Failure To Establish Clear IP Ownership-What Every Startup Needs To Know Part 5

By Debby Winters

In the last blog post we looked at how the current employer of the founders might try to lay claim to the IP rights of the startup. In this post, we will look at the founders or stakeholders of the startup.

In many instances, multiple stakeholders contribute IP to the startup. As a general rule, IP rights belong to the individual who conceived of an invention or created the work first, absent any agreement to the contrary. Well-crafted written agreements between stakeholders and the startup can ensure all rights are assigned to the startup. For IP created before pre-incorporation, IP transfer via a written agreement, in exchange of company shares or for money, is recommended. If co-founders are involved in the formation of the startup, a founder agreement may be important in ensuring that the startup owns the IP. Such an agreement can prevent issues with respect to a departing co-founder later claiming IP ownership.

In our next blog post we will look at how independent contractors could try to claim IP rights.

 

Failure To Establish Clear IP Ownership-What Every Startup Needs To Know Part 4

By Debby Winters

Failure to establish IP ownership rights can be a deal breaker in many business transactions. Due diligence analysis generally seeks to verify not only the startup’s ownership rights to each piece of IP but also to determine if there are any restrictions on its use. Typically IP ownership issues can be averted if addressed early, sometimes even before the incorporation of the startup.

Here are a few of the places where ownership should be established:

  1. Current Employment for the Founders
  2. Employees of the Startup
  3. Independent Contractors
  4. Startup Founders

In this blog, we will discuss the first topic and take up the other topics in subsequent blog posts.

Founders of many startups continue to work for their current employer while they establish the new company. The employer may have required that the Founder/employee sign a confidentiality or invention assignment agreement in which the employee agreed to assign all new ideas and inventions related to the employer’s business to the employer. This is particularly problematic if the startup product or service is closely related to the employer’s business as the employer may try to claim rights to the startup’s IP.

Thus, it is important that founders carefully review their current employment agreements and fully understand employment obligations, including IP assignment clauses and non-compete language. Employees should also consider discussing personal projects/inventions with their employer upfront to avoid ownership issues later down the road. Generally, employer resources or company time should not be used to develop projects for the startup company without the pre-approval of an employer and without the employer’s agreement not to claim ownership rights.

In the next blog, we will look at establishing ownership of IP with employees of the startup.

IP Plan- What Every Startup Needs To Know Part 3

By Debby Winters

Startups, from conception, need to determine several things about their intellectual property (IP) including (1) the role that IP will play in their business, (2) the IP tools that support their business model, and (3) their overall IP strategy. In many cases, a startup’s intangible assets may be the only assets and failure to fully consider IP during launch is the source of many missteps and oversights. In contrast, a well-structured IP strategy or plan is a proactive step toward seed funding and avoiding loss of IP assets, while minimizing the risk of third-party IP infringement.

A good IP plan should identify existing and future IP assets; provide a strategy for maintaining and protecting these assets; outline a strategy for conducting freedom-to-operate searches; and establish an IP-related budget. The initial step of identifying existing and future IP is critical as it can help the startup develop a plan for allocation of resources and capital to support the IP assets. Importantly, the information can be cross-referenced against the startup’s business and product development plans to develop, maintain, protect, and leverage IP assets. For example, if the IP assets include trade secrets, the IP plan should include procedures to protect the information such as the proper marking of the documents, establishing check-in/out procedures, limiting access to documents, and storing the documents in a secure facility or network section.

The IP strategy should also include a plan for periodic review of all agreements that relate to the IP to ensure all necessary legal IP safeguards are in place for new and departing employees, consultants, developers, and contractors. It is common to review the license agreements, but many times employment agreements, independent contractor agreements, and nondisclosure agreement are overlooked. This is unfortunate since employees, contractors, consultants, and developers can know many secret IP details that you want to keep a secret or protectable.

Equally as important to the IP plan is that it needs to be continually reviewed and revised as the business evolves. Finally, although a strategically thought out IP plan may include a business’s conscious decision not to pursue registered IP rights, oversight resulting in failure to protect these IP rights can be devastating.

Next time we will discuss the potential failure to establish clear IP ownership.

 

 

Not Establishing Confidentiality Protections- Startups

By Debby Winters

Before publicly disclosing its intellectual property (IP), a startup should balance the risks with the rewards of allowing the confidential and sensitive IP information to get out into the public domain.  Startups often misstep and disclose patentable subject matter at investor meetings, pitch events, or on company websites prior to filing a patent application. Unfortunately, public disclosure of an invention prior to filing a patent application can limit or even destroy patent rights. Such public disclosure can also destroy a company’s trade secrets.

Third-party conversations with those not under legal obligation to maintain confidentiality, such as a public pitch or presentation, a trade show, or publication are common examples of what can be considered a public disclosure to the patent office. If such disclosure is necessary, the startup should file a provisional patent application prior to the disclosure or at the very least have the third parties sign a written Non-Disclosure Agreement (NDA).

One caveat to that rule is that venture capitalists generally avoid signing NDAs because they deal with many startups and believe confidentiality obligations limit their contact and investment opportunities.  Furthermore, while speaking at trade shows or making a pitch, securing an NDA may not be feasible. In such instances, to avoid disclosing confidential information, the revealed information should be limited to generalities.

In the next part of this series we will look at the IP plan.

A Little Thanksgiving IP

By Debby Winters

Does your Thanksgiving Day routine involving watching the MACY’S THANKSGIVING DAY PARADE? Ever wondered if Macy’s has trademarked that name? Well, wonder no more. They received trademark protection from the USPTO on December 1, 1998 for entertainment services, namely, organizing and conducting a parade. They claimed first use in 1924. That means there is one and only one MACY’S THANKSGIVING DAY PARADE. And since that is true Macy’s generates millions of dollars for that one day parade. They charge approximately $20,000 per float, and their additional revenue for balloons and exclusive broadcasting rights to the parade and the performances that are given right in front of the store.

This year, however, Macy’s is in decline. The original R.H. Macy & Co. was a dry goods emporium that opened in downtown Manhattan not long before the Civil War. What’s now known as Macy’s was once Federated Department Stores Inc., which had acquired many of the department stores that might sound familiar to people born before 1970 or so: Burdines, Bullock’s, I. Magnin & Co., and Lazarus, to name a few. The company bought Macy’s in 1994 and a decade later took its name and rebranded its other department stores with the Macy’s name, too.

In the middle of last year, Macy’s decided to close 100 of its 730 stores, eliminating 3,900 jobs. (After a disappointing 2016 holiday season, Macy’s said it would cut 6,200 more jobs.) About half of the 70 stores it’s shut down this year are within 10 miles of another Macy’s.

There have been struggles with large department stores, but Macy’s is trying to make a comeback and is dedicated to keeping its MACY’S THANKSGIVING DAY PARADE going and going. If they stop having the parade they will be in danger of losing the trademark, because as we all know, with the Trademark Office it is Use It or Lose It!

Happy Thanksgiving!

Top Patent Stories

By Debby Winters

Every year Donald Zuhn recalls the top 20 patent stories for the past year.  You can find his selections for 2016 at these links: Stories 16 to 20, 11 to 15, 6- 10, and the top 5 stories.

Of note are the following:

#18 about the CRISPR patent.  CRISPR is an acronym for Clustered Regularly lnterspaced Short Palindromic Repeats.  There are many aspects about this, or should I say “these,” patents as more than one has been filed, and that’s part of the story itself.  Since these patents were filed in the days of first-to-invent, rather than first-to-file, therein lies an additional wrinkle to this story.  I will be blogging about CRISPR in the days to come, so won’t go into detail now, but it will be an interesting patent story in 2017 as well.

#16 about the new Trade Secret law, the Defend Trade Secrets Act of 2016 (“DTSA”) signed in law in 2016 by President Obama. Let’s keep our eyes on how this will morph in years to come, especially in light of a new Presidential Administration.

#4  is one of the important stories for both patent attorneys and inventors. In May of 2016, the U.S. Patent and Trademark Office issued the Subject Matter Eligibility Update, which provides further guidance for determining subject matter eligibility under 35 U.S.C. § 101.  We will see more to come on this topic to help clarify what is eligible subject matter for a patent and what is not.  This is also the topic of #2 in continuing fallout of the Supreme Court’s 2014 Alice Corp. v. CLS Bank.

#1- The top patent story, according to Dr. Zuhn was the Supreme Courts refusal to hear a case referred to as Sequenom.  Despite Sequenom’s petition for certiorari and a total of twenty-two amicus briefs that were filed encouraging the Court to grant certiorari, in June, the Supreme Court surprised many in the patent community by issuing an order denying certiorari in the case.  This story is from the Federal Circuit’s very controversial decision in Ariosa Diagnostics, Inc. v. Sequenom, Inc., in which the Federal Circuit affirmed the District Court’s grant of summary judgment of invalidity that the claims of U.S. Patent No. 6,258,540 concerning fetal DNA were patent ineligible.

For more details on any of these cases, click on the links above.