Tag Archives: angel investors

WSJ – Five Intellectual Property Mistakes Startups Should Avoid

WSJ – Five Intellectual Property Mistakes Startups Should Avoid

I was pleased to contribute this guest column to The Wall Street Journal’s Small Business section on May 10, 2012. This excerpt contains some added hyperlinks; a link to the full article at WSJ.com appears below after the break.  Thanks to editor Vanessa O’Connell.  

 

 

5 ‘IP’ Mistakes Start-ups Should Avoid

By ANTONE JOHNSON

Venture capitalists, angel investors and start-up lawyers these days tend to be obsessed with “intellectual property,” or IP.

And for good reason: In the information economy, the core assets of a new venture are likely to be talented people, the IP they create, and little else.

To maximize future value, founders should try to lay a solid IP foundation even before a new start-up is incorporated. Here are five common mistakes to avoid:

1. “Contamination.”

Perhaps the single greatest source of IP anxiety in Silicon Valley stems from the fact that engineers and executives tend to build on what they know best when starting a new venture.

IP Genealogy
IP ownership gets complicated thanks to the natural fluidity of startups as business enterprises: A developer may start out with a side project, bring some of that knowledge to bear on a consulting engagement, and ultimately found or join a related startup.

If a former or “day job” employer can lay any claim to the IP upon which a new start-up is built, that claim, however tenuous, injects risk into the venture. And that risk grows in magnitude over time proportionate to the success of the business.

A classic example is the so-called “Winklevoss Twins problem” made notorious by the movie “The Social Network.” Some degree of ambiguity regarding IP ownership may be inevitable, but if a sliver of equity must be granted to settle the dispute, it makes quite a difference if the “sliver” is in a company worth $1 million or $100 billion. In Facebook’s case, the settlement netted the Winklevoss brothers stock worth many millions of dollars.

Of course, such disputes are rarely litigated except when the new start-up turns out to be a big success, in which case everyone scrambles for a piece of it.

2. Mixing up what came from where.

IP rights ordinarily belong to the individual who creates the work unless the creation occurs as part of the person’s job, a so-called “work for hire.”

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The Great Crowdfunding Train Wreck of 2013

The Great Crowdfunding Train Wreck of 2013

What sort of business operators can we predict will be disproportionately drawn to using a funding mechanism that is designed from the ground up to leverage a large number of middle-class individual investors with minimal bargaining power under circumstances involving minimal disclosure, toothless corporate governance and little-to-no liability to shareholders?Continue Reading

Convertible Note Financing 101 for Startups

Convertible Note Financing 101 for Startups

A key advisory role of startup lawyers in my opinion is to level the playing field by bringing our own perspectives to bear, having gone through the twists and turns with many clients over the years. Knowledge is power.Continue Reading

Web 2.0 Summit 2010 – Thought Leaders Ponder the “Battelle” for the Network Economy

Web 2.0 Summit 2010 – Thought Leaders Ponder the “Battelle” for the Network Economy

This week, industry leaders, pundits, journalists and assorted hangers-on are gathering in San Francisco for the annual Web 2.0 Summit, one of the online industry’s most influential events. John Battelle and Tim O’Reilly moderate conversations with a long list of Web luminaries, including Eric Schmidt, Carol Bartz, Marc Benioff, Reed Hastings, Peter Chernin, Tony Hsieh, Evan Williams, Mark Zuckerberg, Mark Pincus, Ron Conway, John Doerr, and Fred Wilson.Continue Reading

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