3 Legal Risks That Can Lead to Business Litigation

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3 Legal Risks That Can Lead to Business Litigation

Experienced business owners know to mitigate risk as much as possible, especially risks that can lead to costly litigation. While there are some inherent risks to any business that can be anticipated and planned for, there are some that seemingly come out of nowhere.

These three business risks all have the potential to lead to litigation:

Risk #1: Unintentional use of another’s intellectual property.

Imagine you have what you think is a world-changing idea that you believe you can monetize quickly with your startup. You perform a little due diligence—usually a quick Internet search—to see if it’s already out there. Nothing comes up, so you go ahead and invest all you have into your idea. Just when your company is gaining some traction, you receive a letter telling you that your business is infringing on an existing copyright, patent or trademark. If you don’t stop marketing your idea, someone is taking you to court. But if you do stop, you lose your investment. Neither scenario is going to work out for your business. To avoid this, be sure you have an experienced IP attorney perform an in-depth search to ensure your business idea or even your branding is free and clear of any existing registrations.

Risk #2: Engaging in unfair competition.

One of the most common violations of unfair competition laws is when companies hire a heavy hitter from a competitor who then brings their old company’s customers—or confidential information—with him or her to the new company. While it’s not against the law to hire someone from a competitor, you have to be sure that your new hire doesn’t use a previous employer’s confidential information to benefit your company. Be sure your background check on potential new hires includes ascertaining whether they have non-compete, non-disclosure or confidentiality agreements in place and that if they do, you need to honor those agreements, at least to the extent that they are enforceable.

Risk #3: Not protecting your own IP.

Establishing clear IP ownership is essential, especially for companies that rely on outsourced development expertise to fully develop their product. Management needs to execute a written assignment of copyright when working with external developers, as well as review employee agreements with former employers to ensure those employers do not have a claim to intellectual property. When working with others on product development, managers should also use confidentiality agreements and mutual non-disclosure agreements to protect IP. Failure to do so could invalidate IP protection down the road.

Unfortunately, business disputes can arise even when great care is taken to avoid them. If they do, you need experienced legal representation and advice. Williams Mestaz, L.L.P., is a law firm focusing on contract litigation, bet-the-company cases, and business divorce. Contact us at (602) 256-9400 and schedule a time to meet with us today.

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