What is Intellectual Property?

When you and your co-founders begin to iterate on an idea and develop a business plan or begin to build a product or a platform, you are creating intellectual property (IP). IP comes in many forms but make sure that whatever IP is being developed for your new enterprise belongs to the entity and not the individuals behind the development of the IP. That includes your products, recipes, marketing materials, logo, branding, packaging, website, business plan, theme songs, inventions, and more. You need to decide what constitutes intellectual property for your company. Obviously it includes anything co-founders create, relating to the company, during work hours. But what about ideas generated outside the office, such as when someone is on vacation, or a voice recording someone adds to their phone with their “idea”. A broad definition related to the business of the company regardless of time or place can be used, but must be balanced with not discouraging employees to be creative in their own right and for their own interests.

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Steps to Protect Intellectual Property?

Both a company’s founders and its investors have a stake in ensuring that the company protects its intellectual property and avoids infringing the intellectual property rights of third parties. Here are some of the common protective measures undertaken by start-ups:

  • Assignment of IP to the Company. As a startup or any business, work done for the company should remain the company’s property. Any intellectual property developed for your business goes to the entity itself, not to any particular person. For example, say one of your co-founders comes up with a great new name or technology solution. Unfortunately, too many founders work, iterate and develop an idea or a technology but separate before the IP that has been developed has been assigned from them into the entity, meaning your new enterprise may not have rights to various things that it will need to evolve its business or otherwise raise capital. If your founders’ agreement states that any intellectual property devised for the business is owned by the business and not any co-founder or employee who came up with it, you would be covered.
  • Co-Founders. Co-founders should also sign an IP Assignment Agreement or as an alternative provisions could be added to a Founder’s Agreement.
  • Confidentiality and Assignment Agreement for Employees. Every employee should be required to sign such an agreement. It accomplishes several purposes. First, it obligates the employee to keep confidential the proprietary information of the business, both during employment and after employment. Second, it ensures any inventions, ideas, products, or services developed by the employee during the term of employment and related to the business belong to the company and not the employee.

Your intellectual property is part of the special sauce that makes your business unique. Take some of these steps to make sure that special sauce is only used as you see fit.

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