Protect Your IP Before Raising Funds

Robust legal protection reassures investors about the long-term future of your company. It can also support the value of your innovations on the market. A well-defined intellectual property protection strategy lets you defend your ideas and maximise your chances of attracting investors. Let us look at why, and above all how, to protect your intellectual assets before seeking financing through a funding round.

Why protect intellectual assets before raising funds

Intellectual assets often represent a start-up’s main value. Investors seek to minimise the risks attached to their investments. Robust intellectual property protection reassures investors about the long-term future and value of your company. You thereby show your ability to defend your innovations on the market. For this, you can call on a fundraising lawyer.

Types of intellectual property protection

Patents

Patents protect technical inventions and industrial processes. A patent confers an exclusive right of exploitation for 20 years from the filing of the application (Article L. 611-2 of the French Intellectual Property Code (Code de la propriété intellectuelle) (in French)). This prevents competitors from copying or using your invention without authorisation. To find out more about patents, visit the website of INPI (in French) (French patent and trademark office).

Trademarks

Trademarks protect the visual and commercial identity of your products or services. They let you distinguish your offering from your competitors’. Register your trademarks: registration takes effect for ten years from filing and is renewable indefinitely (Article L. 712-1 of the Intellectual Property Code (in French)). Detailed information is available on the INPI website.

Copyright

Copyright protects your literary, artistic and software works. In France, copyright protection starts automatically, by the mere fact of the work’s creation (Article L. 111-1 of the Intellectual Property Code (in French)). For more details, visit the website of the French Ministry of Culture.

Designs

Designs (dessins et modèles) protect the appearance of your products. This protection runs for an initial period of five years from filing, renewable for periods of five years up to 25 years (Article L. 513-1 of the Intellectual Property Code (in French)).

Key legal steps of a funding round

Step 1: Setting the strategy

Build an equity story from the company’s incorporation, taking into account the respective positions of the founders. Balance the cap table before any transaction on the share capital, to anticipate the necessary rebalancing. Analyse from a legal standpoint the strategic choice between an equity round and convertible bonds (Obligations Convertibles en Actions, OCA).

Step 2: Road show

Provide for NDAs with the funds interested in the deal. Protect the company’s technological core before any discussion with third parties. Limit disclosure to strictly necessary information.

Step 3: LOI and due diligence

The letter of intent (LOI) structures the deal with the investors. Prepare the due diligence, which follows the signing of the LOI, to validate the company’s legal fundamentals in corporate, employment and tax law, intellectual property and main contracts.

Step 4: Negotiations

Anticipate the key discussions on the shareholders’ agreement (pacte d’associés). Adapt the articles of association to the choices made. Investors often require representations and warranties or a warranty and indemnity (garantie d’actif et de passif). Pay particular attention to the terms and conditions of the securities issued.

Step 5: Closing

Hold an extraordinary general meeting at the end of the process. This meeting of the shareholders marks the conclusion of the fundraising phase. The signing of the subscription forms and of the shareholders’ agreement, and the payment of the funds, complete the deal.

How intellectual property protection supports your company’s valuation

A well-structured portfolio of intellectual assets can support your company’s valuation. It can help you negotiate more favourable financing terms. Protecting your innovations strengthens your competitive position on the market. Investors see it as a factor that reduces risk.

Intellectual property protection strategies

Take a proactive approach to protecting your intellectual assets. Identify the key elements to protect from the start of your project. Call on intellectual property experts for advice on the most suitable strategies. A well-defined strategy limits the risk of disputes and protects your company.

Using NDAs (Non-Disclosure Agreements)

Confidentiality agreements (NDAs) protect your sensitive information during negotiations. They prevent stakeholders from disclosing confidential information. Use NDAs systematically in discussions with potential investors.

Monitoring and enforcing your rights

Put monitoring mechanisms in place to detect any infringement of your rights. Take legal action where necessary to defend your intellectual assets.

Legal references

1. Patent
   • Intellectual Property Code (Articles L611-1 to L615-22)
2. Trademark
   • Intellectual Property Code (Articles L711-1 to L731-4)
3. Copyright
   • Intellectual Property Code (Articles L111-1 to L136-4)
4. Designs
   • Intellectual Property Code (Articles L511-1 to L521-8)
5. Convertible bonds (Obligations Convertibles en Actions, OCA)
   • French Commercial Code (Code de commerce) (Articles L228-91 to L228-97)
6. Non-Disclosure Agreement (NDA)
   • French Civil Code (Code civil) (Articles 1101 et seq. on contracts)
7. Shareholders’ agreement
   • Commercial Code (Articles L225-1 to L225-248 on public limited companies (sociétés anonymes))

For assistance: lawyer for your fundraising.