As a law school graduate (not a licensed attorney), I empathize with many of my dear friends on the state of the legal market. As an entrepreneur, I lick my chops at the cutthroat opportunities it affords early-stage companies. Bringing together these two perspectives, here four tips for protecting your intellectual property (IP) and hiring the right lawyer:
1. Lawyers are Abundant
Lawyers are abundant. Law schools churn out new graduates at significant rates; this combined with the smack-down the industry received in the recession, the implosion of law firms, the technological revolution, which is automating basic legal tasks, and you have a nirvana for early-stage businesses. There are many lawyers; if you think you need intellectual property (IP) protection (you probably do) pick someone who does nothing but IP – just don’t let them sell you more than you need. Just like venture capitalists (VCs) expect focus from founders, you should expect focus from your lawyers.
2. Talk about Your Business, Not Your Idea
It’s common sense: a good lawyer will tell you to shut your mouth. If you don’t have legal protections for your idea, and often even if you do, you shouldn’t talk about it. Why? Public disclosure can nullify the protections you are trying to find. You might ask, “How do I tell people about my idea if I can’t talk about it?” Simply put, don’t talk about the idea, talk about the business. At the early stage you should be focused on the problem and the customer. Neither of them care how you solve the problem, in detail, they simply want a basic frame work for how your solution works and then they want to focus on the output; so should you. Moral of the story: stop talking about your tech – it protects you and your customer.
3. Get the Right Kind of Protection
I’m not a lawyer, so you should consult one. However, in my experience, early-stage companies blow a ton of cash on things they don’t really need. This is especially true with patents. It’s important to know that there are provisional (back of the napkin) and non-provisional (full blown) patents. The former is pretty affordable and gives you a year to figure things out, make adjustments and ensure you’re serious. The latter is expensive, time-consuming … and did I mention expensive? Usually not something to go after right out of the shoot unless you’re confident you’ve invented a whole new widget.
Things like your logo can gain protection by simply adding the TM symbol and throwing your hat into the ring of capitalism. If you’re writing software, there’s a good chance it’s not going to qualify for protection. But, for now, let’s just start with the basics. If you have work that needs to be protected, then attempt to do so. The best way to protect your IP is to not talk about it (this is a trade secret). When you do talk about your IP, use a non-disclosure agreement (there are hundreds on the internet; some better than others). A good rule of thumb is the need-to-know basis. Just like the military, ask yourself: “Does this person need to know the details in order to achieve the desired outcome?” If so, execute a non-disclosure agreement (NDA). It’s standard practice, and sophisticated business folks understand and will agree to an NDA.
4. Avoid Paying Too Much
Mid- to large-sized law firms across the country are offering enticing deals to get early-stage companies to do business with them. They’re counting on catching the next Uber, but know there will be a few duds along the way. So pitch them. Convince them you’ll be the next Uber, just as you would an investor, and collect the spoils. Here the spoils are typically flat-fee engagements and plenty of time to pay. Law firms are still pretty stodgy, mostly because old wealthy partners sit at the top of the dog pile, while their younger associates slave away billing as many hours as possible to fund the partners’ retirements. So, most likely, you’re going to get stuck with paying by the hour, or getting a flat-fee; very few of them will offer discounts or pro bono work. This is especially true because the IP law firms are less saturated than other areas of the law, the bar is high, the work is mind-numbing, but the business is consistent.
The trick for you is that you need a reputable enough firm that any VC doing diligence has confidence that IP protections will be worth a price. But you don’t want such a big of name firm that you’re paying out the nose. The nice thing about lawyers is they rarely send a client to collections, or charge them a bunch of interest, because most complaints to the Bar, their professional association, are about fees. This works to an entrepreneur’s advantage. We are typically cash-strapped, heads-down, working on the next big thing. The less cash we put out today, the more payrolls we make tomorrow. Now, I’m not telling you not to pay your lawyers, you definitely should (my friends also need to eat), but legal fees are one area you might be able to push out a bit to buy yourself more time to succeed.