Prototyping is one of several key phases in the development journey of a product; it involves the testing of new concepts or iterations of existing products to assess their practicality and viability. This phase not only helps in refining the product, but also plays a vital role in achieving market success.
Whether a company is looking to develop tangible goods or a software product, it is important to take steps to protect the innovation and consider the following fundamental commercial and Intellectual Property (“IP”) law considerations:
- Confidentiality – In the excitement of developing a prototype, it is easy to overlook the need to keep the prototype, and related information, confidential. A company’s confidential information sets it apart from its competitors. Failing to implement proper internal and external controls risks exposing this information before the prototype (or a more polished version) is brought to market. Instead, a company should consider implementing:
- Internal procedures, for example, taking practical steps to limit the spread of knowledge of key details throughout the business and using password protection on information relating to the prototype. The latest product developments may be exciting news, but unrestricted “water cooler conversation” can potentially cause real, if inadvertent, harm. Implementing a confidential information policy creates an internal best practice to reduce the risk of disclosure, even accidentally, of confidential information; and
- External protection, for example, agreeing a tailored Non-Disclosure Agreement (NDA) that properly captures confidential information relating to the prototype before disclosing any such information. Ensuring a company’s prototype remains a secret may be a pre-condition to the registration of certain IP rights.
- Protection of IP – The creation of a prototype, which may have previously been just an idea, will invariably give rise to and / or use IP rights:
- IP rights may have been created at an earlier stage, such as during the design stage, through concept drawings;
- There may be automatic rights; for example, copyright may subsist upon the creation of the prototype (e.g. in the case of the development of new software); and
- There may be registrable rights; for example the invention may be patentable, or the prototype’s design may be capable of protection by registration.
Consider taking protective measures for such rights at this early stage in the development process. If employees and/or directors are contributing to the prototype or if any third party IP rights are used by, or incorporated in, the prototype, the IP position may be more complicated and require obtaining suitable licensing arrangements.
- Ensuring compliance – It is crucial to ensure that any product complies with the rules and regulations applicable to that product and its target customers. For example, if the product is a website, the developer may need to consider legislation regarding online safety and consumer protection. Where a product requires or involves the use of personal data, data protection legislation must be considered. It is advisable to have compliance “baked in” at an even earlier stage than prototyping, such as during concept development.
- Engaging third parties – A company developing a product may not have the capability to undertake all aspects of prototyping in-house. In such circumstances, the company may need to engage a third party to develop (and potentially test) the product or elements of it. Care should be taken in the selection process for outsourcing; for example, a company should verify, before engaging a third party, that it is not in any way affiliated to or otherwise collaborating with a competitor. Furthermore, it is crucial to have in place confidentiality obligations prior to disclosing confidential information relating to the prototype (the risks of not doing so without an NDA in place are discussed above). When developing hardware, a company may need to enter into commercial agreements for the supply of components or equipment required to assemble the prototype(s). A company should ensure any supply contract contains clear contractual duties (for example, relating to the quality of materials supplied) and robust contractual protections. An agreement that fails to provide these duties and protections may expose the company to greater risk and limit the recourse that company has against its supplier.
- Funding – A company that takes proactive steps to implement the measures detailed above will be able to leverage their IP-readiness when seeking investment or grant funding. The prototyping phase may have been enabled by Research & Development (R&D) funding. In such cases, any R&D Agreement should be reviewed carefully, especially with respect to the company’s obligations and IP ownership.
The next stage of product development will depend on the type of product and the priorities of the business. Whether the product undergoes further testing or moves straight to commercialisation, IP and commercial law will undoubtedly play a part in these latter stages also. The Intellectual Property, Data Protection and Technology team at Stephens Scown can advise you at all stages of your product development journey.