Part 1 (of 3) deals with IP legal landmines that caused pretty severe problems for scaleups--this presentation is from the perspective of a scaleup team, i.e., it is not dense legalese.

1. OOPS! I JUST LOST
A BILLION EUROS.
PART 1
GLOBALCAPITAL
GLOBALCAPLAW.COM
2Q18
True stories of legal landmines when
companies goof on IP agreements
JAMES C. ROBERTS III

2. GlobalCapital
I AM NOT GIVING LEGAL ADVICE
While these stories are generalized versions of
true events and they lead to preventive
actions, none of it is legal advice. There are
plenty of exceptions, which we’ll ignore.

3. GlobalCapital
DISRUPTIVE TECH COUNSEL
GLOBALCAPITAL advises on strategic and
legal issues for clients who
• Create
• Finance
• Distribute
• Use
Disruptive Tech
globalcaplaw.com

4. GlobalCapital
THE MORAL OF THESE STORIES?
• Startup/Scaleup teams and their investors
can move too fast
• They undervalue legal costs at the outset

5. Part 1: Your
IP Slipping
Away

6. The 1st Story: Can Two Words Cost Billions?*

7. GlobalCapital
THE BARE FACTS
1. New (genetic) researcher signs an assignment agreement
with university
2. With their permission, works with VC-funded genetic
research company
3. Signs their NDA

8. GlobalCapital
THE CONSEQUENCES
1. University loses patent rights . . .
2. And (probably) more than $1,000,000,000*
*Other factors involved in loss

9. GlobalCapital
THE CRITICAL LANGUAGE
The Recipient agrees to assign to the
Company all right, title, and interest in
and to any and all [Intellectual
Property]. . .

10. GlobalCapital
WHAT’S WRONG
A future promise: no assignment yet.
The Recipient agrees to assign

11. GlobalCapital
“ACCEPTABLE”
Developer hereby assigns to the Company, for
good and valuable consideration, all right, title,
and interest,
Future promise v. statement of action

12. GlobalCapital
SEE STANFORD V. ROCHE

13. The 2nd Story:
Oops…We
never
owned
the IP.

14. GlobalCapital
2ND STORY BARE FACTS
1. “We Need You to Get to Work”
2. IC starts working without an IC agreement*
*Usually includes assignment & NDA provisions

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THE CONSEQUENCES
You don’t own the IP until she signs one
She can disclose the confidential information
You have violated reps & warranties
You might not own it even after she signs it

16. GlobalCapital
OK, HERE’S A “WORK-FOR-HIRE” AGREEMENT
Does not cover any work already started
Is she an individual in California?
You can go to jail and pay big fines
And you have still violated reps & warranties

17. STORY #3
THE IC SIGNED THE CONTRACT

18. GlobalCapital
3RD STORY BARE FACTS
1. IC signs the IC agreement. All OK.
*Usually includes assignment & NDA provisions

19. GlobalCapital
ANYONE CHECK HIS PREVIOUS WORK?
Does the IC own his tools?
• His tools are owned by a former client
• He used Open Source Software as if it were
in the public domain
Do you even own the IP that is the basis for further work?

20. 3RD STORIES:
THINGS WE FIND ON
THE WEB

21. GlobalCapital
IP IS A BUNDLE OF RIGHTS:
E.G., MUSIC
Do you have the mechanical rights?
The publishing rights?
The synch rights?
Did you register with the authorities?

22. IT’S ON THE WEB.
SO IT’S IN THE PUBLIC DOMAIN.
AND CAN BE USED.

23. GlobalCapital
“THE EIFFEL TOWER LIGHTSHOW ON GOOGLE”
Availability does not make (certain) content part of
the public domain.
• Coca-Cola’s on the Web. Caterpillar. Prada.
• The Eiffel Tower Lightshow is copyrighted.

24. AWESOME!! OPEN SOURCE SOFTWARE!

25. GlobalCapital
OPEN SOURCE SOFTWARE
IS NOT IN THE PUBLIC DOMAIN*
Everyone uses Open Source Software.
• Everyone has to comply with the license agreement.
*It could be, but not by its nature. Someone might have screwed up.

26. ENOUGH!!
WHAT CAN WE DO?

27. GlobalCapital
WHY SHOULD YOU CARE?
Any IP problems and investors might go elsewhere
• They don’t want and don’t need the headaches.
• Who wants a lawsuit?
• Reputational risk.

28. GlobalCapital
PRINCIPLE #1:
“PHYSICAL” CREATION = OWNERSHIP
The person who physically creates it owns it . . .*
*with a few exceptions
Known as “reduces it to a physical medium.”

29. GlobalCapital
BASIC PRINCIPLE #2:
THE COMPANY SHOULD OWN* ALL NEEDED IP
• Provides competitive advantage.
• Prevents departing team members from competing.
• VCs demand it.
*Own can also mean a license to it (e.g., Open Source)

30. GlobalCapital
IP IN WHAT YOU BUILD
Underlying platform
Programming
Design & Look-and-feel (third-party content, too)
Features & functionality
Tools to make more

31. GlobalCapital
ASSIGNMENT AGREEMENTS
FOR (ALMOST) EVERYONE.
• Each person owns what he/she creates until rights
are assigned IN WRITING.
• Assignment must be “current.” Developer hereby
assigns . . .
• Work-for-Hire agreements=assignment.

32. GlobalCapital
SO WHAT?
1. Always use the present tense with IP
assignments
2. Read every NDA.
• Does it include an assignment clause itself or an
ownership claim?

33. GlobalCapital
TWO AGREEMENTS YOU NEED
1. Assignment Agreements: To transfer to the company
whatever they make for you.
2. License Agreements:
• “Inbound” To use what you need
• “Outbound”
• To let users use what they need (e.g., a TOU)
• For partners or distribution/syndication

34. GlobalCapital
HAVING THE AGREEMENTS SIGNED IS NOT JUST
CHECKING A BOX
• Take the process seriously
• Make it clear to the ICs that they have to be clear
about Open Source and on prior obligations
• It’s not just their rep & warranty
• Timing is important: before work begins.

35. GlobalCapital
THINK ABOUT DUE DILIGENCE
• Take the process seriously
• Do you need to look at ICs previous engagements?
• Timing is important: before work begins.

36. GlobalCapital
REMEMBER: THIS IS NOT LEGAL ADVICE.
“Your mileage may vary.”
globalcaplaw.com

37. GlobalCapital
THANK YOU.
jcr@globalcaplaw.com
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