When I was in law school, I spent a semester in the Technology Venture Clinic. Besides the benefit of working with real-life clients, I also received a startup lawyer primer in contracts, intellectual property (IP), and financing requirements.
I also met clients who had made some serious errors in the early stages of their companies. I extensively researched the issue of why people were not seeking professional advice and found that the answers ranged from complete lack of understanding of business and legal risks—like the need to lay the proper foundation for intellectual property (IP) ownership and protection—to fear of attorney costs.
Even if you’re not an IP lawyer, you can help your business clients by understanding how to spot potential IP and facilitate the necessary contracts to ensure ownership. When I spoke with startup lawyers, they estimated that one in three clients had IP ownership issues when they sought venture funding. In some cases, the early mistakes were irreversible.
You can triage your client to uncover ownership issues and identify valuable IP that will need protecting. By walking your clients through a checklist, you can avoid some of the most common errors. Ask questions like:
- Who are they working for when they had their great idea or started their business?
- Do they have a co-founder? If so, do they have agreements with that co-founder?
- Do they have proper employee and contractor agreements?
These may seem like non-IP questions, but if your client had their great idea while working under an employee contract that does not allow for outside ventures, they could not own the IP associated with their new company! Also, one of the most common mistake is that co-founders get things started without an agreement that provides a buy-sell clause that states how a co-founder exits if there is a dispute and who owns the IP developed within the company.
Finally, employees and contractors have very different rights with respect to their work product. For example, if your client is using a software contractor instead of employees to develop code, ensure that their contractor transfers ownership of the source code to your client. Just because work is paid for does not mean that your client owns the code; ultimately, the contract governs ownership. I have heard horror stories over the years with respect to work product being held hostage by contractors for additional fees.
IP is complicated and people get confused about the differences between patents, trademarks, and copyright. Most do not understand how valuable a trade secret can be and what steps are necessary to properly protect that IP. However, the most important point is to educate the client to ask you about their latest product, rebranding, website, or anything else that they develop or create themselves.
Again, your clients asking questions about their ideas, brand, and work processes will uncover the potential IP upfront. Most entrepreneurs or small business owners do not think they have IP, because the softer IP, or non-patented ideas or brand assets, goes unnoticed until there is a problem, or until they try to raise funds or sell their business. Even if you are not becoming an IP attorney, the ability to spot your clients’ valuable IP and refer them to appropriate resources will enhance your value as an attorney.