5 Things Your Startup Needs to Know about Intellectual Property to Avoid Litigation

Young engineer working at night in the lab, adjusting a 3D printer's settings.

Most startups are born from an idea, an invention, or some other creation from the minds of the company principals. These creations, while not necessarily concrete, are the property of the startup and they are legally protected. Known as intellectual property, companies are not always aware of the legal regulations that govern this part of business law. It is important to understand some aspects of intellectual property law to protect your trade secrets. Here are five things you should know about intellectual property to avoid litigation.

#1. Understand the Types of Intellectual Property Your Business Owns:

What is intellectual property, exactly? Essentially there are four types of intellectual property (IP) including:

  1. Copyrights
  2. Trademarks
  3. Patents
  4. Trade secrets

A copyright grants exclusive rights to the producer of an original work. Books, visual artwork, movie, plays, and even computer programs fall under copyright protection. Only the creator of the work has the rights to produce and distribute. Copyrights protect the owner's "vision", but not necessarily the subject of that vision.

A trademark is a unique name, logo, symbol, or design used by a business for identification. A good example is the Nike swoosh. Even without the company name, the swoosh is quickly identified all over the world as the trademark for Nike.

Patents grant an inventor exclusive rights to their invention. The two basic types are utility patents and design patents. Utility patents cover new or improved technology and include items such as machinery, electronics, processes, and even chemical formulas. Design patents cover new designs for products that provide a new look, but the same function as the original.

Trade secrets include formulas, recipes, or other techniques that give a company competitive advantage. An excellent example of a trade secret is the Google search algorithm. Improper disclosure of trade secrets can lead to litigation.

#2. Ensure Your Confidential Information Stays Confidential With a Nondisclosure Agreement:

The first step in protecting intellectual property is a good nondisclosure agreement. A nondisclosure agreement is a legal contract, usually between a business and an employee, requiring that confidential information be kept secret. The agreement needs to clearly identify who operates under it, the property protected by it, and other terms such as the length of time it is in effect and any agreed upon exceptions. Clear communication of the agreement terms protects both the property owner and the subject employee.

#3. Make Sure You Own What You Own With a Work-for-Hire Agreement:

Work-for-hire agreements protect the intellectual property of companies created by their employees. Under copyright law, a work-for-hire employee does not retain authorship of any unique work. Legally, the employer is the author. Like any employee agreement, understanding ownership is important and helps prevent future legal problems.

#4. If You Build or Buy It, Protect It With Licensing Agreements:

Many startup businesses own revolutionary intellectual property, but lack the ability to market or produce it for commercial retail. As a way to get their product to consumers, the startup enters into a licensing agreement that allows another business to promote or retail the new product.

Licensing intellectual property is complex. For their protection, companies must carefully consider all aspects of a license agreement. In particular, they must agree upon items such as who retains control of the intellectual property, who sells the products, and the royalty fees involved. If manufacturing or sales take place overseas, companies need to know what international laws apply as intellectual property rights differ in other countries.

#5. Keep Trade Secrets Safe With Non-Compete Agreements:

Employees often have access to company trade secrets. Before current employees become former employees, you need to protect yourself with non-compete agreements.

Closely related to non-disclosure agreements, non-compete agreements prevent an employee from seeking employment by a direct competitor for a time after termination. Companies often expose their employees to confidential information during the course of their job. This is especially true for middle and high-level managers. To keep business secrets safe, companies legally forbid certain employees from working for a competitor. The lifetime of non-compete agreements is typically six months to as much as three years.

Protect What Is Yours – Work With the Small Business and Startup Lawyers at Hendershot Cowart P.C.:

Intellectual property defines a company. The creations of a business, it’s brand and distinctive properties of it make that business what it is. For a business to be successful, it’s instrumental that owners or stakeholders alike aggressively protect and police their business propriety information that is unique to them and instrumental to its operations. At Hendershot Cowart P.C., our award-winning business attorneys help our clients protect, prevent, contain, and obtain redress for intellectual property and any infringement, misappropriation or theft of trade secrets. Our business legal team has the knowledge of both Texas and federal law to confidently assert or defend your rights in any type of IP dispute.To protect what is yours – schedule a consultation with one of our experienced business attorneys. Call (713) 909-7323 or contact us online 24/7

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