Ten Legal Mistakes Made By Start-Ups: Failing to Protect Intellectual Property

For the 3rd installment of my posts regarding the Ten Legal Mistakes Made By Start-Ups, I highlight the issue of the need to protect intellectual property.

Myth #3:  "I can wait until later to address intellectual property issues as the costs are very expensive."

While it is understandable that start-ups are often strapped for funds and need to preserve financial resources, it can be a monumental mistake if you fail to protect your intellectual property rights from the outset.

First, if you have a product or service that itself, or any element thereof, may be patentable, you need to speak to a patent attorney to determine if a patent application is warranted in the US and/or any other country.  The risk is that if you wait too long you could lose your patent rights in the invention. A U.S. patent is invalid if no application is filed within one year of the first time the invention is offered for sale, sold, publicly used or publicly disclosed.  Determing when the clock begins to run requires the advice of a patent attorney, but understand that if you violate the rule, the patent is stautorily barred.  (Note, you should also consider whether you want to file a trademark application relating to your business name, products/services).

Second, make sure all employees/consultants sign an Invention Assignment Agreement.  Without an Invention Assignment Agreement, any person who worked on the development of the product or service can try to claim that they own rights to any ideas they contributed -- and you can imagine the claims the company will face if the business is successful.  The Invention Assignment Agreement is a clear acknowledgement that anything contributed by an employee/consultant is owned unconditionally by the company.

Third, and a related to the Invention Assignment Agreement, make sure that any intellectual property (which includes domain names, patents, trademarks, copyrights) contributed to the company by a shareholder/member are assigned to the company.      

Fourth, check to see if the domain you want is available and then purchase it.  You do not want to create marketing materials and begin promoting your business and then later find out someone else owns the domain name because the costs of rebranding or obtaining the name could be quite significant.

Fifth, as per my previous postings, do not just copy and paste your website policies from another website -- aside from the copyright issues, you need to make sure your policies are consistent with your product/service offering and your business policies.

There will be seven more installments of the Ten Legal Mistakes Made by Start-Ups so stayed tune.