No doubt, Facebook is one of the internet's hottest startups. The company has raised gobs of venture capital, has deals with companies like Microsoft (NASDAQ: MSFT), and is often rumored to go public or be bought out.
The company's founder, Mark Zuckerberg, is just in his early twenties, fresh from Harvard. Over the past few months, several of his recent classmates have made claims that they are the real owners of the Facebook concept.
Such disputes are very common for early stage companies. And it's also common for these companies to be sloppy in protecting themselves from legal claims.
So what can be done?
First, it's important to have founder's agreements. These set forth contributions, roles, and ownership positions. There should also be clauses for things like noncompetition, nonsolicitation of employees, confidentiality, and commitments on time to be devoted to the venture.
I also think it's a good idea to have all employees, contractors, and founders sign invention assignment agreements. This means that all intellectual property that is created will belong to the company.
To get some more insight on all this, I had a chance to interview F. Scott Moody, CEO and founder of AuthenTec (NASDAQ: AUTH). He recently took his company public and had to undergo tremendous due diligence -- especially on its intellectual property. The company develops sophisticated fingerprint identification technologies.
According to him:
"Execution is the best way to protect your company and its key assets. Having an idea is really of little value unless you can turn it into something -- either on your own, with others or by even licensing it to someone that can 'make it happen.' If one was to do any level of research, I would bet that few times in history has the one that came up with the first idea been able to ride it to a leadership position. Did Intel (NASDAQ: INTC) invent the microprocessor? Did McDonald's (NYSE: MCD) invent the hamburger? Did Google (NASDAQ: GOOG) invent the search engine? Did Microsoft invent the OS? Did Apple (NASDAQ: AAPL) invent the PC? The answer in each of those cases and many more is no.
"They may have refined it, they may have made material improvements, they may have had the idea to take it to the mass market, but none of them invented the base idea to start. What they did do was to execute -- to turn the idea into something real. In many cases, even like the Facebook case, it is not the idea that guarantees success.
"When folks ask me what I worry about most for our own company, my answer is always the same - execution. Yes, we have more patents in this market than anyone else. Yes, we are out-filing our nearest competitor by about 10:1. Yes, we have four times as many products as our nearest competitor. Yes, we have shipped an industry record 20 million sensors. But, who the heck cares? It is about our ability to execute now and in the future, to stay ahead, to continue to innovate and drive new product development."
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
9-10-2007 @ 9:35AM
Beltway Greg said...
Well, I guess with the sale of the 1 millionith IPhone all is forgiven in Apple land. I predicted they had passed their goal about the same time Steve was giving his speech. As many of the buyers were also shareholders (or should be), all is well. I've did another informal survey of the stores in and around the metro DC/Baltimore area this week and the Apple swag is blowing off of the shelves. I'm thinking earnings around $1.10, a hunch not based on any real data, just a hunch. (I'll do the number crunching later.) Neverthenoose, should make for an interesting re: highly profitable march to the next earnings announcement. I still think we'll hit $175.00 by mid-Oct. though my price target for last week, $145.00, didn't quite hold up as the week progressed resulting in a short stay in the house of pain. I also believe Wendy's is about to be acquired around $41.00 and APH is the little engine that always can.
Beltway Greg.