How to Protect your IP (Intellectual Property) when Dealing with Contractors
Updated: May 13, 2020
Intellectual Property is one of those things that can really damage your funding process.
For example, you hire a developer on contract. You sign a nondisclosure agreement but don’t sign an Intellectual Property Transfer Agreement or your initial agreement didn’t have any clause.
You are in the final phase of your funding with a VC firm. Your developer sues you and claims that he owned the IP beyond what you paid him.
This can be a nightmare situation and a good VC will definitely pause the funding process. They may decide to work with you on this or ask you to solve it before starting the process again.
How to Protect Yourself
I am not a lawyer and my experience in based on my experience with startups that have raised multiple rounds. We have our own standard agreement which we do with each and every client of ours that gives the copyrights of all the work done to the client.
Before Starting the Project
I can share some important points which you should include in your main agreement to protect your Intellectual Property in case of litigation or clearing your IP status during funding
It should include a reference to your countries copyright laws e.g in US its United States Copyright Laws (17 U.S.C. 101, et seq.) and in Denmark it’s Sections 54 of the Danish Copyright Act
The ownership of all work done is the property of the client
After the Work is Completed with Contractor
This is not required but considered an extra protection step. If you can sign an agreement after the work is complete that the developer has been paid for all the work done and the Intellectual property is part of the client. This would give another layer of legal protection.
Contracting on Sites like Upwork
If you are using websites like upwork for hiring contractors, the upwork’s basic agreement protects you on both confidentiality and intellectual property in their clause 8.6 (Intellectual property) and clause 15.1 (Confidentiality). However, it is recommended to sign your own agreement mentioning the specific country you want all copyright issues to be handled in.
It is advisable to have a good lawyer as a consultant right from the start. However, they are expensive and you can consult your friends/incubators for advice on these as they mostly have standard agreements you can use.
We sign confidentiality and Intellectual property agreement with all of our clients. If you are interested, kindly contact us and we can share our template with you.