Startups and IP Ownership Issues

Scott Edward Walker

For many startups, intellectual property (IP) is their most valuable asset. Below are the three most common IP-related mistakes that startups make — the first of which I discuss in this brief video with Jason Calacanis. Any IP created or acquired by a founder (e.g.,

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Legal Checklist for Startups

Scott Edward Walker

Button-down IP ownership and assignment issues (see post here ). Don’t issue stock options unless a proper option plan is in place and a valuation has been done in compliance with Section 409A of the Internal Revenue Code (see post here ).

Trending Sources

When Does Zynga Become a Value Stock?

Agile VC

Governance/Control – Founder/CEO Mark Pincus has sold a good amount of his stock and owns <20% of shares outstanding, but now essentially has unilateral voting control of the company. Draw something… other than this painful chart.

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Nuts & Bolts of Intellectual Property for New Startups

Gust

Having covered all the bases to ensure that your corporate name is available, the domain name can be acquired, and the name doesn’t infringe any existing trademarks (as we discussed last week ), now is a good time to look at the categories of intellectual property (IP) that are relevant to most startups. Second in importance only to talented people, IP in all its forms is the key asset comprising most of the value of any tech startup.

Taking stock of the Dutch tech cluster: What The Netherlands needs to win the European startup scene

The Next Web

So let’s take stock: What do we offer? The company has a checkered past, but it was the first corporation in history to issue stock in exchange for capital. This legal-financial ingenuity lead to the creation of the world’s first stock exchange in 1602: the Amsterdam Stock Exchange.

Lockdown Lost-Founder IP

The Startup Lawyer

Thus, it’s wise to lock down your startup’s IP early to prevent the lost founder problem. How to Lock Down the IP. Consideration for services rendered should be given to all developers and consultants that work on anything IP-related at your startup. But since cash tends to be a scarce resource at startups, such consideration typically takes the form of restricted stock or stock options.

If I Launched a Startup

The Startup Lawyer

4) Type of Shares: Common Stock. (5) 10) Consideration for Founders Shares: Cash & IP. (11) 11) Handling of “Lost Founders&# : Lock Down the IP (then Wish Them Well). Here’s what I’d do in the beginning: Incorporation. (1) 1) Entity Choice: Corporation or Corporation. (2) 2) State of Incorporation: Delaware. (3) 3) Authorized Shares in Charter: 10,000,000 Shares. (4) 5) Par Value of Common: $0.0001. (6) 6) Initial Founders Issuance: 8,000,000 Shares. (7)

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Creating a Tech or Biotech: The Entrepreneur

Taffy Williams

Analyze trading histories of public biotech, pharma, or medical device company stocks. Think Ahead When You are Negotiating IP Rights A Few Great Links to Startup Articles ► April (11) Beyond Rumsfeld by (Stephen A. Startup Blog Steps to consider to start and grow a company.

Punch & Pie: How Should Co-Founders Divide Equity?

Agile VC

Additionally, you should put whatever agreement you reach to paper, even if you have not yet incorporated or had your legal counsel draw up the founder stock paperwork. You can then work with your law firm to formally draw up founder common stock paperwork either then or subsequently.

The 5 Biggest Legal Mistakes That Startups Make

Scott Edward Walker

Mistake #2 : not buttoning-down IP ownership issues (at 10:20). S corp vs. C corp – “qualified small business stock” . Mistake #2: Not Buttoning-Down IP Ownership Issues.

Why Lawsuits Are On the Rise at Startups and What To Do About It

Both Sides of the Table

He had a stock option vesting program and had vested a significant amount of his stock but not all. He’s suing the company to get all of his stock options even though he signed a vesting agreement. *. Lawsuits.

Christine: Mobile IM and IP: the Web Portal Killers

Christine.net

Main | How the Internet is Transforming Television Distribution » Mobile IM and IP: the Web Portal Killers Mobile presence, availability, and community were the central issues brought to Spring 2006 VON by Borough Turner of NMS Communications. Christine (.net)

Why founders should assign IP to their company

VC Ready Blog

This may not seem like a big deal when the value of unassigned IP is hard to determine, but it can become one if the IP turns out to be critical to the company’s business. A founder can use unassigned IP to extract a high price from the company (and his fellow founders) at a critical time, such as when the company is seeking financing and the potential investors insist ( as they will ) that the company obtain the IP rights.

Why founders should assign IP to their company

VC Ready Blog

This may not seem like a big deal when the value of unassigned IP is hard to determine, but it can become one if the IP turns out to be critical to the company’s business. A founder can use unassigned IP to extract a high price from the company (and his fellow founders) at a critical time, such as when the company is seeking financing and the potential investors insist ( as they will ) that the company obtain the IP rights.

Why founders should assign IP to their company

VC Ready Blog

This may not seem like a big deal when the value of unassigned IP is hard to determine, but it can become one if the IP turns out to be critical to the company’s business. A founder can use unassigned IP to extract a high price from the company (and his fellow founders) at a critical time, such as when the company is seeking financing and the potential investors insist ( as they will ) that the company obtain the IP rights.

The 5 Biggest Legal Mistakes That Startups Make

Scott Edward Walker

My law firm recently entered into a new partnership with This Week in Startups and sponsored their live fireside chat last month in San Francisco with authors Nick Bilton and Brad Stone.

Top Legal Mistakes Entrepreneurs Make

Deimar

Finally, completely understand who owns what as the relationship persists, especially in the case of intellectual property (IP). Not Protecting IP Ownership. Some entrepreneurs make the mistake of creating IP for their new venture while they are still employed by another company.

The Audacious Plan to Make Electricity as Easy as WiFi

Both Sides of the Table

It’s true the some VCs have started writing so many checks that they resemble stock pickers but the majority of us still have less than 10 board seats at any time and tend to go pretty deep so the result is that we care deeply about where we commit our time.

Some Career Advice for Aspiring Tech CEOs

Both Sides of the Table

Sadly most people I meet these days would rather pile $20k of savings to be seen as an angel in somebody else’s startup than they would to take a $40k pay haircut (the pre-tax equivalent to $20k) to work for the hottest startup they could and have both the stock options and the career experience and networking that comes from working with amazing peers at HotCo. There is often money to be made in finding places with under-valued IP.

Bad Notes on Venture Capital

Both Sides of the Table

If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. Less than you’ll probably grant your most junior employees in stock options? If you want to give them a 50% discount offer them $1 of common-stock warrants (no liquidation preference) for every $1 of stock they buy. This week.

Christine: Sprints ILEC-Hosted IP Centrex Deployment Strategy

Christine.net

« How the Big Guys Support VoIP Through Mesh Network Transitions | Main | Why Sling Media is Protecting Consumer Freedom » Sprints ILEC-Hosted IP Centrex Deployment Strategy How are ILECs and CLECs propping up their market share in traditional TDM voice services? Christine (.net)

When do I need to incorporate a company?

Startup Company Lawyer

Incorporating a company and issuing stock to the founders will help prevent misunderstandings among the founders about equity splits. Please keep in mind that even if a company is incorporated, founder stock purchase agreements with repurchase rights over unvested stock if founders leave are not included with the documents from typical online incorporation services. In addition, any IP created by the contractor can be assigned to the company instead of an individual founder.

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Burnham's Beat: Top 10 Best and Worst Internet Stocks of 2009

Burnham's Beat

Top 10 Best and Worst Software Stocks of 2009 » 01/01/2010. Top 10 Best and Worst Internet Stocks of 2009. After a dismal 2008 , Internet stocks crushed the overall market in 2009, with the sector up +89.9%   The average Internet stock gained +91.6% 2009 Top 10 Best Performing Internet Stocks There’s no clear theme to this year’s crop of winners, other than they were all big losers last year.  2008 Top 10 Worst Performing Internet Stocks.

Bad Notes on VC

Gust

If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. Less than you’ll probably grant your most junior employees in stock options? If you want to give them a 50% discount offer them $1 of common-stock warrants (no liquidation preference) for every $1 of stock they buy. Stock Option plans.

Most Common Early Start-up Mistakes

Both Sides of the Table

To the best of my knowledge US law allows you to work on your own resources and in your own hours and let you personally own your IP. In some countries outside the US (the UK for example) employers can specify in an employment contract that ANY IP you develop while you’re employed by that company is owned by them. Assuming normal valuations at fund raising rounds you’ll be down to 6-12% after you’ve created a stock-option pool and raised capital.

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Burnham's Beat: Top 10 Software Stocks of 2006

Burnham's Beat

« Top 10 Internet Stocks of 2006 | Main. | Top 10 Software Stocks of 2006. Software stocks may have only performed in-line with the rest of the market, but these stocks were at the top of the class. Other than that, its pretty much a grab bag of stocks but medical software stocks were particularly strong, as were open source and VOIP related stocks. January 5, 2007 in Software , Stocks | Permalink. Stocks. Software|Stocks|.

Setting Up a Security System For Your Small Business

Blogtrepreneur | Entrepreneur Blog

Security signage, whether displayed indoors or out, should be vandal-resistant, and made of metal or laminated heavy stock paper. While Internet protocol (IP) cameras are the choice of more and more business and store owners, closed circuit television (CCTV) cameras can also work for your purpose. IP cameras are digital and, since they are installed on a company’s IP network, can communicate with any computer or device that has access to the network.

How to Work with Lawyers at a Startup

Both Sides of the Table

Shame about not getting it in legal writing that you owned the original IP. Forget to get around to setting up that Employee Stock Option Plan and want to be able to give the early guys their options at a low strike price?

Do It Right The First Time, Part II: Visit the Doctor or House Call?

Gust

Take Board action to authorize everything done by the founders to date, appoint executive officers, authorize issuance of stock, approve forms of common agreements, authorize the opening of bank and brokerage accounts in the name of Newco, delegate authority to the appropriate people to manage those accounts, set the company’s fiscal year and place of business, and so forth. Make escrow arrangements for restricted stock (i.e.,

How Great, Operationally-Focused CFO’s Can Transform Your Business

Both Sides of the Table

Stock option top-ups after a few years are vital retention mechanisms. Legal threats from other IP holders? What I love about my job is getting to see teams of super-early-stage companies develop ideas that while raw have potential to make an impact on the market.

Should Startups Focus on Profitability or Not?

Both Sides of the Table

If you spent the 3 years perfecting some hugely differentiated technology IP that may also be different. I always remind this to journalists who ask me about public stocks. There are certain topics that even some of the best journalists can’t fully grok.

How to Manage a Crisis Before It Destroys Your Business

Inc Startups

This included hard assets, as well as the IP that we both created. From the beginning, we had a proper buy-sell agreement with stock certificates and necessary non-disparagement clauses with confidentiality included.

How To Survive A Startup

Blogtrepreneur | Entrepreneur Blog

One of the first lessons in any survival course is to sit down, take stock of your current situation and prioritise what needs to be done. No matter how big or small you are, it’s always important to consider protecting your IP and trademark that will provide a secure shelter for the future of your business. For a certain breed of individual, there’s always been something quite alluring about the thought of being stranded on a desert island.

LawPivot: Crowdsourced, Confidential Legal Advice for Startups

ReadWriteStart

Mandal was the lead of Apple's mergers and acquisitions team, and Gupta was an IP attorney at a several national firms.

How Investors Can Bring More Than Just Money To The Table

YoungUpstarts

Investing in startups is a lot more than just buying “stock” in a company. However, if a company is not going so well is there any way you can help engineer an acquihire or potentially sell off some of the company’s IP on the way out. by Paul Towers, founder & CEO of Task Pigeon.

Eight Silly Data Things Marketing People Believe That Get Them Fired.

Occam's Razor

When I search for "avinash" on Google I might rank #1 in the search results because I'm logged into my Google account, the engine has my search history, my computer IP address, it also has searches by others in my vicinity, local stories right now, and so many other signals.

At least half of all Bitcoin transactions are for online gambling

Lightspeed Venture Partners

Today it checks IP addresses to screen out residents of the US and other jurisdiction where online gambling is illegal, but that has not always been the case.

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Startup Valuation: How Much Is Your Company Worth?

Seed Stage Capital

This analogy carries through to due diligence: fixing a $20 rattling door handle preemptively removes that obstacle to a sale, just as cleaning up your startup’s capitalization table and IP assignment rights in advance will ensure the funding process goes that much smoother.

Why Content Personalization Is Not Web Personalization (and What to Do About It)

ConversionXL

For instance, my IP address would show that I’m from a high-tech company in Boston, so they could offer me relevant case studies from other respected high-tech firms in Boston. Low in stock alerts.

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Startup Resources

www.vccafe.com

IP Location Tools. British Library Business & IP Centre : Funded by the London Development Agency, the British Library supports inventors, small businesses and entrepreneurs from that first spark of inspiration to successfully launching and developing a business. About VC Cafe.