Co-authorship. Startup as an author's project

The success of a startup is in a breakthrough idea that needs to be implemented in a short time with the help of the coordinated work of a team of like-minded professionals.

What is the problem?

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At the start of the project are the principal tasks:

1. to protect the idea - to prevent competitors from taking advantage of the new technology;
2. to establish interaction in a team - to distribute the responsibilities of each project participant, not forgetting about financial and organizational issues;
3. agree on the distribution of profits from the project, providing transparent conditions for motivation.

Usually the team is clearly aware of these tasks. Problems often arise where a team inspired by the idea goes into the design of a project. As a result, fundamental issues are either postponed until later, or discussed in words, but not documented. The team reasonably assumes that it is inappropriate to register a legal entity and spend money on the development of legal documents. Exceptions occur when an investor appears in a startup that insists on the legal design of the project.

As a result, the agreement is easily broken and the newly created business falls apart due to a misunderstanding between the team members. There are even foreign statistics: 62% of startups fail due to internal disagreements. From our own experience we see that the percentage in the Russian market is about the same.

Is there a solution?

So, the importance of fixing the agreement on paper is realized, but it is a pity to spend the budget for expensive legal services. What can be done to solve fundamental issues with minimal budget expenditures, but with the effect of endowing agreements with legal force?

We offer to conclude an agreement of co-authors

A startup is a realization of an idea. And the realization of an idea can always be considered as the creation of a certain intellectual property: either a technical solution that is protected by patent law, or a software product or scientific developments protected by copyright, or, finally, some technology, the protection of which can be organized in the know-how mode.



From the point of view of intellectual property rights, we regard the project team as a group of co-authors, each of which contributes to the creation of an intellectual product. At the same time, the agreement itself determines in detail the contribution and remuneration for its successful implementation. Along the way, we are solving the problem of defining the intellectual assets of a project and exploring ways to protect them.

The beauty of the proposed solution is that even at the very start of the project a legally significant document appears without registration actions and expenses for state fees, notaries, tax trips and other “boring legal procedures”, which also require substantial cash infusions.

Agree, already tempting? To finally convince you to get acquainted with this tool, I will give one more positive effect from the use of this document. If the team tries to conclude an agreement at the start and the original participants cannot agree on the terms and conditions before the launch, the project simply will not start and everyone will save a lot of time and nerves.

Perhaps you just can not imagine how much questions you need to come to an agreement. It may be a surprise for you that in fact there is no single understanding of these issues in the team. We are constantly faced with this. We start working with the startup team - at the talks, everyone perfectly understands each other in words and everyone agrees with everything. As soon as you send a document for approval, which will need to be signed and executed, disagreements and clarification of positions immediately begin: “I didn’t mean it,” “but we didn’t agree on that,” “let's change it here,” etc. .



Even if you decide to postpone the issue of legal consolidation of agreements “for later”, it makes sense to conclude an agreement of co-authors as soon as possible. Either quarrel immediately and scatter, or later it will be easier to issue corporate documents on the basis of agreements already reached and described.

Can you give more details?

Of course. Usually when drafting a co-authors contract, the following questions arise:

How many team members make a contract?

If the team has more than one person. Even two participants will find something to agree on.

Who can be parties to the contract?

By law, only natural persons can be authors. However, we recommend to include in the contract also participants who provide financial, technical, organizational and other assistance. Such participants may also be legal entities.

Is it possible to limit competition in the contract?

Yes, you can consolidate the obligations of co-authors not to develop similar results for other projects and to participate in them. You can prohibit the use of the results obtained for purposes other than those specified in the contract.

Is it possible to include obligations on financing or providing property for project implementation (equipment, software, premises, etc.) into the agreement

Not only possible, but necessary. At the same time, we advise you to indicate how these costs will be offset from the project revenues.

What types of participation is there in the project?

Basically there are two types of parties to the co-sponsors. The first is a creative contribution to the creation of the product. These are individuals whose mental efforts produce intellectual results. These participants become authors and receive shares in the right to the object of intellectual property. We call them collaborators. It is the share in the law that replaces at the early stage a stake in an LLC or a share in an JSC and is a real asset with which it is possible to make transactions.



The second group of participants is individuals who provided only organizational assistance (financed, provided equipment and premises, advised on various issues, etc.).



These are optional participants, but usually they are present in the contract. In addition, the collaborators themselves often provide not only creative, but also organizational contribution, and this is important to consider. Participants who help with the organization (let's call them conditionally Organizers) do not receive a share in the right to an intellectual product, but get the right to receive part of the income from the use of an intellectual asset. This share is also received by co-authors.

Thus, in the contract, we usually have two types of participants and two types of rights: Co-authors (and only they) receive a share in intellectual rights, and also have a share in the distribution of income from the use of a product. Organizers receive a share only in the income from the use of an intellectual product.

What else is important to provide in the contract?

Since on the basis of the contract we have intellectual property rights, we can competently use them!

Change of shares depending on the duration and quality of work in the project of each participant (options)

For example, it is advisable to determine not only how the shares will be distributed at the start, but also how the share will change. Here traditional tools for corporate relations can be used: options, westing and cliff. If a participant works for a long time and complies with duties, then his share does not change or even grows (due to the share of other participants or the reserve), and negligent participants lose their share (if their commitments are poorly fulfilled).

The order of withdrawal of participants from the project, including the forced, and the rules for accepting new participants

It will be good to agree ashore, in which cases the participant can leave the team of his own free will (what compensation he receives and in what order) and forcibly if he does not fulfill his obligations. It is necessary to provide a procedure for breaking the deadlock situations in order not to stall the project due to internal disagreements in the team. There should be a mechanism for negotiating decisions and resolving disputes.

The procedure for making decisions on the use and sale of the product

At the start, you need to agree on how decisions will be made on a particular type of product use. Life does not stand still: the conditions of implementation are changing and you need to clearly understand how the contract will change. It is very important to know who is authorized to make decisions on behalf of the team (everything is unanimous or there is a procedure for putting forward proposals and voting). Therefore, it is important not only what was agreed at the start. It is more important who and in what order can change the original agreement and will make decisions during the implementation of the project.

Summarize

At the start of the project, we have a general idea of ​​what we are doing and how we will earn, there is a general understanding of the distribution of responsibilities and profits. However, the general idea may be forgotten or exchanged and may not be general. The best solution would be to consolidate the agreements on paper and give them legal force. This will significantly reduce the risk of disagreement and increase the chances of a project's success. At the same time, this solution does not require significant time and financial efforts: even by yourself taking the contract template and filling it out, you will receive a real tool for solving the tasks set. Successes!



(c) Kirill Mityagin