Question
I am negotiating a deal with a friend who is CEO of a small software company about a software system I've created. She is very trustworthy in my eyes and we've known each other for a while.
We have so far agreed on a company with a 51%/49% ownership split in my favor. Her own company will give the new business an initial 16 months contract paying four figures/month. They will also provide customer support when it becomes necessary, some sales people and UX dev guys.
I've written the technology myself but we developed the idea and strategy to turn it into an SaaS business model together. So I contributed the tech but she more or less contributed the idea that turns my tech into a business.
My question is now how to integrate the IP into the business. Should it be in my name? My friend says the IP should be in the name of the company otherwise I could just leave the project hanging if I chose to. I tend towards just following her argument and putting the IP in the company's name, but I'm not a lawyer and I would like to hear a professional opinion. What is usually the best strategy in this situation?
Answers: 3 public & 0 private
The whole point about corporate ownership is that the IP (eg copyright) can be shown on the books as outcomes on the asset side of the company. But it also has to be balanced, the contract your friend also needs to be documented and possibly put onto the books (whether liability or otherwise unknown as it is tied to a connected investor. So long as there's clarity in how it is managed going forward (eg dilution for additional investors) and channels for conflict resolution then it can be treated like a spin-out as you slowly acquire your own staff and her role dwindles (or else is there a buy-back option if fails? in which case you're the market canary). What your friend is describing are lumped under good/bad leaver provisions. They are a standard startup risk management technique along with vesting cliffs.
This depends upon the IP. A patent or copyright might be able to remain in your name with a license to the company. However, trademarks and service marks would be very difficult to retain in your name since marks must always be associated with the goodwill of the business and rights in a mark only accrue in the actual user of the mark. That likely is the company.
You will need explicit agreements controlling all of these issues because invariably you and your friend will most likely part ways in this venture and you will have a real mess on your hands if the ownership of the IP is not spelled out.
I want to bring up a slightly different reason you may consider putting the IP in the company name in addition to the others … when you license IP, typically the licensor indemnifies the licensee from 3rd party claims, infringement, etc. So it may lower your personal liability to have the company own it and not you, because the company would be held responsible and not you. There are other risks/ considerations, so I recommend talking with an experienced IP attorney for your specific needs. Often the company entity you have chosen comes into play: for example, some companies place the IP in a parent entity, while allowing the subsidiary to license it etc. It can get complicated.
Hope this helps!
Mary
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