Properly Documenting the Creation of Your Startup’s IP

After doing IP litigation for over a decade and spending thousands of hours conducting evidence discovery, people never cease to amaze me.

Many people hoard an enormous number of worthless documents — just in case they might be needed in the distant future.  This bad habit can increase litigation costs by millions, even for unfortunate startups, when lawyers have to sort and review the stockpile for potentially relevant evidence.  The ease of electronic storage and duplication has made hoarding a litigation nightmare.  (I’ll do a post on proper document retention policies in a few months.)

Ironically, the hoarders usually neglect to adequately document their most important ideas and inventions.

Many people keep the crap and not the important stuff.

(Of course some hoarders keep evidence that proves infringement, which is important to the other side.)

When IP ownership is disputed or the company tries to stop a competitor’s infringement, some companies have been highly dismayed when they don’t have the proper documentation about the creation for the company’s crown IP jewels.

For example, in the Bratz doll case discussed previously, the fate of the billion dollar doll line in large part hinged on the documentation of the Bratz dolls’ creation.  Carter Bryant failed to prove that he conceived of the dolls when he was not employed by Mattel.  Mattel hired forensic document experts and Bryant admitted at trial that he had altered dates on his records.   His poor, clumsy documentation in a spiral notebook didn’t cut it in court.

Because the jury found that Mattel owns the Bratz doll line, the doll designer will likely lose millions in royalties.   MGA, the Bratz doll maker, will lose billions in sales.

If you think that you and your employees may be creating valuable IP, it is well worth the effort to require good idea and invention record keeping — from the start.

As you are creating your company and your key IP assets, you have the perfect opportunity to implement proper recording practices and procedures.

Be aware:

• Courts don’t trust electronic documents.  Dates are often critical to claims of ownership and patent statutory issues.  Everyone knows that dates can be electronically altered and faked.   Trustworthy records are crucial.
• Courts distrust sloppy record keeping.
• An inventor’s own testimony is suspect because it is usually self-serving.

To overcome the Court’s suspicions, you need to create idea and invention records that look reliable and believable.

Even in the electronic age, recording ideas and inventions by hand in old fashioned, permanently-bound notebooks is still the best evidence in court.

Bound notebooks that show when a page has been deleted are more trustworthy.

Affixing data printouts and key code sections to notebooks in a way that shows later alterations, like stapling, is also better evidence than an electronic file.

Remember:  You are creating potential court evidence.

(I will discuss the major issues that software developers face in creating trustworthy evidence in a later post.)

The following are important for an Idea/Invention Notebook:

• Permanent binding (a composition notebook or lab notebook works well)
• Permanent ink for writing

On the inside cover of the Notebook:

• Prominent, legible, printed name of creator
• Name of employer or IP owner
• Date that notebook is started and finished
• Location where work is being conducted

In litigation, failure to identify the notebook’s author and the dates of notebook entries is a big problem.

In the Notebook use the following:

• Legible handwriting
• Project and topic headings
• List of all people involved in each project
• References used or sources of ideas if any
• Ideas described in a way that is understandable to others in the field
• Contemporaneous entry of ideas and research
• Full date on every entry!
• Time of work, if done during off hours and IP ownership is an issue
• Initials on the bottom of every page
• Printouts of key software code sections stapled to notebook pages
• Printouts of key data stapled to notebook pages
• For pages explaining the most important ideas and data, there should be the full signature of the inventor(s) and a signature by a witness

You should have a witnessed record of when you conceived of the idea and when you actually made a working version of the idea.  This is critical for patentable inventions.

You need to remember that you are creating potential legal evidence.

I know it’s a pain, but if what you are creating is potentially patentable or valuable, it is well worth the effort to do a good job in documenting your ideas.

With proper record keeping you can improve the odds that you can protect your million dollar idea or defend yourself against claims of infringement.