Protecting Your New Business – Three Documents Your Business Needs

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Which Intellectual Property Agreements do you need to focus on when starting your business?

Which Intellectual Property Agreements do you need to focus on when starting your business?

While there are a myriad of tasks that you’ll need to complete when starting new business, there are a few key documents related to intellectual property that are important to have at the ready as early as possible.

The Three Agreements

1. Non-Disclosure Agreements

A non-disclosure agreement is a document that allows you to disclose your ideas and other confidential information to others while requiring that they only use the information for specific purposes and keep the information in confidence.  These agreements are useful when talking to potential manufacturers or distributors of your product, marketing persons about your sales, competitors, or business strategies, and when discussing possible joint ventures and investing relationships.  Another benefit to these agreements is that it may assist you in talking with others about your invention without sacrificing the ability to get a patent (especially in foreign jurisdictions).*

The basics of the document include a) the type of information that is going to be disclosed, b) how the receiving party can use the information, and c) how long the information must be kept in confidence by the receiving party.  Breach of the agreement would allow you to sue the receiving party for damages resulting from the breach and an injunction from further use of the information.

Even with the agreement in place, however, you should never disclose more information than is necessary for the receiving party to make the decision they need to make–doing so may just cause problems.

2. Employee/Independent Contractor Agreements

If you hire employees or contractors to assist your business, there should be a written agreement discussing the relationship.  In addition to setting out the compensation to be received by the employee/contractor, the document should also discuss the use (and return) of company property and information, termination provisions, and, if applicable, non-compete, non-solicitation provisions, and the rights to an intellectual property resulting from the relationship.

A good employee/contractor agreement should protect both you and the employee/contractor, setting forth the rights and responsibilities of each party.

3. Invention Assignment

Invention assignments are agreements that assign the right, title, and interest to inventions or other creative works to your company.  Invention assignments are especially important for employees or contractors that are using your company information to further the business of your company.  It applies to more than just inventions – think: hiring a vendor to create a website, having your employee assemble a list of prospective clients, or an employee developing a marketing strategy that your company decides to implement.

If you are working solo, but have formed a company (LLC, S-Corp, etc.), you should consider assigning your rights to the inventions to the company.   Failing to assign your rights to the company is not fatal and can be done at any time, but if an investor is looking at putting money in your company, she is going to want to know that you are not withholding assets from the company (I’ve seen on more than one occasion a serious investor back out of a financing deal because the inventor failed to and in the end was reluctant to assign his interest in the inventions to the company).

Conclusion

With careful planning these agreements can help protect your investments in your company, ingenuity, and your company’s assets.  Although in some instances you may be able to safely use a previously prepared document for a new relationship, it is best not to try to fit a round peg in a square hole – there may be aspects of the agreement that should be reconsidered, revised, or expounded upon in order to properly address the issues that the new relationship presents (e.g., your standard employment agreement may not be sufficient if you’re hiring a CFO) – thus, your attorney should be consulted when a new situation arises.

 

*This concept is called Divulgation, which is the non-confidential disclosure (written or oral) of the inventive aspects of the invention.

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  1. […] Dunkiel Saunders attorney, Justin McCabe explains the importance of invention assignments, as well as non-disclosure agreements and employee/independent contractor agreements, on the Green Mountain IP blog. […]