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4 main legal issues for technology start-ups

4 main legal issues for technology start-ups 1

By Aaron Wood, trade mark attorney at Blaser Mills Law.

A successful technology start-up can be extremely profitable, however, for those considering establishing a new technology business it is important to be aware of the key legal issues you could face, and how to deal with them to ensure you minimise the risk whilst maximising return. Here are 4 important factors to consider when creating a tech start-up business.

  1. Business structure

It is important to consider how your business is to be structured and this will affect how you keep your accounts and pay taxes.

Usually, the most popular option for a technology start-up is to set up a ‘limited company’ in which you, your business partners and any investors can all hold shares. The advantage of this structure is that it limits the personal liability of the business owners, meaning the company has a separate ‘legal personality’ and can borrow money and enter contracts in its own right.

Other business structures include sole proprietorship, corporation and limited partnership. When deciding which is the best for your new tech venture, make sure you consider all liability issues, as well as which tax structure would be best for you and your firm.

  1. IP strategy

Establishing intellectual property [IP] rights is especially crucial for technology businesses, as they protect intangible property such as brands, creative work and inventions.

The general rule of creating IP rights is that anything that is created or generated by an employee during their employment belongs to their employer, unless there is a prior agreement in place. However, if the person creating the IP is not employed at the business, for example if they are a consultant or contractor who created the IP before formal creation of the business, they will own the IP unless you have a written agreement set up to pass their IP rights to your business.

If you opt for using third-party IP, you must outline the terms of use in writing. This will help you prove to investors that you have the right to use it. Having the terms clearly stated in an official document will also be invaluable if an IP dispute arises.

Aaron Wood

Aaron Wood

When setting out an IP strategy, it is also worth considering whether you can monetise IP rights and grant third parties licenses to use the IP your business has created. By having a written contract in place, you can outline that your business still owns the IP you are licensing to a third party, as well as set out exactly what the IP can be used for.

You should also establish brand policies for use internally and externally to ensure all trade marks and other IP content is used consistently and appropriately. If your IP is not used in the correct manner this can weaken its protection, and using it in the context it is not meant for could damage your business’ reputation.

  1. Trade Marks and domains

Before choosing the name of your new business, it is always recommended to perform a thorough online search for any already established companies that may be operating under your chosen name.

You can also carry out a trade mark search using the UK Intellectual Property Office system. These searches are extremely quick and can flag any registered trade marks that are similar to your chosen name. This will help you avoid choosing a potentially problematic name that could result in inadvertently infringing third party trade marks.

Once you have settled on an official company name, you should consider whether to register your trading name and logo as a trade mark. This prohibits others from registering their company under the same name.

  1. Cookies and personal data

When setting up your website, you must bear in mind the regulations about cookies. Any website that uses cookies must provide the user with extensive information about the purpose and use of the site.

Furthermore, if you collect personal data it is imperative that you comply with the Data Protection Act and register with the Information Commissioner’s Office. It is common for technology businesses to process users’ personal data, so it is important to make yourself aware of the Act.

If you require further guidance or support on the legalities involved in establishing a technology business or want to discuss your IP rights in further detail, you should seek the advice of a qualified professional who will be able to guide you further.

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