Strategies on IP protection for Semiconductor startups

Reading Time: 7 minutes

In this follow-up post from our strategic partner Cresco, key intellectual property protections are highlighted—including layout designs, patents, and trade secrets—alongside practical defensive strategies essential for securing competitive advantage in the semiconductor industry as well as navigating the EU Chips Act…

A. Why IP Matters for IC Startups and Scaleups

For companies in the integrated circuit sector, IP protection is critical for several reasons:

• Preventing Imitation: A well-protected IP portfolio helps shield technology from competitors looking to copy or reverse-engineer innovations.
• Attracting Investors: IP is a valuable asset that signals innovation and stability, making startups more attractive to potential investors.
• Commercializing and leveraging Technology: IP rights can be licensed, sold (assigned), or leveraged in negotiations with partners and competitors, providing strategic advantages.
• Mitigating Risk: By securing strong IP protections, startups and scaleups can reduce the risk of being sued for infringement while also countering threats from competitors or patent assertion entities.

B. Key Intellectual Property Rights for Integrated Circuit Startups and Scaleups

1. Layout Designs (Topographies) of Integrated Circuits

The layout or topography of an IC refers to the intricate three-dimensional arrangement of its components. Given the investment and complexity involved in designing these layouts, protecting them through IP rights is essential.

In the European Union, ICs layouts are protected under the Layout-Designs of Semiconductor Products Directive (87/54/EEC). Startups can register their layouts with national IP offices, securing exclusive rights to use and license the design for up to 10 years. The layout must be original, meaning it is the result of the creator’s own intellectual effort and is not commonplace in the semiconductor industry.

The topography must be fixed or encoded in some form, allowing it to be reproduced. Furthermore, registration must be applied for within two years of the first commercial exploitation of the topography anywhere in the world.

The protection of IC layouts has been harmonized across several countries due to the Washington Treaty on Intellectual Property in Respect of Integrated Circuits (1989), also known as the IPIC Treaty. Although the treaty is not universally ratified, it establishes minimum standards for layout design protection, encouraging more countries to offer legal recourse for copying. The IPIC Treaty has also been incorporated by reference into the TRIPS Agreement of the World Trade Organization, with key modifications including a minimum 10-year term of protection, extended exclusive rights over articles incorporating unlawfully reproduced designs, stricter limits on unauthorized use, and exceptions for unintentional infringement.

• Patents: Protecting Innovative Technologies

Layout design protection under EU law safeguards the layout or the topography of the integrated circuits, preventing unauthorized copying of their design. However, this protection only covers the visual structure, not the functional aspects. Patents, on the other hand, protect the technical innovations within the IC or its manufacturing process, offering broader coverage.

Patents are typically used to protect:

• Manufacturing Processes: The innovative techniques used to create integrated circuits, such as methods for fabricating semiconductor components, can be patented.
• Functional Features: If the IC involves a novel technological function or improvement (e.g., increased processing efficiency, energy consumption reduction, or new functionalities), these aspects can be protected through patents.
• Innovative Elements of the Circuit: Patents can also be used to cover specific circuit designs or configurations that contribute to the functionality of the IC.

However, it is notoriously difficult to protect ICs under patent laws, given the strict requirements of an invention needing to be novel and showcase an inventive step. This is one of the main reasons why legislators implemented the specific IP regime for Layout-Designs of Semiconductor Products. Therefore, it is advisable to only look towards patent protection in the event you have invented a highly innovative and still undisclosed integrated circuit.

• Trade Secrets: Safeguarding Confidential Information

In many cases, companies in the IC sector also rely on trade secrets to safeguard proprietary processes, algorithms, or manufacturing techniques that provide a competitive advantage. Unlike patents, which require public disclosure upon application, trade secrets remain confidential, covering a broad range of sensitive data, including:

• Manufacturing Processes: Techniques for fabricating integrated circuits, such as proprietary methods for depositing semiconductor layers or improving yields.
• Design Algorithms: Algorithms that optimize IC performance or manage power consumption, which are often difficult to reverse-engineer.
• Material Compositions: Specialized materials used in chip production, directly impacting performance and efficiency.
• Testing and Quality Control Data: Procedures and test results that help ensure product reliability and can provide a competitive advantage.

Trade secrets can last indefinitely as long as they stay confidential, so keeping them secure is key to their value.

• Copyrights and Software

Although copyright typically protects artistic and literary works, it can also be relevant in the IC industry, especially in protecting software and design-related materials.

Integrated circuits often rely on proprietary software (e.g., firmware) or design-related documentation. Copyright protection can be used to safeguard this material, ensuring that third parties cannot copy, distribute, or modify it without permission.

• Trademarks: Protecting Brand Identity

Securing trademark protection is essential for safeguarding a company’s brand identity and preventing market confusion. By registering trademarks in key markets, companies can protect their brand names, logos, and other identifiers from unauthorized use. Global protection, including filings in major jurisdictions like the U.S., European Union, and China, helps secure a strong international presence.

• Other IP rights and protections

In addition to layout designs, patents, trade secrets, copyrights, and trademarks, there are a few other IP rights and protections that can be relevant for integrated circuits. They include:

• Design Rights: Design rights protect the aesthetic or ornamental aspects of a product. While layout designs protect the functional arrangement of an ICs components, design rights can be used to protect the visual appearance of the circuit or its housing (such as the casing or packaging of the chip). This will however only be possible in the particular case where the design is new and has an “individual character”, creating an impression that differs from the general impression made by designs already available in the market. Moreover, a merely functional design cannot be protected by a design rights.

• Databases: Companies often maintain databases of design schematics, layouts, and testing results, which are critical for R&D and competitive advantage. Under EU legislation, database protection may be granted automatically in the event that the database demonstrates a substantial investment in either obtaining, verifying, or presenting its contents.

These additional protections can complement the main IP rights to ensure comprehensive protection of innovations in the IC sector.

C. Defensive IP Strategies for IC Startups and Scaleups

For ICs startups and scaleups, adopting defensive IP strategies is just as important as actively building a strong IP portfolio. In the fast-paced and highly litigious semiconductor industry, these strategies can provide essential protection against potential infringement claims and help maintain freedom to innovate.

• Defensive Publications: Publishing technical details of innovations can establish prior art, preventing competitors from securing patents on similar technologies. This cost-effective strategy blocks future patent filings on overlapping ideas and reduces litigation risks.
• Patent Clearance (Freedom to Operate): Conducting a thorough Freedom to Operate analysis before launching a product is crucial. This involves reviewing existing patents to ensure that new products do not infringe third-party IP rights. Identifying risks early allows companies to adjust designs or negotiate licenses.
• Joining Patent Pools: Participating in patent pools enables startups and scaleups to access essential technologies through cross-licensing agreements, reducing the risk of infringement claims and fostering collaboration.
• Internal Policies and Controls: Implementing strict internal protocols—such as limiting access to confidential information and providing employee training—helps minimize the risk of accidental disclosure or theft of trade secrets.
• Trademark and Software Protection: Startups should ensure early registration of trademarks in key markets to safeguard their brand and should protect proprietary software through copyright, ensuring both legal and market security.

D. Navigating the EU Chips Act: A Catalyst for IP Strategy in IC Startups and Scaleups

The EU Chips Act, officially adopted by the European Commission on September 18, 2023, offers semiconductor companies the chance to collaborate on research and development (R&D) and strengthen their intellectual property (IP) strategies. The goal is to strengthen Europe’s semiconductor ecosystem, increase technological sovereignty, and reduce dependency on non-EU chip manufacturers.

Documenting and Protecting IP

Collaboration is a key theme of the EU Chips Act, with Pillar 1 promoting joint R&D through virtual design platforms and pilot lines. The Act encourages semiconductor companies across Europe to collaborate on R&D initiatives and share intellectual property to foster innovation and increase competitiveness. Collaboration agreements should specify what IP each company brings into the project (background IP) and what is created together during the collaboration (foreground IP). Keeping detailed records of patents, trade secrets, copyrights, and design rights helps avoid disputes and protects innovations.

Ahead of collaboration, companies should review their IP portfolios to identify what is patented, kept as trade secrets, or covered by other protections. Startups and scaleups, in particular, should weigh the benefits of patenting innovations versus keeping them as trade secrets. Since collaboration increases the risk of “IP leakage”, patents may offer stronger protection in joint projects.

IP Ownership and Collaboration

Under the EU Chips Act, IP ownership in collaborative R&D is typically divided, with each party owning specific parts of the IP and granting licenses to others. Although the Act does not directly address IP ownership, the European Commission suggests that companies may need to share IP and possibly enter joint ownership to receive funding or benefits.

Integrated circuits companies must weigh the advantages of collaboration, such as funding and resources, against the drawbacks of shared IP ownership, which may limit future use. The importance of this trade-off will vary depending on the size and resources of the organization.

E. Seizing the opportunity: Building a Robust IP Strategy

For ICs startups and scaleups, building a comprehensive IP strategy is essential for long-term success. A well-rounded approach that includes patents, trade secrets, layout design rights, and defensive strategies will protect innovations, attract investors, and provide a foundation for growth. With the EU Chips Act supporting innovation in semiconductors, now is the time for startups to strengthen their IP portfolios and align their strategies with the opportunities ahead.

In upcoming blogposts, we will explore how startups can monetize their IP portfolios, collaborate effectively with larger industry players, and navigate common IP disputes, helping you make the most of your IP assets. Stay tuned for more insights on building a future-proof IP strategy.

For more information about Cresco, visit crescolaw.com or contact Olivier Van Raemdonck (olivier.vanraemdonck@crescolaw.com), Ward Verwaeren (ward.verwaeren@crescolaw.com) or Charles Groffils (charles.groffils@crescolaw.com) for Siemens Cre8Ventures, visit our website or contact Carson Bradbury, Director – EU Chips Act & Co-founder Cre8Ventures (carson.bradbury@siemens.com)