Startup Law 101 Series – Key Legal Rules For Who Owns the IP Relating to Your Startup

As a founder, you need to understand work-for-hire. Why? Because it determines who owns key IP in your startup.

Copyright laws protect creative works, including IP that you develop. When you develop IP for others, the work-for-hire idea affects who owns it.

How does it work?

Here are some guidelines:

1. You develop IP for your startup as its employee — the IP belongs to your employer. Pretty basic. This is a classic work for hire.

There are gray areas but, if you create IP while doing employment duties for which you are paid, there is no ambiguity. All IP relating to such work automatically belongs to your employer, whether or not you signed any agreement relating to it.

2. You develop IP for your startup as a consultant and are paid for that work, but have no agreement in place relating to the IP rights — it might surprise you to learn that the IP here would belong to you and not to your startup.

Why? Because the default rule under copyright is that the creator of a work owns the copyright unless (a) it is done as a work for hire or (b) it is expressly assigned under a contract to the other party.

Contractor work is a work for hire only if there is a contract identifying it as such and, in addition, the work falls within certain specified categories of types of work that qualify as works made for hire.

No contract, no work for hire.

No contract, no assignment.

Thus, with no contract specifying that it is a work for hire and with no assignment, the default rule kicks in to provide that you own the copyright to the IP you created even if you were paid for your work.

3. You develop IP for your startup as a contractor and are paid and have a work-for-hire agreement that contains no express assignment provisions in it — again, perhaps surprisingly, you still would own that IP if it involved a software development effort.

Why? Because software development does not fall within the specified categories that would allow it to qualify as a work made for hire in the contractor situation.

Thus, to ensure that IP rights to software are transferred from the contractor to the startup, you will routinely find language in work-for-hire agreements that says, in effect, “this is a work made for hire but, just in case it isn’t, the contractor agrees to assign all IP rights anyway.”

4. Which brings us logically to our last case, that of the contractor who develops IP for a startup, gets paid, and does the work under a work-for-hire agreement that characterizes the work as one made for hire and that assigns all IP rights to the startup — in that case, the startup owns the IP rights free and clear and you retain no rights to the IP.

How might these guidelines play out in practice for you as a founder?

We can assume that you would want your startup to own all its IP. What are potential problem situations by which the startup could face claims from founders or others that parts of the company IP belong to them separately, with at best only a license to use it extending to the company?

Let’s look at some cases to see how the guidelines might apply when we strictly consider work-for-hire (for your specific case, see a good business lawyer.

You and your buddies are developing IP for a startup you hope to launch. There is no entity. Ergo, there is no employment relationship and there is no contract between you and any entity (nor, typically, between you and any other person) relating to your development work.

Quick quiz: who owns the IP rights to your work under work-for-hire principles?

Answer: you do.

No employment. No work-for-hire agreement. No assignment. Hence, the default rule applies and the person who created the work keeps all rights to it.

Let’s assume your buddies paid you for your work in the case just cited.

Who owns the IP now under work-for-hire principles?

You would still own it.

The mere fact of payment changes nothing. For the rights to transfer, you need a work made for hire or an IP assignment. Without an agreement providing for either of these, the ownership rights stay put with you as the developer – even if you got paid.

Now let’s take the same case and assume you are a developer working offshore, say in India. You have a software development agreement with a startup in the U.S. specifying that it is governed by U.S. law. That agreement has a statement of work, defines deliverables, a development timetable, and a price. You comply with all this and deliver the work to the startup. The agreement is silent on all other points.

Now who owns the IP under work-for-hire principles?

Yes, that’s right, you, the offshore developer, own it. Payment or no payment, if it is not done as a work for hire, and if the IP rights are not expressly assigned, the startup gets only an implied use license and not ownership of the IP.

Let’s shift a little.

You and your co-founders form your startup. You assign all IP rights into the company. Then, in the spirit of keeping things loose, you continue to work on the IP development after company formation without contracts of any kind and without setting up an employment relationship between the company and its co-founders.

Who owns the IP rights to the post-formation development work?

Yes, the founders do, individually that is. So if one of you bolts, the company may have a problem with its IP or may need to do a workaround.

Why so? No employment relationship. No work-for-hire agreement. No assignment. Default rule kicks in and the rest follows.

Let’s look at one last case, the one where your startup does a work-for-hire development project for a customer.

Your startup has core IP that it uses in all its consulting projects. It contracts with Big Company X to do some custom development work. It signs the customer’s standard form. That form says, “this is a work made for hire and, by the way, if it isn’t, you agree to assign all IP rights relating to the deliverables to the customer.”

Anything wrong with that?

Yes, there is plenty wrong, at least if you don’t want to compromise your startup’s rights to its core IP.

In such cases, the boilerplate language (which seeks to assign to the customer who is paying for it any IP that does not otherwise qualify as a work-for-hire) may have an unintended consequence: it potentially sweeps in, along with what is intended by the parties, the core IP that your startup uses for all its projects.

Oops.

As a founder, you need to be alert to the effect of such language. A simple carve-out solves the problem, assuming you catch it up front.

That wraps up our quick tour of some key legal rules for understanding who owns the IP relating to your startup. There are some obvious lessons here: if you as a founding team are drifting along without your IP rights buttoned down, time to get that situation fixed. Don’t be slack on this. You might have to pay a high price if something goes wrong.

By the way, in all cases, in order for the contract to stick, a work-for-hire agreement or an express assignment needs to be accompanied by some payment of consideration to the person doing the work. This can be cash or stock or anything else of value. Don’t neglect this vital piece.

A final caution: General guidelines will help you spot problem areas but you will need a good business lawyer to help you evaluate them. Gray areas and exceptions to the rules abound. When it comes to your IP, work with a good lawyer to do things right.

Project Planning for Lawyers – Upping Your Game in a Chaotic World

In nearly two decades of practicing law, I have tried numerous systems to manage projects, stay on top of tasks, and delegate work to team members. The following is the simplest, most effective method I have discovered. For those of you who are Getting Things Done by David Allen enthusiasts, you will recognize his inspiration.

Master Task List

Writing all your tasks down to get them out of your head and stored in a reliable place is incredibly liberating. I have found that inputting all those tasks into a single list is a valuable habit to engage. Of course, half the battle is getting everything into a single list so you can decide what is the highest priority to tackle, which tasks you can delegate, and other ones that can be scheduled for a later date. I have also found that if you give in to the temptation to spread the list across multiple systems or people you are inviting anxiety about the list. So put them all in one place. Fight that temptation.

The list can be maintained in a simple spreadsheet or specialized software like Basecamp. We use proprietary project and task management software that integrates with our client and CRM systems. Because most of us work in a team environment, it is usually a best practice to designate an admin to maintain the list.

In addition to the name of the task, owner, and deadline, we have found tracking the following information to be helpful: task assignor, project manager, priority, client and matter, and practice area of the project. We also distinguish between deadlines (externally imposed obligations like a USPTO filing deadline or a court ordered date on a scheduling order) from a “next action,” which is what we call a task we wish to complete to move a project forward. Requiring the task assignor to include the deliverable requested (80% draft memo, key cases with passages highlighted, etc.) is also a valuable practice as it improves team communication.

I cannot emphasize enough how important it is to keep all tasks in a single list maintained by a reliable person or system.

Project List

Like a Master Task List, the Project List keeps track of all the various projects you either manage or have delegated. It also serves as a good reminder during the Weekly Review, and helps brainstorms next steps. For purposes of this system, I define a “project” to be anything requiring two or more next actions. A single task would be included in the Master Task List.

We track projects by client, matter, project manager, project team (people assigned to the project), and practice area. This allows for sorting and reporting in a variety of helpful manners. For example, I sort the overall Project List by practice area (litigation, trademarks, e-commerce) as well as by project manager. It is also important to distinguish between the projects you own as project manager, those you are assigned, and those you have delegated to others as that affects review and work flow.

Weekly Review

The Master Task List and Project List both should be updated dynamically throughout the week. I have found a few practices that dramatically increase efficiency. The first step is to periodically clear your head of all the tasks and things floating around. This includes emails, client requests, correspondence, etc. Basically, anything that needs attention and resides in your head needs to get out of your head and into the Master Task List. A daily clearing is helpful but not always practical. So I set aside time mid-week and as part of the Weekly Review. Second, I dedicate an hour or two per week to go over the Master Task List and Project List to ensure everything is updated. I have found doing this outside the office or on weekends is most effective because it requires uninterrupted focus. Finally, a weekly or bi-weekly project review session with the team is highly efficient in keeping everyone on the same page. For this session, we sort the Master Task List by project and we also separately review a list of tasks with upcoming due dates in chronological order.

Daily Focus

This last step is bonus points for any adoptee, and will really accelerate your performance. Like Texas Hold ‘Em, this step is simple to explain, but takes seemingly a lifetime to master. Based on the three above tools, you spend five minutes each morning planning the three most important, high-leverage actions to get done that day. Write them down to up your commitment, then create space in your day to give those three actions your highest priority. If you commit to that focus, you will achieve amazing results and start each day with a series of wins. The problem you will face is that the world (clients, opposing counsel, staff, even your own internal thoughts) does not share those priorities. This struggle largely controls your personal effectiveness, and is truly where rubber meets the road.

For more information and articles regarding law firm culture, please see our Culture Counts blog.

Erb’s Palsy (Brachial Palsy)

No amount of joy can match what you feel the day you give birth to a child. At such a time, you are simply overflowing with happiness and excitement. Unfortunately, however, these festive sentiments can change in an instant if you discover that your seemingly healthy child was actually born with a devastating birth injury. Even more shocking is the fact that a number of times, birth injuries can be easily prevented with the deliverance of adequate medical attention.

One of the more common birth injuries that newborns can suffer is a condition known as Erb’s Palsy. It is caused by injury to the brachial plexus nerves, which lie in the shoulder and transmit neurological signals down the arm and even into the hand and fingers. If your child has suffered Erb’s palsy as the result of a medical provider’s negligence, then you may have the right to recover damages for your family’s suffering. 

Causes

Typically, Erb’s palsy arises during difficult birth situations. In these cases, the acting physician will need to apply certain birthing techniques that can be quite damaging if not done correctly. Cases with an increased chance of Erb’s palsy development include:

Abnormally large fetal head

Abnormally large baby

Breeched birth

Shoulder dystocia

Though doctors today should have the knowledge, skills, and experience to handle these situations, sometimes, they fall short of expectations. When this happens, the child being delivered is at risk of suffering serious injuries – for example, Erb’s palsy.

Symptoms

You should be able to tell shortly (or immediately) after birth that your child has suffered damage to his or her brachial plexus. The symptoms of such an injury include the following:

Lack of gripping abilities on affected side

Inability to spontaneously move affected arm and hand

No Moro reflex in the affected arm

Arm abnormally flexed and held against the body involuntarily

If your child has been a victim of this terrible condition, you should know that there are treatment options available. In most situations, affected children experience full recoveries. Therapy, including muscle exercises and massages, is typically prescribed. In more serious cases, however, surgery may be necessary to restore the area.

Contact Us

If your child has suffered from Erb’s Palsy as the result of a medical provider’s negligence, then you may have the right to recover compensation from the responsible party. The New Jersey medical malpractice lawyers of Levinson Axelrod can help you make an effective claim for damages. To learn more, visit http://www.medicalmalpracticenj.com/ today.