Ask the Legal Expert

Q: We are a start-up company developing an innovative engine that will have significant environmental benefits. What should we be doing to protect our intellectual property and ensure that others cannot copy our technology?

A: Your IP will be very important for the business going forward, not just to protect others from copying your technology, but also as the basis for future funding and investment in the company.

The IP that is worth focusing on the most are patents and trade secrets. If you can obtain patent protection for your technology, you should be able to use the patent to prevent others from copying your engine or producing something similar. It is also worth protecting your technology as a trade secret and there are certain steps that you would need to take in order to benefit from protection under the relevant regulations.

It is important to make sure that you also have a robust confidentiality agreement (or NDA) in place before any discussions with anyone outside of the company commence, such as with a potential collaboration partner. Failure to do so could prejudice any subsequent patent application, but it is also a sensible way of ensuring that your ideas are not copied by others.

Q: We have developed a new type of energy-efficient wind turbine, but are finding it difficult to finance the last stages of the development. A large US company who say they can help us take the technology to market has contacted us. They have given us a very long contract to sign. What are the risks?

A: Contracts with US companies tend to be lengthy and difficult to read, but the key provisions are much the same as we would include in contracts under English law. That said, there are commercial risks as well as legal risks to consider.

With regard to the commercial risks, it would be advisable to review the contract to ensure ownership of intellectual property remains with you, and that management control and day-to-day running of your company is not diluted in any way. The financial arrangements should be looked at carefully to ensure you can complete your development work as well as scale up the build or manufacture of your turbine.

With regard to the legal risks, it is important to ensure that key clauses such as duration and termination, limitations of liability and indemnities, dispute resolution and data protection are included and appropriately addressed in the agreement. US law will probably govern the agreement, so you need to know the implications of that, especially if there is a dispute on the agreement at some point in the future.

Q: For the last few years, we have successfully been commercialising a sustainable carbon capture solution for the agriculture sector. We had some initial finance from grants and angel investment, and are about to embark on a larger round of fundraising. Are there any actions that we should be taking now before we start talking to potential investors?

A: It is important that all your paperwork and statutory books are in order before you start talking to potential investors. If any of your IP was initially developed by the founders of the business before setting up the company, make sure that there is a written assignment in place to transfer that ‘founder IP’ into the name of the company.

It would also be sensible to look at the terms of those initial grants and previous investment agreements. They may have implications for the next round of investment, particularly if they give any preferential rights or require consents to be given.

Your investors may also want to carry out a due diligence exercise regarding the company’s legal, financial and tax affairs, so make sure that your lawyers, accountants and tax advisers are ready to assist.

Previous articleIs now the time to consider an Enterprise Management Incentive (EMI) Scheme?
Next articleVision for first-of-its-kind hydrogen cluster in the East of England