Project Description
Master Classes are deep dives into venture creation by MIT ecosystem thought leaders. Browse all Master Classes Here.
This Masterclass is developed by Michael S. Divine, Esq., serial entrepreneur and MIT Sloan alumni. Michael is a practicing attorney at Arnold, Rodman & Kretchmer PA. Michael frequently gives workshops to MIT students to help them understand how to navigate the legal landscape.
Intellectual Property Ownership for Early Ventures
Intellectual property (“IP”) ownership is an exceedingly common source of problems for early ventures. Failing to handle ownership correctly from the beginning may lead to expensive band aids later, investability issues, litigation, and loss of legal rights. This article helps MIT-based ventures reduce those risks by outlining best practices for: (I) protecting ownership of intellectual property created while at the company; and (II) handling ownership of intellectual property created prior to joining the company.
Ownership of IP Created While at the Company
It is extremely important to clarify ownership of IP with regards to co-founders at the onset of your venture and with employees as part of the onboarding process. Generally, IP created by employees and co-founders should belong to the company. Two documents can help you ensure that happens: (1) the Intellectual Property / Invention Assignment and (2) the Confidentiality / Nondisclosure Agreement.
The Intellectual Property / Invention Assignment should confirm all IP created for the company belongs to the company. When drafting, focus on the scope of the covered IP. It should be broad enough to preserve company ownership of anything related to the company but narrow enough to exclude unrelated and/or academic projects. The agreement should also include a list of IP the employee or founder created prior to joining the company, i.e., excluded IP.
Confidentiality / Nondisclosure Agreements bar employees and founders from sharing important things outside of the company. Again, scope is key, and the definition of confidential materials should be appropriate for your goals, as should the duration of the restriction after an employee parts way with the company. These agreements are essential for preserving trade secret protections, which is covered in a separate article.
Intellectual Property / invention Assignments and Confidentiality / Nondisclosure Agreements often have different names and can also be combined into one document. Templates are available to MIT founders free of charge through the BU Law Clinic, Sandbox volunteer attorneys, and other resources.
Ownership of IP Created Prior to Joining the Company
If the company intends to use intellectual property developed by someone prior to joining the company, it must either purchase or license the IP. The most common arrangements for early stage companies – i.e., companies without much money – is to offer stock or a royalty in exchange for use of the invention. Regardless of the arrangement, it is important to consult with an attorney as there are many minefields.
There is an additional layer of complication with IP created through, or based on, research or work done at MIT. In such circumstances the university may have ownership rights. You must secure approval from the Technology Licensing Office before commercializing such IP.
© Michael S. Divine 2020