Often when you start a new business, you’re focused on building your audience and product, on making, creating and selling. And sometimes, in your rush, the paperwork can get a little bit lost. Unfortunately, this can make life a lot more difficult in a few years time when you want to sell your company, license the product for someone else to make, or when trying to get investment.
Finding out what you’ve built and created isn’t actually owned by your company, but by a contractor or disgruntled former co-founder can slow things down or destroy deals altogether. This is especially important in relation to copyright, which relies on proving chain of title to prove ownership, but can become an issue with registering IP rights too.
So, how do you get things right from the beginning?
Get it in writing #1: Co-founders
Before you get any employees, most of the intellectual property created for the business (copyright in code and designs, trademarks, pictures etc) will be made by you, your co-founders or contractors. You might assume that the company owns it, but copyright can only be assigned in writing. So, make sure your shareholders agreement has a clause specifying that work created for the company is owned by the company. A great starting shareholders agreement for New Zealand companies can be found here.
Get it in writing #2: Contractors
Any agreements with contractors such as software developers, designers, photographers includes a clause that specifies that the company owns the IP. I have seen many, many agreements where a software development company will make you a specific product for a specific use, but have a clause saying they “own all the IP”. This is supposed to help them re-use code, but it will make it difficult to license your software, build on it, redesign it, sell it, or patent it. Or, do pretty much anything you might want to do with it.
Be very wary of these clauses and discuss with the parties involved. They can often be changed to something better and more specific for your situation.
Get it in writing #3: Free stuff
It can be very awkward to have a “who owns what?” discussion with someone who has offered to make you a brand / logo / website or picture for free. However, trying to chase them down in 4 years to make sure you can use the image they created on a whole bunch of new products might be impossible. Are you willing to take the risk that you might need to rebrand if they decide you can’t use it? Or that they force you to withdraw a product after launch?
Get it in writing #4: Employees
When you finally have employees, make sure that their contracts include a clause that any IP created by them in relation to their work with the company is owned by the company. The general rule in New Zealand is that employers own any intellectual property created by their employees in the course of their work.
Some employees might have side projects or other things they are involved in, so having a very descriptive job description explaining what they do, what they might do and how your product ties in is important when determining which IP is owned by the company. Review this regularly as your business grows and their role changes. Expert advice for this is important, a good HR company should be able to help.
Finally: Once you have agreements from everyone that creates something for you, keep them in a safe place!
Some useful links:
The NZ Intellectual Property Office on copyright and assignments