Failure To Establish Clear IP Ownership-What Every Startup Needs To Know Part 6

By Debby Winters

In the last blog post we looked at how founders and stakeholders can claim IP. In this post we will examine how independent contractors could try to claim IP rights.

Startups often misconceive that hiring a contractor to create work for a business automatically gives the startup ownership rights of the work.  This is not always true and to ensure that the startup does owns all IP created in all startup-funded work, the startup should have independent contractors enter into an independent contractor agreement that states this is the case. Most often the agreement will contain an assignment clause stating that the independent contractor agrees to assign all inventions and IP to the company.

Additionally, startups frequently use independent contractors to create websites, software, marketing materials and prototypes for instance. Failure to implement written independent contractor or consulting agreements with suitable IP clauses that clearly establish the startup’s ownership rights to the IP prior to commissioning the contracted work can be devastating. This is particularly important if the startup plans to sublicense the work to others, make multiple copies of the work for sale, or hire others to modify the work.

Often the startup will agree to allow use for the consultant’s portfolio or work or other limited engagements. These are items open for negotiation between the startup and the contractor.

All agreements should be in writing and signed by both parties. It should be clearly stated that the startup’s confidential information is only for use for the benefit of the startup; require disclosure of ideas, inventions and discoveries related to the agreement; and include a statement of ownership rights over ideas, inventions and discoveries. Recordable assignment of IP rights should be required to show clear ownership of inventions and other IP developed by its contractors or consultants.

While the approach taken with employees of the startup are similar to these, there are some differences so we will discuss those in the next post.

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