1. Mistake: Not doing your research on the competition.
One of the biggest mistakes that a start up can make is failing to do their homework and researching whether there are other competitors with similar inventions, patents, trademarks, copyrights and other intellectual property already in existence and/or in the marketplace. Conducting this research before launching your business can determine how you will move forward with your idea and whether your invention, idea or product is unique enough to qualify for intellectual property protection. If you fail to do a proper and extensive search, you could unknowingly infringe upon someone else’s protected intellectual property. Remember, ignorance of the law is not a defense. If a court were to find that you are infringing, you could be subject to punitive and even triple damages. Plus, if you’ve ever seen an episode of Shark Tank, you already know that a non-patented invention or idea oftentimes prevents you from securing the necessary funding to get your business off the ground. A comprehensive intellectual property search done by an attorney or reputable company will usually run about $500-$1,000 but is well worth the expense to reduce your risk of being sued for infringing on an idea you didn’t realize already had legal protection.
2. Mistake: Not timely protecting your intangible assets.
There are plenty of ideas that are patentable yet not marketable in the real world. After you’ve done your research about the competition and determined that your idea is commercially viable, filing a patent might be a good next step. But, as they say, timing is everything. And, while you don’t want to be overly enthusiastic and file too soon, you also need to be careful not to wait too long. Most business owners don’t know that a patent application must be filed within one (1) year of the first disclosure, printed publication, or offer to sell the product. If you don’t file within that one-year period, you’ve lost your opportunity to file for patent protection. The US Patent and Trademark Office now has a “first to file” rule, meaning that whoever files first will win the patent race despite not having actually invented first. If you don’t have the funds for a regular patent application or are still in beta stage, you could buy yourself a little time by filing a provisional patent. This gives you another year before you have to file for your regular patent. And, although the provisional patent is not as formal as a regular patent application, you should be as detailed as possible. Another consideration for your intellection property is whether your idea would be best kept as a trade secret rather than being filed as a public patent. This may be the case if your intellectual property cannot be easily reverse-engineered. There are various factors that should be weighed prior to making that determination.
3. Mistake: Not signing the proper agreements with employees, vendors and others with whom you work.
Startups are usually built from passion and as a result, there tends to be a more informal and relaxed atmosphere in the business environment. Although this type of environment is enjoyable to work in, there are legal considerations that you should address early on. If you’re hiring vendors to help you develop the idea, make sure it’s clear who owns the intellectual property and anything else that is created out of the work for hire. Have employees and vendors sign a non-disclosure and confidentiality agreement. Address who will bear the legal cost in the event of an intellectual property infringement situation. You may also want to consider having employees sign a non-compete and non-solicitation agreement so they can’t leave and take ideas, trade secrets and other employees with them without serious consequences.
4. Mistake: Going the DIY route with professional services.
With so many online resources available these days, it’s easy to be tempted to use a DIY website for legal, tax and other business documents – even easier if your company is cash-strapped and finding it difficult to allocate financial resources for professional advice. While these DIY habits may be tough to break, it can be extremely expensive to fix improperly prepared DIY documents. What you don’t get with these online resources is a live attorney who understands the intricacies of your specific business situation and can thus prepare the most appropriate legal documents to support what you’re trying to accomplish in both the short term and long run. All too often, entrepreneurs attempt to put together their own core corporate documents using online DIY resources and then plan to hire a professional at a later date when there is sufficient funding. By then, it could be too late. Just like a house, when you’re starting a business, it’s important to have a solid legal foundation.
5. Mistake: Using proprietary and/or other valuable information from a previous employer.
Sometimes the information that you obtain from a former employer may carry over into your new business. This may include trade secrets, customer lists, client contacts, information technology, business strategies, and the like. While you may not think having this information and using it for your own purposes is a problem, your former employer may have a very different opinion. Nowadays, it’s very common for employers to require employees to sign a non-compete agreement. Oftentimes, the employee doesn’t even recognize the significance of such an agreement and what obligations they are being bound by. This lack of knowledge can be fatal to your new business in the event you use information obtained while working for a former employer. In many instances, the former employer enforces the non-compete agreement, which can subject the business owner to unanticipated legal fees, monetary damages and even criminal liability. It’s important to evaluate the breadth and scope of any restrictive covenant you have agreed to be obligated to before starting your new venture.
For more information on ways to avoid intellectual property mistakes and protect your intangible assets, schedule an introductory strategy session online at graceleelaw.com or call us at (703) 319-7868.