If you’re a startup founder, then your intellectual property is a crucial part of your business. Startups achieve success by bringing new or innovative ideas to the marketplace – think Facebook’s unique social network or Snapchat’s revolutionary image messaging technology. It follows that, for founders, protecting their intellectual property is often the key to achieving success. Despite this being the case, many startup founders fail to adequately safeguard their golden ideas and find themselves in legal trouble.
Snapchat founders, Evan Spiegel and Bobby Murphy, found themselves in such a situation when their former partner, Reggie Brown, brought a suit against them for using intellectual property in which he had an ownership stake without crediting or remunerating him. Snapchat managed to settle the dispute outside of court, but it was recently revealed that Brown was paid upwards of $150 million to drop his suit. To help you avoid winding up in a predicament like Spiegel and Murphy, we’ve created an intellectual property checklist for founders.
Have You Registered Your Trade Marks?
When starting a business, registering a trade mark may not be a priority. However, as you build your business’ reputation, we advise you register your name and logo as a trade mark. Companies are also increasingly registering trade marks for their domain names as their online presence is a significant part of the business’ goodwill.
Failure to do so could leave your startup vulnerable, as competitors (including accidental ones) might encroach on your customer-base by using your name or a logo that’s like yours. Worse still, if a competitor obtains a trade mark before you do, they could gain the exclusive rights to use the name, logo or other symbol acting as a badge of origin, and force you to rebrand. You can read more about the trade mark registration process in our article, ‘How to Register a Trade Mark’.
Have You Assigned Your Intellectual Property?
Many startups, including Facebook and Snapchat, have been on the receiving end of lawsuits brought by former founders who did not assign their IP to the company before their departure. Snapchat’s recent IPO revealed that the unicorn-company had offered Reggie Brown, an employee who left the company during its early stages, upwards of $150 million.
Startup founders would do well to avoid this situation by ensuring that each founder has assigned their intellectual property to the company. IP assignment is a contractual agreement through which intellectual property rights can be transferred. You can find out more about IP assignment in our article, ‘What is an IP Holding Company?’
Do Your Employment Contracts Explicitly Reference Employees’ IP Obligations?
Last, but not least, ensure that your company’s employment contracts address an employee’s obligations regarding intellectual property. This will prevent employees from leaving the company and taking either industry trade secrets or original work that they developed using the company’s resources with them.
For example, a dating app brings on a developer to increase the app’s efficiency by using a new algorithm. The employment contract should specify that anything the developer creates in the course of his/her employment belongs to the company. It should further state that company will act to prevent the developer from taking the algorithm if he/she leaves the startup.
Similarly, employment contracts that explicitly reference an employee’s obligations with respect to confidential information can prevent them from taking items such as client lists when they leave.
Intellectual property is essential to startups as they achieve success by bringing new and innovative ideas to the marketplace. It’s then important that startup founders take measures to protect their IP.
Founders should ensure that anything that might be construed as a ‘badge of origin’ is registered as a trade mark. This will grant your company the exclusive right to use its signs, symbols and name, and will prevent competitors from making use of your reputation in the market. It’s also important that each founder has assigned their intellectual property to the company as this will prevent major disputes from arising later on.
Finally, founders should ensure that employees’ contracts specify their rights/obligations in relation to IP. This will prevent former employees from taking work that they developed using company resources with them when they leave and from using confidential information (for instance, client lists), in new roles.