

Seeking advice: How to manage IP conflicts in a Startup? - gsk

I am teaming up with two other folks to create a software product. One of the person I am teaming up with runs a company already (legal consultancy). The product idea was originally his. His company will be the testing ground for the product and he will market it when we are ready to sell. He suggests that all the IP for the product we create be initially in the name of his existing company. When we are ready to sell, he says, he will transfer IP to the Startup. I am somewhat reluctant because I will be implementing the product (design, code) and would not be happy if I don't have equal stake from the beginning. Have you faced similar situations? How did you move forward?
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pg
He's saying, in effect, that he doesn't trust you. But he's then forcing you
to trust him. You might be able to save the situation by agreeing on some
definite milestone that you could reach in, say, a month, and which if you
reach it the IP goes to the company. Then your risk is capped at a month's
work, and his is decreased by a month's data about your performance.

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gsk
Thank you, pg. He is a pragmatic person. Hopefully, we should move forward
with an arrangement such as this.

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bdfh42
It is vital to get these things properly resolved "up front" and to not rely
upon promises of future action - it will all end in tears otherwise.

I would create a new legal entity to own the IP and divide the shares as seems
appropriate to the founders. The new entity can enter into a license agreement
(exclusive or otherwise) with the pre-existing business.

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gojomo
I would make sure Newco has an ironclad right to use, sell, relicense, etc.
all relevant IP from Oldco for a specific low fee or other immediate
consideration. Otherwise there's lots of risk that customers, investors,
acquirers, etc. could get spooked about unclear IP ownership at important
moments.

Also, there's a risk that your partner (or others with influence in _his_
company) holds you over a barrel at some key point. Is your partner a lawyer
giving legal advice for the whole Newco? If so, you may need to consult, even
if just informally, another equally seasoned professional who can consider
your interests and the Newco's interests without the mixed loyalties inherent
in your partner and his company.

(If I sound wary, it's because I've seen a business partnership between one
legally-savvy friend and another trusting friend degenerate into acrimony and
lawsuits.)

