Thomas Legal Solutions

Thomas Legal Solutions

Intellectual Property Checklist


(1)          Employee & Consultant Issues


(a)          Do you have strong written confidentiality and invention agreements in place with all founders, subsequent employees and consultants?  Do these retroactively cover all work which may have been done and inventions which may have been created prior to agreement execution?  Not securing these early on can cause you serious problem later, including misunderstandings about rights and ownership, concomitant arguments, bad faith holdouts, etc., and can even cause breakup of the management team and/or failure of potential financing negotiations.


(b)          Do you have fail-safe policies and procedures in place to ensure that all new employees and consultants execute strong written confidentiality and invention agreements prior to being hired and prior to commencing work?


(c)           Have you taken steps to ensure that no founder/employee is contributing (or re-creating) intellectual property which may be subject to a claim of copyright infringement or trade secret misappropriation by a prior employer?  (Analysis of this risk may require a discussion with counsel.)


(2)          Ownership versus License-In Have you taken steps to ensure that you either own outright (best practice) or at least have resilient/durable licenses to all intellectual property necessary to carry on your current and planned/likely future business?  (The confidentiality and invention agreements discussed in (1) above are an important component of this.)

You may have no choice but to license certain third party intellectual property, and if so these licenses should at a minimum be:  (i) broad enough to encompass all uses and markets which you believe you may reasonably want to exploit, to avoid having to renegotiate them from a position of weakness/”lock-in” later;  (ii) of sufficient duration (for core intellectual property, where outright ownership isn’t possible, you should try to get perpetual license, subject only to timely payment of license fees, and with ample cure rights for any breach);  (iii) ideally sub-licensable (in some cases sub-license may be integral to your business plan, in which case it cannot be considered optional), at least to affiliated companies;  and (iv) transferable to affiliated companies (less critical if sub-license is possible) in the ordinary course of business, and to unaffiliated third parties in the case of merger or asset purchase, to facilitate eventual exit strategy.


(3)          Copyright Do you have a policy in place for determining when federal copyright registration of certain works of authorship might be advisable?  Copyright registration is not required for a work to be protected under U.S. law, but is necessary before you can bring a lawsuit alleging copyright infringement, and has other advantages (e.g. statutory damages) as well.  Note that registration is not appropriate for purely internal works of authorship which may disclose trade secrets or potentially patentable inventions (or at the very least, all such sensitive information should be redacted prior to copyright registration).


(4)          Trademarks/Service Marks Have you decided on appropriate trademarks/service marks for use in your business?  Branding strategy is critical for virtually any business, of whatever size.  For any business with more than a local or regional scope (and this includes the majority of “internet” businesses), it is recommended that you (i) authorize a formal mark search, in an attempt to “clear” your desired mark(s) prior to expending substantial time, effort and expense on building the brand, and (ii) seek a federal registration (if your business plans include a substantial foreign presence, you should also discuss advisability of foreign registration with competent trademark counsel).  Finally you should regularly monitor (or contract with a third party service to monitor) your business space for potential infringers of your mark(s), as well as any marks which might be “confusingly similar” to your mark(s).


(5)          Website/Online IssuesDo you have an adequately detailed Terms of Use and Privacy Policy for your website, tailored to your particular business needs? 


(a)          Terms of UseThe Terms of Use can be thought of as the primary “contract” between you and your website visitors/customers.  A well-drafted Terms of Use serves at least two purposes:  (i) it lets visitors know what conduct is and is not permitted while accessing your website and related content; and (ii) it limits your legal and financial liability in a number of important ways. 


(b)          Privacy PolicyThe Privacy Policy is intended to protect your enterprise from privacy-related lawsuits, but can also be a useful marketing document (if your privacy policies are sufficiently consumer-friendly), and certain disclosures regarding privacy may even be required by applicable law.


(6)          Patents


(a)          If you have science and/or engineering staff, you should at the very least make clear to them that (i) the company has an “open door” policy regarding potential patenting of inventions, and (ii) they are expected promptly (within days or weeks, not months – less still years!) to communicate to appropriately senior management any inventions which they feel may meet requirements for patentability. 

(NOTE - The basic requirements for patentability are:  (i) novelty – that something “new” has been created/ invented/ discovered; (ii) utility – that the invention is “useful” (note that, with limited exceptions, this element is generally presumed); and (iv) non-obviousness – that the invention is not obvious to “a person having ordinary skill in the art.”)


(b)          If you have a substantial research and development program, a more formal policy is advisable, with at least one individual having official responsibility for regularly (ideally not less than once per quarter, and even more frequently if practical) requesting disclosure of ongoing R&D information from research/engineering staff, and discussing and reviewing any inventions which they believe may be patentable.  


(c)           You should stress to all research/engineering staff that they must not make any public disclosures of potentially patentable inventions unless formally approved by management, whether in white papers or peer-reviewed journals, at technical conferences, at trade shows, or otherwise.

(d)           Note that the decision whether to seek patent protection for an invention is not always an easy one.  In addition to the obvious expense, certain inventions may be better maintained as trade secrets.  Since issuance of a patent (and in many cases even filing a patent application) will eventually result in publication of the disclosed invention, protecting an invention either as a patent or as a trade secret are mutually exclusive propositions.  There may even be certain infrequent cases where you decide against seeking a patent, but may nevertheless wish to publicly disclose the invention, to prevent competitors from independently discovering it and seeking a patent themselves.  The danger here is that if you seek to maintain an otherwise patentable invention as a trade secret, a later inventor might file for patent protection and thereby prevent you (the original inventor) from continuing to use your own invention.


(7)          Piracy Issues


(a)                If you license software to customers, you should carefully consider the effect that piracy may have on your business.  This should include a cost-benefit analysis, i.e. you should estimate how much effort and expense would be necessary to decrease piracy substantially, and weigh this against the likely benefit.  It is important to note here that not every pirated copy necessarily implies a lost sale, as many individuals who use unauthorized software are convenience users only, do not have substantial assets subject to judgment, and would remain disinclined to pay for a license, even if their pirated access were eliminated.


(b)          Finally, I mention the flipside of (7)(a), if for no reason other than completeness:  You should avoid (and implement policies to make sure your employees avoid) using unauthorized copies of software and other materials in your own business.  While the temptation to use such pirated materials may be greatest for startup companies, which often operate on shoestring budgets, a surprising number of much larger and highly profitable companies have also been caught at this.  Copyright owners are much more likely to pursue a viable business for piracy than they might an individual non-commercial infringer.



Copyright © 2011 Terry L. Thomas