Massive Intellectual Property Mistakes That Can Derail A Startup

Posted on Oct 11 2016 - 7:57pm by Editorial Staff


Incredibly, one in three startups encounters IP issues during their first 24 months. And when they do, investors and other stakeholders can run a mile. The problem is that startups are worth little or nothing without the right intellectual property. The moment there’s a problem, the rug is pulled out from under the business, and it starts sinking fast.

These IP issues don’t just come out of nowhere. They’re often generated by the founders themselves. Here are some of the most common mistakes that founders make.

The Founders Are Employed By Another Company When They Start

Recently, there were some ugly scenes between Silicon Valley company Hooli, and its spinoff startup Pied Piper. Pied Piper developed a product which they believed was better than the product currently offered by Hooli. So the founders, who still worked at the company, decided to begin their side venture. After some time, they developed the product and took it to the patent office. Hooli challenged the patent. The parent company said that the founders had used its equipment and software to develop their new product. And, as a result, the true rights to the invention and the patent was Hooli’s.

Usually, companies allow their employees to pursue their side ventures so long as they don’t compete with the firm’s primary product. Pied Piper did, however, compete with Hooli’s primary product. And so Hooli sued. Thus, it’s important that employees carefully read the terms of their contracts. Working away on an idea in secret might sound like a very good idea. But if it’s on the company’s time, you could be in for a nasty surprise.

The Founders Don’t Bother With Proper Contracts And Agreements

Founders of startups always want to do stuff on the cheap. Thus, they often neglect to get a professional to write their contracts and agreements. This might save a couple of thousand dollars in the short run. But it can be devastating in the long term.

Take the example of a founder who downloaded a contract template from the internet. The founder didn’t realize that the contract allowed his customers to “freely” use his inventions. When his customer’s lawyers took a look at the agreement, they noticed the clause giving customers free reign. As a result, he lost millions of dollars in potential revenue.

The advice right now is to get somebody to manage the patenting process on your behalf. There has been a spate of World Patent Marketing complaints. But the evidence suggests that firms like this are still offering good customer service. Founders need to make sure that they consult an expert who knows how to protect an idea so it can become a product.

The Founders Break Up Without A Prenuptial

When founders first get started with a business, they don’t believe that anything will go wrong. But over time, divisions emerge and some companies can split. The problem is that most founders never write down an agreement before starting their enterprise. This can be a problem if one of the founders holds all of the intellectual assets. There needs to be a clause that says that the IP is the property of the company and not either of the founders.

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Editorial Staff

Editorial Staff at I2Mag is a team of subject experts led by Karan Chopra.