Over the next few weeks, I am going to share with you my thoughts on what a tech start-up should be thinking about with respect to intellectual property. As a technology attorney that routinely provides counsel to a range of start-up businesses, including intellectual property matters, I see patterns of issues that consistently come up in conversation with my clients. These conversations are with entrepreneurs, founders, senior management, and their investors alike, and oftentimes the questions are very similar. Along those lines, I’ve come up with a Top 5 List and will post on each issue over the coming weeks.
All technology start-ups are confronted with risks that need to be addressed and weighed against the company’s business goals and short- and long-term plans. When counseling early-stage technology clients, I stress the importance of creating “IP awareness” as a best practice that should be followed sooner rather than later. Having to “undo” prior IP missteps drains resources, causes the company to lose focus of its business objectives, and can result in costly litigation.
When a technology company is in its infancy, its founders are often faced with having to work with many different parties in its effort to get the company “off the ground.” Whether the business relates to software applications, web-based services, or hardware devices, a company typically has to engage consultants, suppliers, employees, and other third parties to contribute to the initial “build-out.” The technology work that is performed in the early stages of development by these individuals often creates the platform for the company’s future products and services.
It is during this initial stage that the inclusion of nondisclosure agreements and protective IP provisions in contracts with all of these individuals and third parties is most critical. Without the appropriate agreements and contracts in place, including provisions that cover ownership and assignment of work product, residuals, patentable inventions, and “know-how,” a company may find itself vulnerable to claims that it does not exclusively own certain portions or components of its successful products and services. As a result, the company could find itself exposed to intellectual property litigation, a breach of contract lawsuit, demands for ongoing royalty or license payments, or a hampered ability to license their products with clear ownership rights.
Additionally, implementing appropriate company policies and procedures regarding electronic monitoring, social media usage, and electronic access are necessary to prevent the company’s IP assets from walking out the door via disgruntled employees or contractors. The assets include general knowledge about the company, trade secrets, research and development techniques, business plans, patents, trademarks, and other know-how. Even the disclosure of a company’s vision for the future can be a costly mistake. Developing the proper forms and contracts upfront can save an extremely large amount of time and costs later. For those employees that have higher levels of access to company IP assets or who are critical to the success of the company, strong consideration must be given to the use of non-compete agreements and restrictive provisions in their employment agreements.
Up next….”Don’t Be Quick to Open the Kimono: Protecting and Retaining IP Going Forward.“