You are working a 9- to 5- with ambitions of entrepreneurship. You’ve had a few signs make you realize that the time is now. If not right now you at least want to start making some serious traction towards your move. Let’s call it your grand escape.
See, it’s not even so much that you hate your gig (or maybe you do). But, that draw to launch your own business is more compelling than what you do behind someone else’s desk every single day.
You read your favorite industry magazines.
Visit the best blogs for entrepreneurs.
Read the books that everyone says are a must read for new business owners.
You talk to your friends who’ve had their own businesses for years.
And finally, you are ready to shift from information gathering to action mode.
But before you shift, there is one thing that you probably haven’t covered in your research that is absolutely necessary to get a handle on. Now.
But first, let me share a
story situation with you…
It involves a lawsuit that lasted nearly eight years between two companies that you’re probably familiar with — Mattel, Inc. (the creators of Barbie) v. MGA Entertainment (the creators of Bratz dolls). Carter Bryant worked for Mattel and during his time there he was the designer of the fashion and hair for the collectible Barbies. While there, he also created the preliminary drawings and a prototype for what would famously become known as the Bratz doll. He pitched the concept to MGA, and was later offered a job at MGA where he created the Bratz collection.
There were a series of lawsuits filed between the two companies but the one that’s relevant here is Mattel’s suit for copyright infringement. They alleged that Mattel owned all rights to the Bratz line because Carter created the concepts, including the sketches and prototype while still an employee.
Also, they alleged that he signed an employment contract releasing the intellectual property rights of his inventions to Mattel. Mattel won the very first round of the battle, and was awarded $100 million dollars in damages. MGA appealed the decision and there were a series of lawsuits that followed leaving Mattel with a legal bill (attorneys fees and court costs) to the tune of $137.8 million. This was a long, complicated legal battle – if you want to read a full recap of it you can check that out here.
I know you’re wondering what in the world this has to do with you?
It has everything to do with you.
The very first thing you must know before you launch your business while working is who owns the rights to the intellectual property that you create during your employment. This issue of employer-employee ownership involves multiple types of intellectual property, including patents, trademarks, trade secrets and copyrights. We’ll explore copyrights and patents in this post.
Your original creations are protected by copyright law. I’ve broken what creative works are covered under copyright law and how to protect them in this post (and this one). Let’s use the Bratz-Barbie scenario as an example – those sketches and the prototype doll that Carter created during his employment with Mattel were the alleged original creations to which he owned the copyright.
Note: there is zero copyright protection for ideas, but there is protection for how those ideas manifest into a tangible creation. Got it?
When you are an employee, your original creations, prepared within the scope of your employment become a work-for-hire. This means that your employer is considered the legal owner of the work – not you. The legal question is, “Is what you’ve created within the scope of your employment?” Meaning, is it reasonably related to your job duties? Now, I want to mention that each state will have its own interpretation of what is considered “within the scope” but I am giving you the general rule.
If what you’re doing by day involves marketing household products and your business will involves creating and selling custom stationary, you probably don’t have a problem. If your internal alarm went off when you read this paragraph because what you intend to do in your business is really close to what you do for the job I absolutely urge you to meet with an attorney in your area on this issue.
Like copyrights, there is no patent protection for ideas. But you can obtain the patent for your original inventions, processes or methods. The default rule is unless you’re specifically hired to invent for your employer then you retain ownership of your inventions even if they were created on the job.
Before you toast in celebration that you’re free and clear of any ownership issues with your employer please keep reading. There is another way that your employer can claim ownership of your inventions, created on the job.
In my opinion, this is actually the most common way that it happens.
What documents did you sign when you were first hired?
When you were hired, you probably signed a slew of documents, and one of them likely had what’s called an Invention Assignment (it may have been a stand alone agreement or just a section within a larger agreement). An assignment means that you agree to a transfer of ownership in your intellectual property, be it copyrights, patents or another form. Each state’s law dictates the extent that ownership can be transferred to an employer, and what language the agreement must have in order for it to be legally valid. The point I want you to get here is that whatever you signed may trump the default copyright and patent laws that I explained earlier.
As you can see, before you dig deep in the business of launching a business while working you have some very important legal business to handle (and that you can’t afford to ignore).
I’m not going to leave you hanging here.
In upcoming posts I am going to give you a pretty fantastic case study of how this issue surfaced (and could have been avoided) in a very popular television show and I’m going to share with you a few more “hot topics” you need to look for in your employee agreements.
If you’re launching while working, let’s make sure you cover all your bases, and that when you walk away from your employer there is no question about your ownership over the business (assets) you’ve been creating.
Launching a business while working starts with thinking before you leap, proper planning and strategy.
It also involves keeping the right peeps on your A-team who can steer you through the process. Are you in for the ride?