Monday 27 March 2017

Lawyers from 28 countries analyse the legal challenges faced by start-ups

The 3rd IBA Silicon Beach Conference - All Along the Spectrum – From Start-Up to IPO/Exit and Beyond was held in Santa Monica, California from 1 to 3 February 2017. We at ELZABURU’s entrepreneurship and start-ups area (Legal & Business Department) had the chance to attend this international gathering as the only representatives from Spain.   

IBA (International Bar Association) is the largest lawyer network in the world. The conference brought together internationally renowned lawyers and expert academics, public institution representatives, entrepreneurs and venture capitalists to analyse the legal challenges faced by start-ups(1).

The conference offered interesting panel sessions and dynamic roundtable discussions on current issues, latest trends and strategies for developing, expanding, funding and exiting from a start-up company.

Of particular interest as far as IP is concerned were the sessions on the legal implications of the development of mobile applications, as well as those in which participants shared experiences in the development of a start-up company’s effective IP protection strategy. Without going into a full summary of the sessions, we would like to highlight the following debates and ideas:

1. Apps of Things (AoT)

The development and use of digital tools and services is growing at lightning speed.

Some time ago, we attended a vehement legal debate on this subject, which constitutes a global strategic priority and an area of intense legislative development.

Nevertheless, the sector referring to Apps of Things (AoT) - apps which turn our day-to-day objects into connected, intelligent devices capable of catering for a wide range of user needs, deriving from, and made possible by, the concept of the Internet of Things (IoT) – continues to be a trend, generating fresh challenges for lawyers and developers alike, and in this market start-ups play a particularly important role.   

The extent of personal data collection and exchange is continuing to grow significantly. People are disseminating an ever-increasing volume of personal data on a global scale. In fact, we have recently been coming across unprecedented cases concerning the implications of the collection of data and personal information by new technological devices that are, by default, “permanently active” and continuously recording, for instance, the voices of users within the private setting of their homes. We refer here to the recent privacy cases involving the intelligent device “Amazon Echo”, which includes the new voice control system (“Alexa”), one of the most promising recent technological advances(2).

These incidents ensure that the debate on the meaning and scope of the right to personal data protection, the new privacy model and user security is kept alive.

2. Solid practices in respect of privacy and security to guarantee a start-up’s survival in the market

The measures, principles, obligations and rights laid down in the General Data Protection Regulation will officially apply and be implemented in Europe (though their significance will transcend European borders) on 25 May 2018. The new Regulation contains important new aspects, including the definition and regulation of consent, the requirement whereby privacy principles must be taken into account right from the design stage and by default, the obligation to report security breaches, etc.

However, in this post we only intend to provide some brief informative guidelines for start-ups.

From a practical perspective, under the new privacy model, businesses must cultivate the value of transparency, and start-ups must be honest with their users. Compliance with legal obligations must go hand in hand with responsible use of information.  

In the development of the application and design of the service, all aspects of privacy and data protection must be taken into account from the outset, and there should be a clear map of the data to be processed and their purpose.

A common mistake is to use standard “Privacy Policies” or “Terms of Use”, the content of which has not been adapted to the personal data processing that is actually carried out or the subsequent use of the data. Furthermore, on some occasions the user’s consent is obtained for specific processing, but the information is then used for purposes that had not initially been forecast, which exposes entrepreneurs to large-scale risks. In the case of apps, the challenge is even greater when minors interact and this had not been foreseen by the developers.     

Ensuring user security and eliminating users’ concerns is another key task (once again going beyond formal compliance with the legal obligations). Since an increasing number of intelligent mobile devices are interconnected, there is a heightened risk that data and confidential information will be accessed by hackers. Thus, we will gradually see how passwords evolve towards other systems of personality detection or biometric authentication, for example.

3. Intelligent IP management for tech start-ups 

At an early stage, the intangible assets protection strategy should take in the fact that the resources that can be allocated by a start-up are limited, but it should also bear in mind that those assets constitute the core of its business, and are what contribute value and a competitive edge in the market.
It seems obvious, but the first step in managing intellectual property rights should always be to ensure that the start-up is the proprietor of the technology that it is developing, or that it has the necessary authorisation to exploit it. 
To that end, it must design and keep a suitable contractual framework (contracts with employees or collaborators, licensing agreements, NDAs, implementation of in-house measures or policies, appropriate notifications in respect of copyright or confidentiality, etc.), ensure that there are no potential risks, restrictions or limitations affecting the exploitation of the rights (its own and third parties’) and that the scope of the rights is sufficient in order to enable the current and future development, growth and evolution of the business (new technologies, improvements, changes of format, adaptations, etc.). The contracts should be reviewed and amended where necessary in order to guarantee business flexibility.   

Also, keeping opportunity and the potential financial value of the start-up’s intangible assets in mind at all times, it is advisable to assess whether the strategy for identifying and protecting the intangible assets that are generated and are contributing to the business (trademarks, copyright –traditional and software-, patents, industrial designs, trade secrets) should be expanded.

The legal problems associated with the creation and distribution of applications and other content capable of protection are not always so “obvious” or easily solved by a recently created company without the assistance of legal counsel. 

This is an excellent time to start up a company in Spain. The ecosystem that supports the entrepreneur sector is increasingly extensive (accelerators, incubators, nurseries, science and technology parks, university spin-offs, business foundations, etc.), and private investment continues to beat records.  Nevertheless, going back to the beginning of the life cycle of a start-up, let us recall that the main goal is to have a good business model and that the initial source of funding must always focus on revenue.  

ELZABURU’s entrepreneurship and start-ups area forms part of the Firm’s Legal & Business Department.  We advise innovative tech start-ups and other operators in the entrepreneurial ecosystem from sectors that are set to flourish in the coming years, such as artificial intelligence, biotechnology, biomedicine, the Internet of things, health sectors (e-health) and ICT. 

For a Spanish version of this article, please visit El Derecho website 

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1. IBA is the world’s leading lawyer network and has a number of international Sectoral and Regional Committees.  This conference was organised by the following Sectoral Committees: Intellectual Property and Entertainment Law Committee, Corporate and M&A Law Committee and Technology Law Committee; and by the following Regional Committees: North American Regional Forum and Asia Pacific Regional Forum.  Collaborating partners included associations such as ITechLaw (International Technology Law Association) and the Intellectual Property Owners Association (IPO), and the event was sponsored by the law firms Knobbe Martens (USA), Hoet Pelaez Castillo y Duque (Venezuela) and Solcargo (Mexico), in addition to a number of accelerator companies (Octane and Plug and Play)

2. The first case refers to the 6-year-old child who asked “Alexa” and received a dollhouse and cookies. When this news story was broadcast on television, numerous such devices were activated in viewers’ homes, which led to the mass delivery of dollhouses. Note, however, that the device contains the option of adding parental controls or entering codes to confirm and/or authorise purchases. The second case refers to an alleged murder in respect of which “Alexa” could potentially provide evidence.


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