Legal

How can I protect my web site IP?

Aleksey Malyshev Software Engineer at iTouch Biometrics, LLC

May 30th, 2016

Suppose I am ready to roll out the first version of my web site to test the idea. At this moment I am not sure if it will work, so I do not want to register a company or make any official paperwork.

How can I ensure that I keep all legal rights for this web site? Suppose it will work. How can I claim it's mine? Suppose I got some traction and decided to register a company. Will I need to transfer the ownership to the new business entity? Maybe use this web site as my initial investment into the business?

Siarhei Harbachou Specialty Market Researching

May 30th, 2016

If you have traction, investors have no interest to copy your project. They invest not in  idea, but in person who drives this idea.

Alex Chan Co-Founder at DataNovo, Inc.

May 30th, 2016

As a long time patent prosecutor and litigator (and now startup founder), I believe that many entrepreneurs have a common misunderstanding (and a mistaken perception) about what IP and how such IP can be protected. But for the sake of discussion (since you have provided no info as to what IP you are seeking to protect), if you are seeking protection for the "look and feel" of your website, then copyright might be the venue through which you could protect your website against downstream copycats.


Copyright vests automatically in a work, provided that it satisfies certain criteria. U.S. provides registration procedures via the Library of Congress which must be followed for the author to benefit from full protection. For a work to qualify for copyright in the U.S., it must be "original." This is not an onerous requirement to satisfy. The work does not have to be novel or unique. It just has to originate from the author (i.e., it must not be copied but must be created as a result of some skill, labor and judgement). The work must also be recorded in writing or otherwise but the method of fixation is irrelevant and could even include computer memory.


With this background, if what you are seeking to protect is the "look and feel" of your website, you should consider whether you are the owner of or have the right to use all of the materials that you wish to include in the website (e.g. data, text, photographs and software). If you are not the owner of the materials, you will need a license from the respective copyrighted owner in order to use, alter, and include them on your website.


Now, if what you are actually seeking to protect is the underlying tools, systems, or methods facilitated by the website (again, you have given little to no information so I'm on a hunch here), then patent might be an option. But patent eligibility has become very stringent in the past five years. U.S. Supreme Court and the Patent Office have created a set of specific rules governing patent eligibility. Abstract ideas (which include certain software implementations) are not patent eligible. A website, without more, is not patent eligible. Nor is it the right kind of "IP" for which you can obtain a patent.


As to ownership transfer, no investors would EVER invest in this "new business entity" unless you have transferred your rights to any such "IP" to this business entity. Without such IP, such investors are basically investing in an empty shell.


A lesson to be learned is Coverplay. Coverplay was looking to raise about 350k from angel investors. A few investors made proposals and one particular investor offered Coverplay's founders 350k in exchange for 40% of their company. Coverplay countered with 350k in exchange for 30% of the company and 10% of the patent. The investors huddled and then pulled their deals off the table because this indicated to them that Coverplay didn't own the patent.


Without the IP, there was no business. The investors (rightfully) assumed the patent was owned by the company. In essence, Coverplay was asking for investment in something they didn't own. Many entrepreneurs are claiming they own the IP when they really don't legally.


When starting a new business entity involving IP, you must transfer the IP to this new business entity. For example, if the intellectual property is developed prior to incorporation, you can transfer the IP via the founder's stock purchase and tech transfer agreement.

David Pariseau

May 30th, 2016

You can file a provisional patent, which can be quite reasonable for a small entity ($130) or the new micro-entity for individuals w/o a lot of previous patents ($65), and you have a year to convert that to a detailed patent application.  The provisional is not examined so you can put in all your ideas and thoughts and possibilities and you don't need to make any claims.  That way if things go well and some of the ideas pan out you can convert it to utility patent and if you want transfer ownership to some newly found company which would purchase the patent rights for some consideration (>$1).  All of this presupposes that there is indeed some patentable invention that can be protected (there are quite a few types of things that this applies to, business methods being one of these), but if that's the case that's a pretty inexpensive way to get some level of protection.   If you need some help with the patent application there'll be costs there, but if you do a good job of describing all of your ideas in detail in the provisional all of that content is available for the patent application in a year's time (at which point you'll know whether this idea is worth pursuing).

Ken Anderson Director, Entrepreneurial and Small Business Development, Delaware Economic Development Office

June 4th, 2016

You can prove that you wholly own a web service through the ownership, stock etc. and IP of a business entity that retains, offers and generates revenue from that service. 

Gray Holland founder / director at UX-FLO

May 30th, 2016

Stealing ideas is a separate topic it seems -- this is always possible, but not likely until you have substantial traction -- at that point you have a customer base that is your greatest asset and protection against competition. 

As far as your question, you effort into your idea is your sweat equity, when you form the "company" you own 100% of it and you decide to "hold" the all of the value of that sweat equity in that company... If you get investment they are buying into that business entity (and diluting your ownership in return). Its your idea and sweat, you form the company -- no need for "converting" it -- you form it. 

Ideally you do this before approaching investors, but its not necessary. The advantage of setting up the legal business first, is you setup all the "rules" that run that company (including how your equity works and lots of 83B tax stuff, etc.) If you wait then you and the investors will be setting it up and all that stuff will be on the negotiation table. Up to you...  

Aleksey Malyshev Software Engineer at iTouch Biometrics, LLC

May 30th, 2016

I was not asking about competition.

David Pariseau

May 30th, 2016

To be accurate you are indeed discussing protection from competition, though in the case you cite, the competition would be from a group of investors who decided to take your idea and implement it without you.  Competition can also come from your supply chain or obviously from competitive firms.  A defensible patent protects you from all of these.  

If your idea is patentable (hard to say without knowing more about it) it adds significant value to approach potential investors with an idea that has patent protection (even if it's pending, or in process, they'll vet the IP anyway). Rather than just the idea... it shows that you've done more than simply come up with a rough concept, but that you've actually taken steps to protect it (which they may see as valuable if the idea has merit).   

Aleksey Malyshev Software Engineer at iTouch Biometrics, LLC

May 30th, 2016

I have an MBA degree from a business school in San Francisco. I met some very prominent businessmen, who said that patent protections is a waste of time. Many teachers also promoted the idea that patents are useless these days because everything changes quickly. You should be quick enough to outperform your competitors anyway. Does this idea look extreme to you?

Aleksey Malyshev Software Engineer at iTouch Biometrics, LLC

June 4th, 2016

That makes sense. If I am getting paid for this service then it's probably mine. That gives another reason why investors prefer investing into companies that already have revenue and not just proof of concept or MVP.

Aleksey Malyshev Software Engineer at iTouch Biometrics, LLC

June 4th, 2016

Thank you very much for comments. I got interesting second look at the problem. However I still think I was misunderstood.

Think about it this way. If I have money in the bank, it is recorded on my name and I can prove it's mine by showing my ID. If I bought a house, I have a record somewhere that says it's mine. If I have a share in a company, there is some sort of document that says who owns what.

When you register a web domain name, it is usually enough to provide an e-mail and a credit card number to pay for the service. They do not require any ID, would accept a nickname instead of my real name, etc. If I approach anyone and say - "this web service is mine". How can I prove I wholly own it?