Got IP? Avoid These 2 Startup Stumbles!

Got IP?

In the technology space, companies are often born from an idea. Sometimes it is an individual effort, but more often than not, two or more minds worked together to refine the functionality or design of that “idea.” The “idea” needs protection and the type of protection sought will depend, in part, on: (i) what the “idea” is; (ii) how that “idea” will be used, commercialized, or monetized; and, (iii) other factors such as the likelihood of copycats and imitators. Your intellectual property (IP) protection strategy for your “idea” could include a combination of copyright, trademark, design patent, utility patent, trade dress, and trade secret. All important, but you may not even own the “idea” you are protecting. 

Stumble 1: Not reviewing employment agreements and handbooks of your “idea” contributors.

For each and every contributor to the “idea,” if they are employed by any other entity, you need to review existing employment agreements, handbooks, and contracts. Generally, companies will have agreements or clauses (as part of the terms of employment) that state it owns all IP created while employed. The agreements or clauses will generally cover everything under the sun, even if it is unrelated to the actual scope of employment, and may be contained in a standalone confidentiality agreement, stock options, or handbooks. Your onboarding process should be able to quickly identify such issues. If you run into one, you should consult an attorney to determine the enforceability of such agreement/clause under your particular facts and circumstances.

Stumble 2: Not having founders, employees, consultants execute an IP assignment agreement.

You also need to make sure there is a comprehensive invention assignment agreement that is properly executed, and enforceable, including provisions for covering pre-incorporation activities, offshoring, and other distributed contributors. An invention or IP assignment agreement should be executed by all “idea” contributors, founders, employees, consultants, etc., that clearly establishes the ownership of the IP.

Preferably, you will have done this in advance of assembling your team, pitching your ideas, or collaborating at that next startup weekend event. Otherwise, there is risk that you may find another company, or person, having an ownership interest in your next big “idea”, in whole or in part; the next big “idea” walking out the door with a freelancer, consultant, or investor; or, a seed funding deal falling apart because of a lack of clear ownership to the IP.