Idaho and California startups should be aware of which types of contracts are essential to protect their intellectual property. There are three primary contracts startups should consider when creating, assigning, and protecting its intellectual property: Technology Assignment Agreements (TAA), Confidentiality and Invention Assignment Agreements (CIAA of CIIAA), and Non-Disclosure Agreements (NDAs).
In order to determine what type of contract to implement, startup founders need to first identify who created the IP and when they created it. IP ownership rights may be determined by who created it and in what capacity it was created. To be more precises, startup founders need to first identify if an individual founder created the IP prior to the formation of the company or if a founder created the IP after forming the startup’s legal entity.
Identifying if a person created the IP preformation or an individual working for the company created the IP post formation will dictate who holds ownership rights to the IP.
If a person, whether a founder, employee, or another party – created the IP preformation, then that person owns the IP until its assigned to the company. Likewise, if founders or employees created the IP while working on behalf of a prior legal entity, then the old legal entity will own the IP until its transferred to the current legal entity.
For example, often founders will create a legal entity in the state they reside – such as Idaho or California. However, once they consider raising venture capital, intuitional investors will require the startup to become a Delaware C corporation in order to issue preferred stock. The IP will have to be assigned from the old entity to the new entity.
The contract which assigns intellectual property from an individual or old legal entity to the current startup is called a “Technology Assignment Agreement” or TAA. The TAA transfers title from the creator of the IP to current legal entity. TAAs must be executed by the owner of the IP. If startups are unsure who owns the IP, best practices recommend all founders and previous legal entities execute TAAs assigning property to the startup.
Once all IP has been properly assigned to the startup, founders should consider implementing measures to ensure that any work product created by the startup’s employees will be considered the company’s IP. For future intellectual property created post formation, startups should require all its founders, employees, and consultants to sign Confidential Information and Invention Assignment Agreements (CIAAs or CIIAAs).
CIIAAs accomplish two objectives: 1) ensuring that employees are bound by confidentiality agreements which require them to keep information learned throughout their employment confidential; and 2) any work product, regardless of whether it qualifies as perfected or potential IP, is owned by the startup rather than the employee.
After ensuring all IP is owned by the startup and any future IP created by employees will be owned by the startup, growing companies should develop and implement Non-Disclosure Agreements (NDAs). NDAs ensure that information shared between two businesses will remain confidential. If a startup is considering entering into a potential business opportunity with either a vendor or a customer, an NDA will protect confidential information disclosed between the two companies. Unlike TAAs and CIIAAs, NDAs can get complex and often are negotiated between company legal counsel.
Our Idaho and California attorneys have experience with all three intellectual property contracts, and can provide outside counsel guidance to emerging growth companies considering implementing IP strategies.
