Starting a venture on the side? Avoid these 3 costly employee-as-founder mistakes.

Workplace with notebook, office supplies and wooden desk.

Some entrepreneurs choose to remain with their current employers while launching new businesses. While this can be a good way to test your new product and market without sacrificing your income, you need to be aware of related pitfalls and protect against them. Here are a few of the main issues that can arise.

  1. Not owning your intellectual property

Depending on the employee agreement you have signed, you may find that any work product you create while in the employ of your employer belongs to them and not you. This type of contract clause tends to be standard for work product created during your work hours, but what many entrepreneurs do not know is that some contracts state that any work product created in or outside of work hours belongs to your employer. Especially where your new work product presents some potential benefit or competitive threat to your employer, they may well pursue a claim against you. Even if you eventually win, you will have to spend time and money defending your position.

Check your employment agreements carefully, if necessary with the help of a lawyer, and protect yourself against vulnerability in ‘grey’ areas.  Sensible precautions include, for example, not using a company laptop, and not working on company property even after hours.

  1. Opening yourself to accusations of infringement of your current employer’s IP

If your new business is similar to your employer’s business, you may find yourself adopting similar processes, tools, and strategies. Some of these may be classified as trade secrets, or be protected by copyright, patents or other IP. Especially if your employer is a large company, it may not be immediately apparent that certain processes or information are protected. In a worse case scenario, you can be sued for infringement and also potentially face criminal liability.  So, before you finalize your business plan or produce your product, evaluate thoroughly whether anything you are adopting could be construed as infringement or theft. Again, the advice of a qualified lawyer will be valuable in ensuring you take the necessary precautions to protect yourself against allegations of infringement.

  1. Disclosing confidential information

When you are working closely with other people, it can be tempting to discuss work projects, especially when you have shared expertise and interests.  It is also easy for people working in close proximity to inadvertently share information, for example by leaving computers open, or documents on a desk.  Disclosing information can become a problem, especially when you are developing innovative products. Prior disclosure can make your idea or innovation unpatentable, and destroy the confidentiality of your trade secrets. Always take the necessary precautions to avoid intentional or inadvertent disclosure in your workplace.

Researching and launching your new business while still in employment can be a great way to test its viability without taking a big financial hit. By taking the simple precautions listed above, you can avoid many of the potential issues that can arise.

Need help or information for your venture or intellectual property? Post a question to our experts, or see our explainer video here.
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