Bootstrapping your IP: seven questions emerging businesses should ask themselves.

• Author: Nielsen, Eric
• Position: Legal Brief

Bootstrapping," an idiom familiar among emerging businesses, is believed to have originated from the phrase "pulling oneself up by the bootstraps," an impossible task. Now the term has become associated with growth notwithstanding limited resources. In this context, bootstrapping doesn't mean blind attention to certain issues, to the exclusion of other (sometimes unknown) issues. Bootstrapping isn't gambling. Instead, successful growth of bootstrapped businesses can be attributed to prioritization and efficiency.

As it relates to IP, you don't need to know all of the answers, but the prioritization and efficiency characteristic of successfully bootstrapped businesses are only possible if you can at least ask the right questions:

Who may have rights in my IP?

Employment agreements (even with former employers), independent contractor agreements (even for work that has already been completed) and university policies (which can apply to professors and students alike) can trigger IP ownership issues. If there is any doubt, deal with the issues early on, and memorialize any resolution.

Who holds my IP?

Establish an entity (e.g., an LLC or a corporation) and conduct all business through the entity. IP should be held in the name of the entity. In the entity's governing documents (e.g., operating agreement for an LLC, bylaws and/or shareholder agreement for a corporation), the owners may consider addressing IP ownership issues.

What to do about patents?

In addition to the obvious reason for filing a patent application (for an offensive purpose, to prevent others from commercializing an invention), consider that filing (i) may have a defensive purpose, to prevent others who file after you from obtaining overlapping patent protection, (ii) allows you to market the invention as "patent pending," which may have a deterrent effect, (iii) may be attractive to prospective investors or acquirers, and (iv) may result in unanticipated patent protection.

If filing does make sense, do so before any public disclosure of the invention. While the United States does offer a one-year grace period after public disclosure within which to file, foreign countries generally do not, and patent rights in the United States and most foreign countries are awarded to the first inventor to file, not the first person to invent.

A United States provisional patent application can be an efficient way to preserve U.S. and foreign patent rights for one year, while the invention is...