Make the right choices for your start-up and spin-off

You have developed a promising new technology which could lead to an interesting venture. But the first question to answer is whether you own the technology.

Even if you have been the inventor or if you have written the software yourself you have no guarantee that you own all industrial property rights.

If you are an employee your employment contract will probably contain clauses dealing with this ownership.

If you made a development for another company the agreement you entered into therefor will also deal with this question.

And what are your rights if you were not alone but were part of a group of researchers working on it?

Even if your contracts are mum on your ownership of the intellectual property rights, the applicable law can come into play and determine who will own the rights.

And of course, who owns the intellectual property rights decides! Your first question would therefore have to be whether you own sufficient rights to decide yourself and to start negotiations with potential partners. And if you would have not answered this question before, be sure that it will be brought up by any investor or commercial partner you start discussions with. Or even before you get the chance to start discussions.

→ Bracquené can be your guide here. Together with you, an in-depth analysis of the ownership rights will be made and based on the outcome thereof the next steps can be prepared. 

A successful exploitation of  your IP requires a keen protection strategy. Protection of your IP grants you an exclusivity on the market allowing you to reap its benefits more efficiently. Investors will of course also be asking questions about the validity of your IP protection and a sound and clear strategy will help you to convince them.

Guidance in the strategic choices to be made can be offered by Hans Bracquené and the team of IPLodge. 

A freedom to operate study mapping the existing third-party rights that could potentially be blocking can be a necessary first step. But an analysis of your own technology to determine the best way forward will always be required. Based on its outcome you will be able to define the optimal protection. You will have to make a choice between patenting, copyright protection, other types of protection or a strategy based on trade secrets and we will assist you with that. 

This choice will have to be based on the specifics of your technology, the market you will be operating on and the costs of the protection.

Finally, if a third party owns the technology and makes it available to the spin-off, an in-depth  analysis of its protection status will have to be made prior to its transfer to the new company.

A close interaction between your team and ours will therefore be required and we have the required legal and technological expertise in-house therefor.

Whether you own the technology yourself or whether another party is the owner, the newly created company will need the legal rights to exploit it. Different legal solutions are available for this transfer of rights.

The most straightforward way is the transfer of the ownership rights to the new venture. But a license, granting user rights that will most likely be exclusive, can achieve the same aim. 

And whether the route of a contribution in kind, with shares in the new company as a compensation,  is chosen or not has of course a major impact on the structure of the company and on the relationship between the different parties involved.

The consequences of each of these choices involved will need to be assessed carefully. For the different parties involved (new company, IP owner, venturer, financial partner) the impact is different and a balance will need to be found.

The negotiations and drafting of these contracts will then be the next step whereby the experience and expertise of our team can assist you.  

Until recently, it was difficult as a co-founder of a startup to capitalize on your expertise and future work. In practice, only cash or previously developed and protected technology could be brought in in exchange for shares.

The new Belgian company law now finally allows to involve also the technological expert as a full partner in the incorporation, next to the financiers.  For the Private Company (bv), the legislator is now looking more realistically at the needs of the start-up company.

The expert as a full partner

This offers new opportunities to the founders of spin-off and to all start-ups who want to use a newly developed product or service as the basis for their activities. The rules on contributions in kind have been relaxed, as (future) labor and know-how can now also be contributed to statutory capital of a bv.

The valuation of the contribution of labor and / or know-how is done in the same way as the valuation of any other contribution in kind. The founders will have to provide a sound valuation and the statutory auditor will have to give its opinion.

This contribution can thus be put in balance with the contribution in cash.

Widening, no relaxation

However, the abolition of the capital requirement does not mean that fewer resources have to be made available to the company. The founders will still need to provide an initial capital sufficient for the planned activities of the company. This amount will therefore have to be determined case-by-case on the basis of the business plan.

The renewed company legislation and in particular the contribution of labor and know-how to the bv thus helps with the difficult balancing act between the contributors of the financial resources and the contributors of the technology.

With the right guidance and knowledge of the possibilities offered by the new company law, the negotiation position of the inventor, developer or author is considerably strengthened.

→ Feel free to contact us for more information and advice.