by Tom McGuire,
Head of the Innovation & Technology Group at Taylor Vinters

Introduction | Page 2 | Page 3

In this region we have seen many technology companies formed as spin-outs of larger operations. This can be a great way to start a company as the principals usually have a friendly relationship with the parent company and can get plenty of valuable advice and support. A friendly relationship, however, does make some people shy when it comes to requiring the clarification of intellectual property rights and asking for warranties. But without these formal agreements at the start, the value of the spin-out to potential investors is jeopardised.

The entrepreneurs who are 'spinning out' should also consider undertaking a due diligence check on the parent company before any agreement is made, to ensure that the parent company really does own the intellectual property it is providing to the spin out.

A challenge to the ownership of a company's intellectual property would be a serious setback to most new businesses. This is a particularly critical area for technology companies, since knowledge and innovation are the capital from which they generate profits.

Entrepreneurs should talk to a lawyer who specialises in intellectual property at an early stage in the formation of a company, to make sure that all rights are fully protected and exploited.

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