Innovation 101 Ep 9: Legal Considerations

Summary

The video discusses key considerations for startups before engaging their first customer. It emphasizes the importance of seeking legal advice specific to your business structure, obtaining insurance, and protecting intellectual property (IP) through non-disclosure agreements, trademarks, and IP assignment deeds. The speaker highlights that copyright is automatic in Australia for creative work. Startups should also focus on essential contracts like service agreements with clear liability clauses. The video advises ensuring ownership of developed software code and getting professional advice when dealing with investors. The UNSW Entrepreneur Legal Centre offers free legal support for students and alumni.

Takeaways

• 📝 It's important to get independent legal advice tailored to your business entity before starting.
• 💼 Consider obtaining insurance to protect yourself from personal liability.
• 🔐 Identify and protect your business's intellectual property (IP) early on.
• 💡 Patents are only for new and inventive ideas, and the process can be costly and time-consuming.
• 🛡️ Use NDAs (Non-Disclosure Agreements) to safeguard your company's confidential information.
• 📛 Trademark your business name and logo through IP Australia for simple and affordable protection.
• 🌐 Secure a corresponding domain name for your business to strengthen your online presence.
• 📜 Ensure that the company owns all IP, and transfer any personal IP ownership with an IP assignment deed.
• 📄 Start-up contracts, like customer terms and service provider agreements, are critical for legal clarity.
• ⚖️ Liability and indemnity clauses in contracts should limit your responsibility, and liability caps are essential to avoid excessive financial risk.

Q & A

What should you do before dealing with your first customer?

Before dealing with your first customer, it's essential to get independent legal advice specific to your business structure.

Why is it recommended to get insurance for your business?

Insurance is recommended to ensure you are not personally liable for any potential risks or damages associated with your business.

What is one of the most important considerations for a business related to intellectual property (IP)?

One of the most important considerations is to identify and protect the intellectual property (IP) that your business has.

Is patenting always necessary to protect your business idea?

No, patenting is a costly and time-consuming process that only applies to new and inventive ideas. There are other ways to protect IP, such as using non-disclosure agreements (NDAs) and trademarks.

What is an NDA, and why is it important?

An NDA (Non-Disclosure Agreement) is important because it ensures that your company's confidential information remains protected when shared with others.

How can businesses easily trademark their name and logo?

Businesses can trademark their name and logo through the IP Australia website, which offers a simple and inexpensive process.

Why is it important for the company, and not individuals, to own all the IP?

It's important for the company to own all the IP to avoid complications with investors and ensure that the business fully controls its assets, which can be assigned through an IP assignment deed if necessary.

What is the key difference between copyright and trademarks or patents?

Copyright is an automatic right, meaning there’s no need for registration. Anything you create, such as photos, videos, or writing, is automatically protected under copyright laws.

What types of contracts should start-ups consider having in place?

Start-ups should consider having contracts such as customer terms and conditions, or a service provider agreement if they are offering services, to outline the services and payments involved.

Why is it important to limit liability in contracts?

Limiting liability in contracts is important to ensure that your business isn’t exposed to excessive financial risk. A liability cap helps protect you from being sued for more than what your services are worth.

Outlines

00:00

🛠️ Setting Up Your Business Structure and Legal Precautions

Before dealing with your first customer, it's essential to consider various factors specific to your business structure. Seeking independent legal advice is recommended, as insurance might be necessary to protect yourself from personal liability. Understanding your intellectual property (IP) is crucial, and it's important to know that patenting can be a lengthy and expensive process, suitable only for new, inventive ideas.

📄 Protecting Your Intellectual Property (IP)

Many ways exist to protect your IP without needing a patent. Using non-disclosure agreements (NDAs) ensures confidentiality when dealing with others. Trademarking your business name and logo is a simple and affordable process available on the IP Australia website. Securing a domain name is also advised to enhance market entry speed.

🏢 Ensuring Company Ownership of IP

It's important that the company, not individuals, owns all the IP. If individuals hold any, an IP assignment deed can transfer ownership to the company. This is especially important when dealing with investors, as they want assurance that the company owns the IP.

🔒 Understanding Copyrights and IP in Australia

Copyright differs from trademarks as it's an automatic right. No registration is necessary for creative works like photos, videos, and writings. You automatically own these under Australia's copyright laws. It's crucial for start-ups to be aware of this distinction.

📝 Key Contracts Every Start-up Needs

Start-ups must prepare key contracts, including customer terms and conditions or service provider agreements, depending on the business model. Contracts should clearly outline the services provided and the corresponding payments. It's important to focus on liability and indemnity clauses to limit your risk and prevent excessive liability.

💻 Software Companies and Code Ownership

For software companies, ensuring ownership of the developed code is essential. All code should either be written by the company or be open-source and legally usable. Agreements will expect confirmation that the code is original or properly licensed.

💰 Navigating Start-up Funding and Investor Agreements

The interests of start-ups and investors may not always align. If an investor offers funding, seek professional legal advice to avoid potential pitfalls. UNSW offers free legal advice for start-ups, making it a valuable resource for students and recent alumni.

📈 Next Steps: Financing Your Project

In the next session, the focus will be on different financing options to grow your business. Viewers are encouraged to share their thoughts on the series and prepare for the upcoming discussion on securing funds for their projects.

Keywords

💡Business Structure

The structure of a business refers to how it is legally organized. This could be as a sole proprietorship, partnership, corporation, or another legal entity. In the video, the speaker emphasizes the importance of choosing the right structure, as it influences legal obligations, liability, and how you should operate before dealing with your first customer.

💡Intellectual Property (IP)

Intellectual Property refers to creations of the mind, such as inventions, literary and artistic works, designs, symbols, and names used in commerce. In the video, IP is highlighted as a crucial aspect of a business that needs to be protected, and the speaker discusses various methods to secure it, such as patents, NDAs, and trademarks.

💡Patent

A patent is a legal right granted to an inventor that gives them exclusive rights to use, sell, or license their invention for a set period. Patents are only available for new and inventive ideas. The video explains that while patents are an option, they can be costly and time-consuming, and there are other ways to protect IP without one.

💡NDA (Non-Disclosure Agreement)

An NDA, or Non-Disclosure Agreement, is a legal contract that ensures information shared between parties remains confidential. The speaker in the video emphasizes the importance of using NDAs to protect your business's confidential information when dealing with third parties.

💡Trademark

A trademark is a recognizable symbol, word, or phrase legally registered or established by use to represent a company or product. The speaker advises that businesses should trademark their name and logo through IP Australia to protect their brand. Trademarks can help distinguish a business's products or services from others.

💡Copyright

Copyright is a legal right that grants the creator of original work exclusive rights to its use and distribution, typically for a limited time. Unlike patents and trademarks, copyright protection is automatic in Australia for creative works such as photos, videos, and writing. The speaker mentions that there is no need to register copyright as it is an automatic right under the law.

💡Liability

Liability refers to the legal responsibility one party has to another, especially in terms of financial compensation for any harm or damages caused. The video stresses the importance of limiting liability in contracts, particularly in service provider agreements, to avoid excessive legal responsibility. For example, the speaker suggests capping liability at the amount charged for services.

💡Indemnity

Indemnity is a legal principle where one party agrees to compensate another for any losses or damages that arise from specific conditions. The speaker highlights the need for businesses to carefully review indemnity clauses in contracts to avoid having to pay for damages they are not responsible for.

💡Service Provider Agreement

A service provider agreement is a contract between a business and a client that outlines the terms and conditions under which services will be provided. In the video, the speaker recommends having such agreements in place to specify the scope of services and fees, while also addressing liability limitations.

💡Assignment Deed

An assignment deed is a legal document used to transfer ownership of IP from one party to another. In the video, the speaker explains that if individuals own IP outside of the company, they can transfer it to the company through an assignment deed, ensuring the company holds all relevant IP, which is important when dealing with investors.

Highlights

It's important to seek independent legal advice tailored to your business structure.

Ensure you have the right insurance to avoid personal liability.

Identify the intellectual property (IP) your business holds, such as patents, trademarks, and copyrights.

Patenting is expensive and time-consuming, so it’s not always the best option for protecting your IP.

Use NDAs (Non-Disclosure Agreements) or confidentiality agreements to protect sensitive business information.

Trademark your business name and logo through IP Australia's website, an easy and inexpensive process.

Secure a corresponding domain name to your business for online presence.

Speed to market can give your business a competitive advantage, so avoid unnecessary delays in registration.

Make sure the company, not individuals, owns the IP—use an IP assignment deed if needed.

Investors will want to see that the company owns all the IP before investing.

Copyright is an automatic right in Australia; no need to register content like photos, videos, and writing.

Start-ups should have necessary contracts in place, such as customer terms and service provider agreements.

Pay close attention to the liability and indemnity clauses in contracts to avoid unlimited financial risk.

Software companies should ensure they own the code they’ve developed or have legal rights to use open-source code.

If you have investors, get professional legal advice to avoid pitfalls in aligning interests with them.

Transcripts

Once you've chosen a structure for your business

there's a lot of things you need to consider before you actually

deal with your first customer.

I'll take you through a few different points today,

but it's really important that you go and get independent legal advice

specific to your entity.

Dependent on your structure and your business it's a good idea to get insurance

so that you're not held personally liable.

One of the most important considerations, is to work out what intellectual property

or IP your business has.

The first question people often ask themselves is, "Can I patent my idea?"

Patenting is a very expensive and time consuming process

and it also only applies to new and inventive ideas.

There are a lot of ways in which you can protect your IP

without actually applying and paying for a patent.

Firstly, when you're dealing with anyone else, make sure you have an NDA,

or a confidentiality agreement, as they're otherwise known.

This will make sure that your company information is kept confidential

and protected.

You should also look into trademarking your name and logo.

You can do this yourself through the IP Australia website,

and it's a very simple and inexpensive process

that I would recommend to most businesses.

Also make sure you have a corresponding domain name.

A big advantage to your business is speed to market.

First in often gets the sales.

So try not to waste too much time on complex registration processes

and just go in and start your business.

It's important to make sure that the company and not individuals own all the IP.

If any individuals own IP outside of the company,

these can be assigned over to the company with a simple IP assignment deed.

If you're dealing with investors,

they'll really want to know that the company owns all the IP

that you're trying to sell them.

As opposed to trademarks and business names,

copyright is an automatic right.

There's no need for you to register anything,

if you're creating photos, videos, writing pieces, these are automatically yours

and you own it due to Australia's copyright laws.

For start-ups, another big issue to consider

is the suite of start-up contracts that you'll need.

If you're dealing with customers,

you might need customer terms and conditions.

Alternatively, if you're a service provider,

you'll need a service provider agreement,

which sets out the services you provide

and the amount of money you'll be receiving for those services.

In any contract one of the key clauses that lawyers look at

and that you should also look at is the liability and indemnity clause.

This sets out exactly what you'll be liable, responsible for

and also what you need to indemnify the other parties for,

in other words, pay the money back.

You need to make sure that your liability is limited

and that you're not indemnifying them

for things that you aren't actually responsible for.

Make sure there's a cap on your liability in your contract,

otherwise you could potentially be sued for millions and, for example,

in a service provider agreement, I often suggest that you cap your liability

at the amount that you've charged for your services.

If you're a software company,

it's really important to check that you own all the code that you've developed.

So make sure you've written all your own code, or it's open source

and that you're allowed to use it.

Every agreement will expect you to say "We've developed this ourselves"

or "We have the legal right to use it".

The interests of start-ups and investors aren't always aligned.

If someone comes to you with real money and wants to invest in your business

I suggest you get professional legal advice

to make sure you don't fall into any traps.

If you're a UNSW student or recent alumnae we run an entrepreneur legal centre

which offers free legal advice for start-ups, so come along and see us.

Next time, we'll be looking at different ways you can finance your project

to help it grow.

Please leave your thoughts on our series below.