Eureka! You’ve found a gap in the market and have just come up with your breakthrough idea. You may have thought of a way to use Bitcoin to alleviate world poverty or maybe you have created a new way for lawyers to reach more clients. Before you plough ahead and put your plan into action or create an initial prototype, stop and have a think about whether you are bound by any current obligations that might affect how you develop your idea. Declan Bradley, a legal director and employment lawyer at Doyle Clayton, shares his tips so you can avoid rookie mistakes.
What are my Employment, Consultancy, or University Obligations?
You may currently work for an employer or be engaged as a consultant by a principal. Either way, you may have signed up to an agreement that restricts what outside work you can do or you may have transferred rights to any IP you create to your employer or principal. Even if your employer has not provided you with a written agreement, any IP you create which is relevant to its business might belong to it anyway (consultants on the other hand usually own the IP they create unless there is a specific agreement in place). You will need to check whether any relevant confidentiality clauses, IP provisions, outside interest clauses, and post-termination restrictions could prevent you from operating in the same space as your employer or principal. There may also be restrictions on dealing with their clients or particular individuals for a certain period of time after your employment/contract has ended. If you develop any part of your business because of, or incidental to your University course and you use University equipment or know-how, the University might have a claim to your IP. It is worth checking through any materials or policies provided by your University.
3 Key Tips to Avoid Legal Battles at this stage:
- Keep your new venture separate from your 9-5
To protect any IP you create at this early stage, it is advisable that you do any work for your own project outside of the working hours where you would usually work for your employer/principal/University. Do not use their equipment or confidential information, and make sure that you keep your new business idea as separate as possible from your 9-5 job. Be careful not to breach any outside interest clauses – you don’t want to get sacked before it’s your time to leave. The amount of times I have come across people working on their own projects on their employer’s time and money is astounding. Stick to creating your empire in your own time, not their time.
- If you can’t avoid competing, get out quick
Ideally, your plans would not compete with your employer’s/principal’s business, but if they do you may want to think about ending the employment/engagement before starting your new venture. If you start to compete (or even take steps to compete in the future) with your employer/principal in breach of contract, you and your new business could be liable for damages and you might face possible court orders to stop your business from competing for a period of time. Getting out quick also means that the clock on any relevant post-termination restrictions starts to tick and you’ll be free of them sooner rather than later. That said, you might work for an innovative employer or principal that is happy to partner with your project. If so, it could be worth raising the idea with them as a business proposal. In most cases though, this is a dangerous move, so be cautious.
- Manage your way around post-termination restrictions
Post-termination restrictions can be complex. If they are relevant, it is recommended to take legal advice on whether the restrictions are enforceable, how likely they are to be enforced and how you may be able to circumvent restrictions without being in breach.
The above is intended as guidance only and does not substitute legal advice. Please get in touch with me via LegalDrop if you need assistance on such issues or to discuss my Start-up services. I am happy to have an initial no-obligation chat.
contributed by Declan Bradley, Doyle Clayton