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INTELLECTUAL PROPERTY PRIMER INTELLECTUAL PROPERTY PRIMER

1. MAKE SURE YOU OWN THE IP 5. LEARN HOW TO PROTECT EMPLOYEE-GENERATED IP

I n the early stages of a startup, individuals typically collaborate informally to develop their M ost companies assume that any IP created by employees for their job automatically becomes
ideas, and there may be no formal agreements among them. But without a formal agreement
the employer’s property – but this assumption is often incorrect, and can lead to lengthy and
as to ownership of the IP, disputes may arise. Further, the individuals in a startup may be costly disputes. Generally, an employer’s right to such IP depends on the circumstances of the
bound by other agreements with their current employers, and may even be required to assign the IP employee’s hire and whether the parties entered into an agreement that assigns the IP to the employer.
to their employer. Therefore, ownership of IP should be openly discussed and agreed upon. When the Companies seeking to avoid such disputes should have employees sign an Inventions Assignment
company is formally set up, formal agreements should then be executed. Agreement.

2. PREVENT INADVERTENT DISCLOSURE Without an agreement, although laws differ by state, the following general principles apply: (1) for
employees employed to invent (i.e. engineers and scientists), the inventions are generally owned by
the employer even if the employee did not sign an agreement; (2) for general employees (i.e. sales
tartups typically share too much information with others in the beginning, whether out of
S excitement for the new endeavor or to attract investors. While disclosure of some information and marketing), who have not been hired specifically to invent, the general rule is that the employee
owns such inventions if there is no agreement providing otherwise; and (3) for general employees
is necessary to build the business, confidential ideas or plans are at risk of accidental whose inventions do not relate to the business of the employer, these inventions are generally owned
disclosure – and in some cases, the public disclosure of IP may adversely affect IP rights. To mitigate by the employee absent an agreement.
this risk, consult with an experienced IP attorney to help determine what information can be disclosed
without compromising your rights. Also consider using a formal nondisclosure agreement.
6. UNDERSTAND WHAT “WORK-FOR-HIRE” REALLY MEANS
3. PROTECT YOUR IP f your company is involved in software development, you’ve undoubtedly come across the
I term “work-for-hire.” Typically, companies needing software developed enter into written
contracts with an independent contractor and insert the magical phrase “work-for-hire,”
O nce a startup has identified its IP, it’s time to look to potential IP protection. Protection can thinking it will automatically assign ownership of the IP to the company. However, entrepreneurs
come in the form of trademark, copyright, patent, or trade secret. The protection available
depends upon the IP at issue. Determining the type of IP protection available at the start will should know that works created by independent contractors constitute a “work-for-hire” only in very
help a startup plan and develop its internal policies and procedures and help secure its competitive limited instances.
advantage in the marketplace.
Works created by an independent contractor can constitute a “work-for-hire” only if: (1) the work is
specifically ordered or commissioned; (2) the parties expressly agree in a signed written agreement
4. DEVELOP AN IP STRATEGY that the work shall be considered a “work-for-hire”; and (3) the work is (i) a contribution to a
collective work, (ii) a part of a motion picture or other audiovisual work, (iii) a translation, (iv) a
A startup should develop a strategy for how it will continue to pursue and protect its IP. supplementary work, (v) a compilation, (vi) an instructional text, (vii) a test, (viii) answer material
Developing an IP strategy will support the company’s growth from the beginning and also
for a test, or (ix) an atlas. 17 U.S.C. §101. Obviously, software does not fit neatly under one of these
provide for an exit strategy. Work with a professional to determine an appropriate strategy nine limited categories because it was not contemplated by the Copyright Act when drafted decades
that meets your goals and sets a framework to achieve them. ago.
Some lower courts have determined that software programs satisfy the definition, but until there is
a Circuit Court decision holding that computer software fits under one of the enumerated categories
to qualify as a “work-for-hire,” the law remains uncertain. Companies should be aware that use of
the phrase “work-for-hire” may not fully guarantee that ownership will be assigned in a software
development contract. Thus, to ensure that all works prepared by the independent contractor are
assigned to your company, the best approach is to use the “work-for-hire” recitation in conjunction
with an express assignment provision.

When building your company, consulting with an IP professional to help understand your rights and
how to protect them is well worth the effort.

ERYN Y. TRUONG, ESQ.
COUNSEL
CAMPOLO, MIDDLETON & MCCORMICK, LLP
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