Entrepreneurs in California may be aware of some of that state’s laws concerning intellectual property. California is one of the few states that expressly prohibits employers from requiring an employee to assign their inventions to their employer if the invention was developed on the employee’s own time and with their own resources. State laws throughout the United States vary on some aspects of ownership of intellectual property, such as adequate consideration for assignment of an invention.
Those who invest in enterprises that derive profits from intellectual property do so for potential rewards and must assess risks that could diminish those rewards. Just as the ownership of real property must be documented before it can be exchanged, the ownership of intellectual property must be clear for investors. They also want to know whether an enterprise is obligated to pay compensation for intellectual property. These issues can become difficult to assess if intellectual property was developed before the enterprise was formed, developed by employees before they joined the enterprise or was developed by contractors.
Investors can get a clear assessment of the risks involved in an enterprise if assignments for inventions or other ideas are adequately detailed and signed by all interested parties. Inadequate documentation often results from procrastination. For example, a founder of an enterprise may have moved on but never got around to assigning an invention before he left. Assumptions are sometimes made about contractors or employees assigning their inventions.
Patents and trademarks can be the lifeblood of an organization. Entrepreneurs who seek investors may wish to consult with an intellectual property attorney to ensure that ownership rights are properly documented.
Source: Techli, “Reality Check: Does Your Company Own The Intellectual Property You Think It Does?“, December 24, 2013