central to the industry, and responses to the various disputes that can arise at the operational level.
A small or medium-sized enterprise or startup that has introduced innovative technology or holds a new business idea may find it advisable to actively comply with the law in relation to patent rights, trademark rights, and technology license agreements, and to seek advice regularly on the protection of trade secrets and intellectual property rights.
Intellectual property rights refer to the rights that may be legally protected with respect to intellectual creations arising from human creative activity.
Specifically, they are exclusive rights over intangible value assets such as inventions, devices, designs, trademarks, works of authorship, and trade secrets. Such rights arise either through registration after certain requirements are met or simultaneously with creation, and they prohibit unauthorized use by others while allowing legal protection.
In this way, intellectual property rights are a core means of legally protecting creative ideas and information assets, rather than tangible factories, land, or equipment, and of generating exclusive economic value.
In particular, for small and medium-sized enterprises and startups, original technology, a differentiated brand, design, and content, rather than facilities or capital, often form the core of corporate competitiveness.
This is because the structure typically involves capturing the market based on a distinctive concept and original works during the development of new products, new technology services, and new brands, or securing consumer brand recognition to expand sales and business scope.
If such creative outcomes are not protected as legal rights, this can lead to serious business risks such as imitation by competitors, market confusion, declining investor trust, and a fall in asset value.
Moreover, startups face a high risk of infringing the trademarks, designs, works of authorship, and patents of others during product launches, service operations, marketing, and investment attraction.
In the case of technology startups, cases often arise in which the company becomes involved in litigation by using existing patented technology without even being aware of it.
This can cause serious managerial damage such as the suspension of development, the blocking of services, claims for damages, and the loss of trust from business partners. In particular, when legal due diligence is conducted during investment attraction, intellectual property issues are treated as a key review item and directly affect the valuation of the company.
In the end, securing intellectual property rights is not a choice but a survival strategy for small and medium-sized enterprises and startups. It is necessary to secure patents, trademarks, designs, and copyrights as soon as the technology or brand is developed, and to establish a comprehensive rights management system, including the conclusion of nondisclosure agreements before technology disclosure, the inclusion of clauses on the attribution of rights in contracts with partner companies, and the review of copyrights for external marketing content.
2. Small and Medium-Sized Enterprises and Startups | Definitions and Protection Strategies by Type of Intellectual Property Right
The following reviews intellectual property rights protection strategies that SMEs and startups can implement.
Patent Right
Definition : A system under which the State grants an exclusive right for a fixed period over an invention (a product, method, substance, algorithm, or the like) that is new, involves an inventive step, and is industrially applicable.
Small and Medium-Sized Enterprises and Startup Protection Strategy : Immediately upon completing technology development, a prior art search should be conducted, and where there is a new result, a domestic and overseas (PCT) patent application should be filed promptly to secure priority in rights.
Before development is complete, a nondisclosure agreement (NDA) should be concluded with partners and investors to prevent leakage of ideas, and in the case of joint development, the attribution of rights should be clearly agreed upon to prevent patent disputes.
Utility Model Right
Definition : A system that grants rights for practical technical improvements through devices relating to the shape, structure, or combination of a product. Although the technical level is lower than that of an invention, such improvements may be protected.
Small and Medium-Sized Enterprises and Startup Protection Strategy : Where there is an original improvement in a product design or mechanical structure, protection through a utility model is possible even when a patent application is difficult, so this may be used actively.
In particular, mass-production hardware startups and manufacturing startups may need to consider this as an efficient strategy for securing rights.
Design Right
Definition : This is a system that protects rights in the external design of an article (a combination of shape, pattern, and color) or in screen designs such as a GUI or icon.
Protection Strategy for Small and Medium Enterprises and Startups : A company should promptly secure originality in visual elements such as product design, app UI, web service screen layout, and functional icons through design registration, and it should thoroughly manage the prohibition of disclosure before release.
To prepare against design imitation, a company should establish a system for monitoring competitors' products and responding to design right infringement.
Trademark Right
Definition : This is a right that protects the exclusive use of names, logos, symbols, and the like that indicate the source of goods or services.
Protection strategy for small and medium-sized enterprises and startups : As soon as brand naming and logo development are complete, a trademark application should be filed domestically and in major foreign countries, and the possibility of a dispute should be checked in advance through a prior search for identical or similar trademarks.
In particular, trademark disputes occur frequently for game, content, and IT service startups, so securing the trademark right before launch is necessary.
Copyright
Definition : This is a right that arises at the same time as creation, in respect of creative works such as literary, musical, audiovisual, artistic, and computer program works.
Protection strategy for small and medium-sized enterprises and startups : Clearly establish the attribution of copyright in the company's own content, app UI, marketing images, webtoons and web novels, YouTube content, and the like, and clearly arrange copyright contracts and use permissions when using third-party works.
Artificial intelligence and data-based startups should also thoroughly review the copyright risk of AI training data.
Trade Secret
Definition : This is a right that protects non-public information of economic value, such as production and sales methods, management information, customer lists, and business strategies that are not known to the public.
Protection Strategy for SMEs and Startups : For materials shared externally, such as core technologies, algorithms, business plans, and investment materials, the conclusion of nondisclosure agreements should be the rule, and an internal employee security management and access restriction system should be established.
To prepare against trade secret infringement, it is important to thoroughly keep records of the management history of materials and of viewing and access permissions.
3. Small and Medium-Sized Enterprises and Startups | Main Types of Intellectual Property Issues
The main types of intellectual property disputes that arise at small and medium-sized enterprises and startups are as follows.
Startups set an initial brand name and use a trade name, logo, and service name, but in many cases they do not formally register these as trademarks with the Korean Intellectual Property Office, and later entrants secure the trademark rights first.
As a result, this can lead to serious risks such as changing the company’s own name, litigation, and damages, so before business registration a company should review whether to file a trademark application and register its main service names, app names, and domain names.
2. Technology misappropriation due to failure to secure patent rights
Even when a technology startup develops a core technology, delays in patent filing or the absence of examination may allow competitors to imitate the technology and secure the patent first, or the technology may be leaked at public tenders or investor presentations.
Accordingly, before disclosing technology, a company should prioritize securing rights through a non-disclosure agreement (NDA), early patent filing, and a PCT (international application).
3. Product copying due to failure to register design rights
Small and medium-sized enterprises frequently use a product design, app UI/UX, or package design without separate protection, only for other companies to imitate and distribute it without authorization.
Because only registered designs can receive legal protection under the Design Protection Act, design registration should be pursued promptly before commercialization.
4. Copyright issues
Unauthorized use of images, fonts, and audio
When images, fonts, audio, video, and the like are used without a copyright agreement during website, app, and content marketing, there is a high likelihood that this will develop into a legal dispute.
In particular, when using commercial fonts, images, and background music, it is important to verify whether a license agreement is in place and to keep the contract documents and supporting evidence in an internal management system.
5. Disputes over the attribution of rights with partner companies and developers
During outsourced development, design production, and content production, the party to whom the intellectual property rights in the work belong is not clearly determined, which gives rise to disputes in which developers and designers assert the rights.
The contract should clearly specify a clause on the “attribution of work product and intellectual property rights.”
6. Preemption of similar trade names and domains
There are cases in which a party preempts a trade name or domain similar to a startup’s name, causing brand confusion, interfering with consumer traffic, and demanding the sale of the domain.
A company should preempt its trade name before business registration and its domain before service launch, and should be able to respond by using the regulation of “acts causing confusion” under the Unfair Competition Prevention and Trade Secret Protection Act.
7. Technology leaks and leaks of trade secrets by departing employees
In many cases, departing developers and designers leak core code, design drawings, client information, and business partner data, and then move to a competitor or start their own business.
A company should conclude a “non-disclosure agreement,” a “post-employment non-competition clause,” and “regulations on the management of business secrets” in advance, and should establish internal guidelines for managing trade secrets.
Response Process for Intellectual Property Infringement Disputes
1. Confirming the fact of infringement and collecting evidence
When a dispute arises, the first thing to do is to objectively confirm whether infringement has occurred and to secure evidence.
It is important to secure screen captures of the infringing product, infringing service, and infringing content, as well as purchase records, transaction records, catalogs, web pages, advertising materials, and usage history, and to maintain their evidentiary value through timestamps.
2. Reviewing the rights relationship and prior rights
A legal review is needed to determine whether the company's own rights are valid, whether those rights have been infringed, or whether the rights asserted by the other party are legitimate.
Whether there is a prior registered patent, trademark, or design, as well as the scope of the right, similarity, registration publication, and registration date, are confirmed through the registration records of the Korean Intellectual Property Office and the published gazette.
3. Requesting cessation of the infringing act and sending a warning letter
When the infringement of rights is clear, the company can send a request to cease infringement to the other party, or send a formal warning letter through an attorney, and demand the cessation of the infringing act and damages.
4. Settlement or license negotiation
When an amicable resolution between the parties is possible, negotiations such as cessation of use, payment of a license fee of a certain amount, or a royalty agreement can be conducted.
This is a way to reduce litigation risk and to minimize delays to the business.
5. Administrative remedies (objection and invalidation trial before the Korean Intellectual Property Office)
When the right asserted in the infringement claim is improper or there is a defect in the procedure for acquiring the right, the company can file a trial for invalidation of trademark registration, a trial for invalidation of design registration, a trial for invalidation of a patent, and the like before the Korean Intellectual Property Office, and may invalidate the other party's right.
6. Responding to court litigation
When the rights holder files a claim for an injunction against infringement, a claim for damages, or a criminal complaint, the company responds in accordance with civil and criminal litigation procedures.
In litigation, the fact of infringement, the effect of the right, the amount of damages, and intent must be proven, so prior evidence collection and a legal strategy are important.
Small and medium-sized enterprises and startups are always exposed to the risk of infringing the intellectual property rights of others during technology development and product launches.
Accordingly, it is necessary to establish a response system such as the following.
② Preemptive registration of trademarks, designs, and patents
③ Conclusion of clauses on the attribution of rights and nondisclosure in contracts
④ Establishment of an IP portfolio management system
⑤ Prompt action upon discovering signs of infringement
In particular, a history of IP disputes can be a critical factor in the valuation of a company during investment attraction or M&A due diligence, so managing the risk of intellectual property disputes at all times and establishing a joint response system with a legal expert immediately when infringement occurs is a growth strategy for small and medium-sized enterprises and startups.
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