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TIA: Tennessee Inventors Association in Knoxville Tenn and Oak Ridge TN
Oak Ridge and Knoxville, TN  

August 2010 Legal Documents and Agreements

Meeting Date: 
August 21, 2010

Maryville attorney Justin Martin of Kizer & Black discussed a day in the life of a widget. In particular, Justin discussed the legal issues relating to inventing and profiting from that invention.

One of the first legal documents an inventor encounters is the Non-Disclosure Agreement (NDA) or the Confidentiality Agreement. In order to preserve any patent rights that may exist in an invention, an inventor should use an NDA to avoid making a public disclosure. Justin said that every inventor needs to read and understand what the NDA covers.

Justin next spoke about creating a company. To fully develop an invention, more than one person is needed. There may be multiple inventors, there may be investors, and/or other people who can contribute skills to the business.

Justin identified three ways to form a company. First is the do-it-yourself (DIY) route. Similar to DIY is using an internet service like Legalzoom. Both of these methods are without legal advice. The third way is to hire an attorney who will provide legal advice to ensure the proper form of company is selected and the company is properly formed.

A properly formed company helps the principals limit their liability when things go wrong. Having a company will not limit liability if things go wrong because of negligence or willful acts.

Who owns what and what do they share needs to be addressed for every company. Some owners of a company have know how, others have money. When forming a company, the owners must determine who is offering what. They must also decide who gets a capital interest and who gets a profit interest and who gets both.

Justin briefly discussed insurance. He suggested that product liability insurance could be valuable. Such insurance should cover the company and also include additional insured for the principals.

 Justin closed his presentation with three rules for avoiding problems:

  1. Pay now, or pay more later. That is, money can be saved by not hiring professions, be they lawyers, accountants, or others. But, when problems present themselves because of mistakes, the cost of hiring professionals will be more than if they were hired at the start.
  2. If it is too good to be true, it probably is.
  3. Don't let pressure control the deal. Take time to make sure the deal is good for you and the right thing to do.