Intellectual Property in a New Business - Explained
New Businesses Must Secure their Intellectual Property
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Table of ContentsHow to Secure Intellectual Property with Employees and Independent Contractors?Employee and Contractor MattersWhat is an At-Will Employment Offer Letter?Proprietary Information and Inventions AgreementIndependent Contractor Services AgreementIntellectual Property MattersWhat is Nondisclosure Agreement?Assignment of Intellectual Property from Founders to the Company
How to Secure Intellectual Property with Employees and Independent Contractors?
Startups must generally consider the process for contribution of IP to the startup and the protection of IP created by employees or within the business. Each of these procedural steps are discussed below.
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Employee and Contractor Matters
What is an At-Will Employment Offer Letter?
The at-will employment letter will outline the rights of employer and employee to end the employment relationship. The employment offer will generally include provisions stating that all IP created by the employee in the course of work belongs to the company.
- Note: State law differs with regard to the extent to which an employee is at-will.
Proprietary Information and Inventions Agreement
A proprietary information and invention agreement states that all IP created by the employee in the course of work belongs to the company.
Employees will often develop intellectual property in the course of employment. A detailed invention agreement will outline the ownership rights of the corporation with regard to employee inventions.
Employees will come into contact with proprietary information of the corporation, such as trade secrets or R&D not currently subject to intellectual property protection.
This agreement puts employees on notice of the restrictions from disclosure or use of this information outside of the business.
- Note: Often, founders will come into the firm by contributing valuable intellectual property. This is generally covered in the shareholder subscription agreement.
Independent Contractor Services Agreement
An Independent Contractor Agreement should contain provisions that establish the ownership rights of the Company with regard to intellectual property created by independent contractors in the course of a project.
- Note: As with employees, independent contractors may contribute to the development of intellectual property.
Intellectual Property Matters
What is Nondisclosure Agreement?
This puts employees, contractors, suppliers, etc., on notice regarding the prohibition against disclosure of certain trade secrets or intellectual property.
A non-disclosure agreement can be unilateral (only binds the employee) or mutual (binds the employee and the company).
Assignment of Intellectual Property from Founders to the Company
The Intellectual Property Assignment agreement transfers rights and ownership in intellectual property created by the founders to the Company.
It is common that the founders of a company create intellectual property prior to the formation of the company. As such, it is important to transfer all of those rights to the company. This done in the form of a blanket IP transfer agreement - though the agreement may specific identify some intellectual property being transferred.
This may be contained within the subscription agreement or as a standalone document.