When technology startup, entrepreneurs, or any new venture embarks on the various tech startup due diligence and best practices covering product development, product promotion, company formation and intellectual property protection, the possibility of startup lawsuits are presented. Startup lawsuits can take many forms and they all have one thing in common: they should be avoided if at all possible by a startup.
Dangers of Startup Lawsuits
The reason startup lawsuits introduce such peril into a new company is that startups by nature already face substantial risk. Startups face product risk in terms of feasibility and market acceptance. They also face promotion risk in launching effective customer acquisition campaigns. And of course most startups are cash conscious and bootstrapped, and face financial risk. To then add legal risk to this equation by way of a startup lawsuit, may be the final the blow that makes the risk calculation untenable for any investor, including startup investors who are traditionally more comfortable risk.
Types of Startup Lawsuits
Startup lawsuits can take many forms and will be based on the type of legal complaint or claims that is being made against the startup tech venture.
One type of start up lawsuit can materialize from a dispute between cofounders. This is where, for example, one or more cofounders claim that other cofounders have breached their duties to the company in one form or another. Some of these duties may involve failing to provide services for the company, failing to provide a promised cash contribution or capital investment to the company, or some other conduct that was potentially prohibited such as infringement of intellectual property rights in connection with the company work product.
Another type of lawsuit that may a startup may face can include intellectual property violations vis-à-vis third parties. Intellectual property is a type of law that protects creative or novel business assets such as works of art, marketing copy, images, photographs graphics and audiovisual works (videos) under copyright law, the brand name, logo, or slogan of a business under U.S. trademark law, and useful inventions under patent law. For example a company like Gucci has intellectual property rights in connection with its brand name as well as it is proprietary marketing materials and it proprietary jewelry designs, and, a company like Facebook has intellectual property rights in its algorithms and user data.
Intellectual property lawsuits, also called IP Litigation, can take place in many forums, including federal district courts in the United States, state courts, and in some cases, agency tribunals such as United States Patent and Trademark Office (USPTO) Trademark Trial and Appeal Board (TTAB). Consultation with an experienced intellectual property lawyer or IP litigation attorney in California or nationwide is highly recommended if facing an intellectual property startup lawsuit.
Contract Startup Lawsuits
Another type of lawsuit that a startup my face is contract lawsuits or contract disputes. Contract lawsuits may occur, for example, between vendors and the technology startup for various services or goods to be provided. Depending on the nature of the tech startup in Los Angeles, Malibu, Hollywood, or anywhere else nationwide, a contract lawsuit or contract dispute may also arise between the startup and its customers. To avoid contract disputes the best strategy is to have a well drafted contract in place, and at the beginning of the deal, to make sure that you’ve done your due diligence on the contracting party to make sure that the terms of the contract reflect the business objectives of the tech startup venture.
Startup lawsuits should be avoided at all costs. If you are involved in a startup lawsuit or facing the possibility of one, consult with an experienced startup attorney, or IP litigation attorney, to discuss strategies and defenses.