As soon as you bring other people into your business, you’re putting your intellectual property (IP) at risk. Whether that person is a co-founder or employee, no matter how good your relationship is with them, they pose a threat to your company’s IP.

The best way to ensure protection on all sides? Draw up an operating, employment, and/or founders’ agreement as soon as you bring another person into the mix.

Protecting IP Among Founders

The Thing About Founders’ Agreements…

Founders’ agreements are . . . uncomfortable. It’s like asking your spouse for a prenup. It’s the acknowledgment that something between founders might go wrong, that your relationship might not work out in the end.

How could you possibly have such a negative thought toward this person, your partner? Do you not trust them?

So much in business can change over the years. Regardless of your confidence in the relationship and trust of your business partner now, founders’ agreements are crucial from the start.

Say you have a business partner who comes up with an idea years down the road that drastically changes the direction of your company. Not everyone might agree with this partner’s vision or the value of that contribution.

Or, perhaps you have an instance where one business partner is putting in more effort and time into the company than the other. They may feel they deserve more in return.

Feelings change. Relationships change. Two founders can reach a point where they’re at odds. Having guidelines from the beginning is essential for dealing with these difficult situations.

Get It on Paper

Once you and your co-founders are in agreement that some sort of documentation is necessary to protect each party, there’s a lot to consider. Points that might come up include…

  • Intellectual property rights
  • Distribution of equity
  • Long-term company goals
  • Roles and responsibilities
  • Termination

Start by discussing these issues amongst yourselves, and once you are on the same page, it’s time to set up a meeting with your corporate attorney. The longer you wait to get operating and employment agreements in place, the harder it will be to come to a satisfactory agreement for all.

Protecting IP Among Your Employees

Who Does This IP Belong To?

Beyond agreements with your co-founders, it’s crucial to include IP clauses in your employment agreements with new hires

Within your operating and employment agreements, intellectual property can cover not only patents and trademarks, but also marketing materials, packaging, web presence, and business plans. Requiring confidentiality for all of this intellectual property and the requirement to assign all IP to the company ensures that all assets belong to the company and not to employees/founders that come and go (sometimes taking with them a piece of the IP that they can later leverage or hold ransom, if that IP has not been assigned).

If a member of your team has not assigned their intellectual property to the company, especially patents, and they walk out the door or are let go, key aspects of the company can be held hostage by this former employee’s continued rights in the IP. That former team member can ask however much money they want in exchange for assignment of the IP to the company.

Needless to say, requirements to assign IP in employment and founders’ agreements are anything but trivial.

Maintain Good Relationships

Employment agreements often ask for employees to give up quite a lot by agreeing to hand over any future intellectual development. Typically, blanket agreements ask each employee to relinquish all rights to future contributions, no matter how big or small. So, if an employee comes up with a remarkable discovery or invention after signing such an agreement, there’s no guarantee that they will be compensated for this contribution.

It’s important, then, to reward your team for those contributions. Often, an increased bonus is a great starting point, but sometimes a reward program in addition to year-end bonuses can create more effective incentives since an inventor does not have to wait until New Year’s to reap the rewards of their innovations.

Additionally, reward programs can include public acknowledgment (e.g., patent plaques, or box seats for the most innovative groups), since different employees respond to different incentives. A reward program can be as simple as movie tickets or a free dinner for smaller contributions, all the way up to thousands of dollars for a filed or issued patent.

Some companies do more, some companies do less, but even a small sign of appreciation goes a long, long way.

Within our practice, our most innovative and prolific clients are the ones with incentive programs in place.

Protecting Your IP Beyond Your Own Four Walls

In addition to protecting your intellectual property among your internal team, you need to consider extending protections outside your own walls.

Protect Brainstorming Sessions

While it might not be immediately obvious, protecting brainstorming meetings — particularly with individuals who do not fall under your employment, operating, and founders’ agreements such as joint development staff from another company — can be vital to your organization’s success.

For example, you might go into a brainstorming meeting with a partner company with solutions in hand. The other company’s staff may add some ideas during the brainstorming session and all of a sudden there is a disagreement as to who contributed what.

Without a provisional patent filing prior to the meeting, it can be very difficult to prove what ideas your team brought to the meeting.

Another protection? Record your meetings (with the other side’s permission). Most importantly, though, file for patent protection on any ideas that you take into the meeting.

Provisional patents can be filed in as short as 24–48 hours and for as little as a few thousand dollars. Then, put something in writing with the other party that explicitly states how intellectual property from the meeting is handled. Finally, any ideas that your team develops at the meeting should be provisionally protected within days of the meeting.

Will My NDA Protect Me?

In the instance above, a non-disclosure agreement (NDA) will also help dissuade the other side from publicly disclosing the information discussed in your brainstorming session or trying to patent it themselves. However, even an NDA is only as valuable as your ability/willingness to enforce it in court. Therefore, a combination of all of the above tactics is the best way to create a diverse defense against stolen ideas.

Know what kind of IP protection you need based on your company’s current status and the entities you’re working with (co-founders, employees, or colleagues) ahead of meeting with your attorney.

This preparation will not only save you time but legal fees as well, and you can get back to doing what you do best — creating innovative products and business solutions, knowing that your IP is well-guarded from all angles.