April 24th, 2009

The Awkward IP Discussion

I have been to several presentations in the last few months given by lawyers that work with startups. Last night, the firm was Goodwin Proctor and the topic was “8 ‘Great’ Mistakes Entrepreneurs Make”. To me there’s one HUGE common thread that comes up over and over again at these presentations: PROTECT YOUR IP (or as they phrased it last night “Mistake #8: Failing to Adequately Protect Your Intellectual Property Assets”).

If these lawyers push and belabor the IP issue in presentation after presentation, I’m guessing it’s because they see tons of startups that have had IP issues of some sort – and this is their attempt to head them off at the beginning.

Here’s the problem: founder equity debates (who gets what percentage of the company) are awkward enough, but trying to break down IP ownership is EVEN MORE awkward. I sometimes think of it as trying to divide up a check at a large group dinner when it’s someone’s birthday. You don’t want to pay more than what you believe you owe, but you don’t want to be the one to speak up either.

Yet the stories of IP disasters keep coming. The guys from Goodwin pointed out that it’s not just the co-founders that could have a claim to your IP – you also need to think about former employers, 3rd party developers, and consultants.

The lesson here – take some steps early on to protect your IP. Don’t be sheepish about discussing IP ownership and know that you might need to ask your employees to sign NDAs (though don’t try to ask a VC to sign an NDA, it will just show them how naive you are).  Be vigilant about your IP – your lawyers will thank you.