The Dos and Don’ts of Moonlighting Your Startup
August 9, 2019 — Auz Burger
Many entrepreneurs begin their startup businesses while moonlighting a day job. While this is a common occurrence, and it helps keep your cash flow going until your startup is off the ground, it is important that you be cautious about Intellectual property (IP) laws. This is something that can break your startup before it even gets off the ground. Here are a few dos and don’ts to help you navigate IP laws while getting your startup off the ground.
Do: Hire a Business Lawyer Early
Getting your startup off the ground can be difficult, so hiring a lawyer, in the beginning, is a good way to help you navigate getting your startup running. Make sure you hire the right lawyer. Hiring a litigation lawyer or one who practices family law is not going to be the best fit for you. Look for a lawyer that handles business law, startups, IP, or something else along those lines. Those lawyers know what they are doing and are the best suited to help you.
Do: Read All Agreements Related to Your Current Employer
Most employers will make you sign several documents when you are hired, and many people simply sign without paying much attention to the content. All of these documents are intended to protect your employer by making sure you do or do not do certain things.
When you decide to begin moonlighting your startup, you need to sit down and read every single document you have from your employer before you begin your side project. Having a lawyer go over everything with you is also a good idea, because they can help you determine what you can and cannot do, in terms of your startup.
Some employers will include in these documents that any inventions you create while under their employment, even on your own time and with your own resources, are the property of the employer. You may be able to get a written release from your employer so that they cannot claim ownership of your inventions. Even if this is not included, you may still want to ask your employer for something in writing that says they will not attempt to claim ownership of your product.
If you determine that you need some sort of permission from your employer to work on your project, make sure it is an amendment to the current agreement, not a simple document. Making it an amendment gives it a better legal standpoint for if you have trouble with your employer later on.
This is why it is vital that you have your lawyer go over the documents with you, so they can advise you on your best course of action in this instance.
Do: Make a Clean Break
Leave your employer as early as you can, and make sure you make a clean break. The longer you stay with your employer while working on your startup, the stronger their legal claim can potentially get. Try to leave on amicable terms; if your departure from the company gets ugly, the employer may attempt to claim ownership out of spite.
Don’t: Use Your Employer’s Equipment or Time
If you use company time or equipment on your side project, your employer may attempt to claim the rights to your IP. Even if you have finished all of your work for the day and have a couple of hours to kill before you are off work, do not touch your project when you are on the clock. Anything that is linked to your employer in any way, including a work laptop, phone, or email address must stay away from the project.
Working on your side project on the company’s time or equipment can give your employer an opening to claim ownership of your project.
Don’t: Ignore Securities Laws
When you begin your startup, you need to make sure you follow securities laws, because if there is an error in them, it can harm your investment opportunities down the road. Wait to begin looking for investors until you are truly ready to, and make sure you have a good lawyer to help you with this. If you do not follow the securities laws, you will run into trouble when looking for bigger investments.
Don’t: Use Your Employer’s IP to Benefit Your Project
Moonlighting your startup can be tricky. IP is the biggest difficulty here, because if your product is too closely linked to your employer’s, they may be the owner of the IP, not you. This will especially come into play if you are going to be competing directly with that employer. It is important to be cautious here and make sure you have not copied any IP from the employer.
This does not just include products created by your employer, but even things like customer lists or pricing options could be considered your employer’s property, depending on your employment contract.
You can still use the knowledge and skills you have gained from your employer for your project. This is much different than using their confidential information for your project.
There can be a fine line between the general knowledge you have acquired and what your employer considers confidential, so that is important to keep in mind. Consulting your attorney can help you determine where the line falls in certain cases.