Idea Protection

When starting any new business enterprise it is important that the owner, or owners, each make a thorough audit of any existing legal obligations each has that could impact the new business.

In many circumstances individuals starting a new business enterprise may be currently employed elsewhere, or have been previously employed elsewhere. They may also have current or prior ownership interests in other business enterprises. There is at least a possibility that in connection with such other employment or business ownership an individual entered into certain legal obligations in relation to their employer or other business enterprise. Those legal obligations, if any, can have a potentially significant impact on a new business enterprise the individual becomes involved with.

For example, it is not uncommon for a business to require its owners and employees to sign contracts that require them to safeguard any company confidential information, and to assign over to the company any intellectual property they develop while an employee of the company that relates to their employment. If a founder of a contemplated new business has entered into such a contract with their current or prior employer, this is something that all of the founder and any other co-founders need to be aware of consider before moving forward. Failure to do so could potentially create claims from the founder’s prior employer of ownership in the intellectual property of the new company, and/or other allegations that could lead to a costly legal dispute.

So, to avoid legal trouble, before commencing with any significant development activity on a new business enterprise, conduct a self-audit of any legal obligations you may have that could possibly impact or affect your ability to contribute or participate in the new business enterprise. And make sure that anyone you are working with also does the same.

Any agreement between founders of a new business enterprise should expressly require each founder to represent that they have made the necessary investigation concerning any conflicting legal obligations, and appropriately warrant that there are none.