Aside from launching your first business, what could be more exciting than launching a new product? The excitement, passion, and enthusiasm we see from entrepreneurs who are ready to take yet another leap into the unknown and tackle whatever lies ahead - well, it’s intoxicating. But, as a prudent attorney, it is my role to tell them to pump the brakes, get their ducks in a row, and seek out any other idioms that may apply.
If you are looking to take a new product to market in the near future, here are a few of the considerations I urge you to take some time to mull over before putting moving forward:
I know, I know - if you’ve been working with us, you almost certainly already have at least one formal business entity. What I’d like for you to think about now is what impact your new product will have on your entity. Each new product you put out into the world brings about new risks and liabilities for your business. Are you comfortable giving away everything you’ve built until this point because someone gets hurt using your new product?
If not, you may be interested in forming a new business entity to handle the business relating to your new product and to contain the liability if something should go wrong. Of course, a new entity is not going to be the right choice for everyone. A new entity brings about additional tax considerations, formalities, management considerations, contracts, and more contracts to get going and to keep compliant. However, if the rewards for creating a new company outweighs the risks of launching a product without, it’s time to start thinking about the form of business entity that makes the most sense for your goals and objectives, and to decide how your new entity should be structured alongside your existing business.
Manpower and Resources
Creating a new product is time and resource intensive from designing, to developing, to commercializing. If you don’t already have the capacity to operate through all of these developmental stages, you should consider whether it is time to recruit and hire new employees, or whether it makes more sense to seek the assistance of independent contractors. Once again, there is no right or wrong answer, but there are very specific laws and regulations for taxes, wages, benefits, and more that vary greatly depending on the nature of the relationship you form with your workers.
Perhaps manpower isn’t the only issue you are facing. Do you have all of the assets and financial resources you need? There is no need to worry if you don’t, as there are plenty of solutions available to you. In addition to seeking outside loans or funding, you may want to consider a third party collaboration in the form of a strategic partnership or a joint venture. Either option is a great way to spread your risk and to fill in the deficiencies of your current business. Naturally, your decision will give rise to even more considerations - such as how to structure your collaboration and the ownership of resulting IP - but you’ve gotta’ do what you’ve gotta do if you truly want your product to be a success.
The way in which you deal with your IP will look very different depending on how you grapple with your business structure, manpower, and resources. Regardless, it is important to address IP ownership, use, and protection as early as possible to avoid trouble in the future.
Begin by sorting out who will own the IP created by your employees and independent contractors - it is common practice for any IP developed within the scope of employment or engagement, created on company time, created using company resources, or relating to a company’s current business or anticipate R&D to belong to a business, but however you decide to approach the subject should be put into writing and agreed to by your workers. You must also think about your product and branding strategy in light of the other patents, trademarks, and copyrights floating around in the world. Take the time to assess whether your product name and design is an infringement on anyone else’s rights so you won’t have to face a lawsuit or the need to reinvent the product in the future. Finally, pinpoint all of the valuable aspects of your new product, whether it be the function, use, name, logo, or anything else, and find a way to protect them. Building a robust IP portfolio of patents, trademarks, copyrights, and trade secrets will give you strength in the marketplace and facilitate your success.
About the Author:
David "Tyler" Bennett is a business and intellectual property attorney, and he is a partner at Verhagen | Bennett LLP. To learn more about David, please click here.
For questions or comments about this post, please email David directly at: David@VerhagenBennett.com
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© 2017 David T. Bennett — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.