Intellectual Property
Commercial Litigation Practice
Intellectual Property
The Top 5 IP Issues to Consider Before Starting a Software Company
Those interested in forming a startup software company will have to confront several significant legal issues to achieve success. Notably, entrepreneurs looking to start a software company should be prepared to address some of the following questions:
Which business structure will you follow? The business model a startup company chooses to follow will have important legal implications. These implications include how the business is taxed, the ways the business can raise capital, and the personal liability of those in control of the business. A few of the most common business structures are sole proprietorships, partnerships, and corporations. Startup software companies that choose to follow a sole proprietorship model will be unincorporated businesses with an individual as a sole owner who is personally responsible for all business obligations and who receive all ownership profits. Software companies that follow a partnership model include a relationship between two or more individuals, corporations, or other entities. The rights and obligations of the different partners will usually be set out in a formal partnership agreement. Finally, startup software companies that choose to follow a corporation model will have separate legal personalities from their shareholders and will have the ability to hold property, carry on business, and enter into contractual relationships.
From where will the investment capital come? This question is particularly important for individuals interested in forming a startup software companies because one’s investors should not only have the assets needed to start the company but should also have some experience or expertise in the technology industry. This knowledge will be invaluable to avoid potential pitfalls that the new startup software company might encounter.
How will you protect the IP of your software? It is vital to protect your intellectual property to compete effectively in the software development space. Some ways to protect IP held within software include the use of patents, copyrights, and trade secrets. Patents can protect novel functions of the software itself and can provide the startup software company with the exclusive rights of a process, design, or invention. A software company can copyright source code to make sure that the code is protected. Trade secrets can protect ideas and practices vital to the development process of software. The effective use of these IP protection types is important for any startup software company.
Will you out-license your software? If your startup software company is considering out-licensing your software by allowing other companies to use your software via a licensing agreement, it is important that you structure in protections to ensure that you retain ownership and control of your license. Generally, licenses should be thought out carefully regarding the context in which the licensed software will be used.
Will your startup software company use independent contractors or employees? Determining whether your company will use independent contractors or employees is crucial for ensuring that your startup and its employees understand the terms and conditions of employment. Moreover, defining the terms of employment can minimize the risk for future uncertainties and disputes. If you enlist other people’s help to run your software company, be sure not to treat them as employees unless you want to be liable for their actions and plan to provide them with benefits. Additionally, it is important that, regardless of the employment type, intellectual property rights are clearly defined and stipulate that your startup software company will own the rights to all intellectual property created by an employee or independent contractor.
By Carsen Nies, Seattle University School of Law
The intersection of online privacy and the fourth amendment.
As the use of various technologies increase and as individuals continue to expand their online presence, so too must the Supreme Court update its interpretation of the Fourth Amendment to address the ever-growing concern of online privacy. Online or internet privacy refers to how much of one’s personal, browsing, financial, or other information remains private while online. Risks to one’s online privacy can range from phishing scams to malware, and issues with website security can result in identity theft or the hacking of one’s bank account.
Traditionally, the Fourth Amendment of the Constitution has served as the main protection against violations of personal privacy. It states the following:
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
From the Fourth Amendment came the Supreme Court’s codification of the “third-party doctrine,” which stands for the principle that individuals have no legitimate expectation of privacy in information that they voluntarily share with third parties, regardless of whether they wanted the government to have access to the information. Thus, while the government would need a warrant to obtain an individual’s personal papers from their home, the third party doctrine removes that protection when law enforcement wants to obtain the same papers from a third party with whom the papers have been shared.
The third party doctrine is made all the more complicated by the growing use of technology. In today’s digital age, many people keep their private information and data not on their persons or in a physical form, but rather online. As a result, one’s privacy is not guaranteed in the same way that it was before the internet existed, as advanced technology permits others to track digital information from a distance and as smart devices share users’ information with third parties. Therefore, it is necessary that the Supreme Court set a consistent interpretation of the Fourth Amendment when it comes to one’s online privacy.
The Supreme Court last tackled this issue of online privacy in a 2018 decision called Carpenter v. United States. The Carpenter majority held that a warrant is required for police to access cell-site location information (CSLI), and it declined to extend the third-party doctrine to the data collected by cellphones. However, the case was limited to only applying to CSLI, which is produced when a phone user sends or receives data, such as phone calls or text messages, that are then transmitted to the closest cellular tower through radio waves. Precise records including the date and time of transmitted data and the approximate location of where the call began and ended are produced as a result. Because Carpenter only addressed privacy with regard to CSLI, it left open the question of how the Fourth Amendment and the third party doctrine apply to other technologies and methods of data collection besides data collected by cellphones. Thus, as smart devices continue to expand and develop beyond the simple cellphone that the Supreme Court addressed in Carpenter, it is imperative that Carpenter be read broadly or that the Court re-examine the application of the Fourth Amendment and the third party doctrine to all forms of technology and online privacy. The Supreme Court must recognize that the Fourth Amendment can play an important role in preventing government intrusion into one’s online privacy.
By Carsen Nies, Seattle University School of Law