THREE THINGS TECH FOUNDERS NEED TO KNOW ABOUT PATENTS

Intellectual property (IP) is a valuable asset for any company, and even more so for tech startups, as patents can play a significant role in their ultimate success (as noted here). In fact, a recent report found that startups with patent protection are 35 times more likely to be successful. If you’re starting a tech company, focusing on a few key principles will help you lay the foundation for a successful patent portfolio as your business matures.

Ownership

It may sound basic, but it’s important to have all founders and other early team members on the same page with respect to ownership of IP rights. Typically, the early team members will execute a written agreement (e.g., a founders’ agreement) with a section specifically addressing IP rights, so that it’s clear that the company owns all IP related to the business. A written agreement can help avoid disputes about IP ownership later on, for example, when a founder leaves the company. In addition to the early team members, all future employees and contractors should also assign their rights to any IP that they generate in the course of their work.

Preferably, all team members (founders, employees, and contractors) will sign agreements at the time of formation or hiring that generally assign their IP to the company. The general assignment should include a “present assignment clause,” which assigns the IP at the time of signing (language such as “I hereby agree to assign, and hereby do assign . . .” is common). Moreover, a “further assurances clause” should also be included, where the team member agrees to assist with patent applications, including the execution of necessary documents after they leave the company. It may also be helpful to include a provision that requires team members to promptly disclose inventions to the company, which helps document the company’s ownership and aids in filing patent applications promptly.

Confidentiality

Confidentiality agreements (also called non-disclosure agreements (NDAs) or secrecy agreements) should also be signed by all team members and anyone that may have access to the company’s sensitive information, including people outside the company. For example, when you plan to discuss your technology with potential investors, suppliers, or manufacturers, have them sign a confidentiality agreement before the discussions.

Confidentiality agreements are important for a number of reasons. They allow you to control the company’s sensitive information and protect against unwanted public disclosure or use of it. And they can also protect against a potential loss of patent rights. For instance, publicly disclosing an invention (before filing a patent application) bars patentability immediately in many jurisdictions outside the US, and after a one-year grace period within the US. Having a confidentiality agreement in place can preserve your patent rights by preventing discussions with third parties from being considered public disclosures that would bar patentability. So it’s important to have the proper agreements in place to protect your patent rights both in the US and abroad. Check out our previous posts about confidentiality agreements for more information.

Early Patent Filings

Finally, it’s generally important to file patents as soon as possible, and it’s best to file them before disclosing the material outside the company (e.g., before meeting with investors, publishing academic papers, presenting at a conference, etc.). Although having an NDA in place can prevent a loss of patent rights in certain situations as discussed above, there are other factors to consider. For instance, earlier filing dates provide clear evidence of invention and prevent the company from being “scooped” on its ideas.

Conclusion

Every company’s situation is different, and there are many nuances to IP law. An attorney can guide you through the nuances and answer specific questions with regard to your company’s situation. That specifically-tailored advice is critical to protecting your company’s rights, obtaining patent protection, and ultimately achieving your goals. Please get in touch with us if you have questions or if there’s anything we can do to help you!