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Inadvertent transfer of IP Rights

Often, when creating a business, entrepreneurs seek support from friends and families to assist them in building content, creating logos, brainstorming on products & services, etc.

Although it does not initially sound like a bad idea, there could be unintended consequences like transferring all or a portion of your intellectual property rights to the person working in your business if the business owner does not do the following:

  1. Enter an Assignment of Rights Agreement.

  2. Enter a non-compete agreement

  3. Non-Disclosure agreement

  4. Keep a list of projects that a friend or relative is working on as a benefit to your business.

Let's break down the importance of each task.

Assignment of Rights: This agreement allows the business owner to retain the support of those who will be assisting the business owner in creating intellectual property assets in the business. However, for this agreement to be valid, there must be substantial compensation. The validity of this agreement and other legal parameters you'd need to implement will be based on the status of employment of the individual: employee vs. independent contractor.

Non-Compete agreement: A non-compete agreement can be included in your assignment of rights agreement as a separate clause. This agreement ensures that the individual will not take what they've learned in your business (or helped to create) to another "competing business" in the same industry and geographical location. You must be careful of your state's rules, because some states require that the non-competition is limited in time, scope, and geographical region to be valid.

Non-Disclosure Agreement: This agreement can stand on its own or be incorporated into another agreement. This agreement ensures that the individuals will not take your trade secrets, methodologies, and other intellectual property (or anything they learn about your customers) to a competing business or freely share with an unauthorized person.

Tracking Assignments/Creations: Most entrepreneurs don't do this enough. It's best practice to seek a full list of any creations that the individual has created outside of working for you so that there is a clear understanding of what intellectual property belongs to you (the business owner) and the individual. This will also help you to ensure that the individual is not using your business resources to build their own thing.

Don't make this mistake. Book your legal consultation or business audit HERE or call us at 708.234.7298


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