No small or medium-sized business owner ever got up and said, “Today is the day that I am going to identify my risks and do an inventory of my intellectual property to maximize my value.” It takes an event – a visit to a lawyer, a plan to fund retirement by selling your business, or at worse, a cease and desist letter.
However, more than once in your lifetime, you should review whether your business is at risk. In fact, it should be a priority as you start and then once a year.
Get Legal
Starting a business is exciting, but do not skip over the setup steps like Richard from HBO’s Silicon Vallley. Don’t be standing in front of a bank teller not being able to cash a check because you do not have a LLC or corporation plus an employee identification number (EIN). Or worse, don’t have your personal assets at risk because you do not have a business entity.
Those overwhelming accounting tasks like keeping good books and records plus paying taxes and securing insurance may seem like something you can put off until you grow, but they are essential tasks to protect your business. Don’t procrastinate on these administrative tasks, as you are risking your entire company if you do not comply.
Get People
One of the biggest mistakes that you can make when starting a business with co-founders is not having an agreement in writing that addresses what happens if someone leaves.
Even if you are the only founder, there will come a time when you need to hire some people to help. They may not be employees, but you must have everything in writing. Never have a contractor do work on a handshake. Also the “employees versus contractors†decision is not a choice. Seek professional advice to classify workers.
Get Offering | Grow
Every business will at least have a name for the operation and maybe names for products or services. Before you launch do a google search and look on the USPTO database for all the names you may wish to use. Rebranding can be so expensive! Remember that if you have the domain name, it does not mean you have the rights to use it.
Outside creators not only need to have contracts however those agreements must contain clauses that transfer all the ownership of the creations – i.e. blogs, pictures, videos, or product like software – upon payment. Simply paying does not guarantee ownership.
Capturing innovation to leverage its value requires a process to identify all IP and that is not just patents. Trademarks and copyright materials have valuable plus trade secrets like Coke’s recipe is worth millions.
With new Bring your Own Device (BYOD) situations at many smaller companies, the risk of trade secrets loss escalates. Setting up a regular review of all your new brand work, creations, inventions and anything that is sold or used internally – seems like a tall order but the value of your business depends upon this routine.
Don’t Get Sued
Just because there is no copyright symbol does not mean that it’s yours to use. Think of it as bicycle without a lock — you would not take the bicycle just because it is not secured. If you did not create the picture or code, then look to find who did and what the permissions state as far as use. You can then avoid any cease and desist letters and expensive fines.
Taking it a step further – if you take a picture of a celebrity and try to use it for promotional purposes, be very careful. Seek professional help re publicity rights.
Overall policies and training for employees and contractors alike are important for not only avoiding lawsuits but for identifying and protecting your intellectual property.
Sell or Retire
Ownership is the big risk. If you’re moonlighting from your day job without first reading your employment contract, you might find out that your employer owns what you’ve created, even if your off time. Look to Season 2 of Silicon Valley – accusing a character of being a co-Founder while working for a large company and later saying that the real founder used their equipment to test his entrepreneurial software.
You cannot sell what you do not own. And it’s not just the tangible assets like inventory, computers, buildings, or desks but also your IP. Again you must look to co-founder and contractor agreements to ensure that ideas and secret
Bonus Takeaways
- 100% of all types of companies have IP;
- Ignorance is not a Defense – you need to understand the laws and rules; and
- Intangibles are at least 80% of a company’s value
You can download a checklist with some questions here with the slides from my presentation.
Please check out the full free business risk assessment and reduce your risk. Upgrade to our full ID your IP to capture all your intangibles – to maximize your business’ value.
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