focus on
Average read time 7'

What happens when the idea “belongs” to the minority partner?

Published in: Intellectual Property
by Arlo Canella
Home > What happens when the idea “belongs” to the minority partner?

The protection of intellectual property plays an essential role in the dynamics between partners in a company, especially when innovative ideas are intertwined with corporate roles and internal conflicts.

Revolutionary ideas and partner conflicts: the intellectual property dilemma

In the start-up world, the protection of revolutionary ideas sometimes turns into a real challenge. This scenario becomes particularly intricate when, within the group of founders, disagreements flare up and a battle is waged over the recognition of the merit of achievements.

The minority partner is often at the centre of these dynamics, frequently behind a brilliant idea but not formally recognised in a specific job role. They find themselves struggling to obtain due recognition for their intellectual contribution in front of the other partners.

Intuition, by its ephemeral and intangible nature, eludes easy valorisation and definition. However, copyright law (Law No. 633/1941) and industrial property law (Legislative Decree No. 30 of 10 February 2005) offer suitable tools to protect the interests of those involved. When the minority partner has been the driving force behind the innovation without a formalised work framework, the question of ownership of the idea becomes complicated.

It may be that such ownership is attributable directly to him, it may be lost in a kind of legal limbo, or it may be assigned by right to the company, depending on the very nature of the innovation concerned. It is therefore crucial to explore this issue carefully to thoroughly understand its implications and possible solutions.

The key to an effective and fair management of such issues often lies in the ability to anticipate potential conflicts through clear and detailed agreements, thus ensuring that each contribution, regardless of its shareholding or formal role within the company, is duly valued and protected. Let’s see how.

Agreements between partners and the risk of unfair competition

In the context of the complex dynamics that characterise the birth and development of a start-up, the definition of clear and detailed agreements between the partners assumes central importance, not only for the protection of innovative ideas but also to prevent potentially harmful behaviour, such as unfair competition. Such agreements, which unequivocally outline each partner’s contribution, corporate roles, and above all the way intellectual property is managed, are an important shield against the emergence of internal conflicts.

A fundamental clarification concerns the importance of including specific clauses such as non-competition or confidentiality agreements in company agreements (see the article: “What is the point of a confidentiality agreement?”). This aspect is crucial, for instance, to prevent a partner, especially one holding crucial information or expertise, from starting competing activities, endangering the interests of the start-up of which he is a co-founder (in fact, it is not uncommon for the partner ‘getting fed up’ and seeing the company in stalemate to decide to start a new company with new partners). Without clear agreements in this regard, the door remains open to misconduct that could undermine the success of the company.

With regard to the company director, Italian law places an explicit prohibition on competition, as set forth in Article 2390 of the Italian Civil Code. This provision precludes the director from engaging in activities competing with the administered entity, unless explicitly authorised by the shareholders’ meeting. This measure is intended to protect the company from possible conflicts of interest that could compromise its strategy and development.

In this context, it emerges that the practice adopted by some more experienced shareholders is to assign the role of director to the shareholder considered crucial for the company. This strategic choice not only enhances the individual’s contribution, but also channels the partner’s expertise into a position of responsibility that, by law, binds him or her to exclusive corporate loyalty, thus mitigating the risk of competing initiatives.

The elaboration of these pacts between partners, therefore, is not limited to a mere formalisation of individual contributions, but becomes a strategic tool for internal cohesion and company protection. Through an open and constructive dialogue, partners have the opportunity to lay the foundations for a collaborative environment in which innovation can flourish safe from legal and operational risks.

The problem of "beneficial ownership" of trademarks, patents and software

The protection of patents and trademarks is a well-established and clearly defined legal practice in the start-up context, characterised by the constant search for innovation. Through their registration and simultaneous registration, these legal instruments offer clear and direct protection for inventions and distinctive signs, thus also safeguarding the interests of the company. However, when it comes to software and applications, the legal landscape becomes less clear and considerably more complex.

Unlike patents and trademarks, software protection through copyright does not require a formal registration process to be effective. Software is automatically protected by copyright law from the moment of its creation, as long as it possesses a minimum of originality (see the article: ‘The tools of legal protection for software’). This means that protection arises automatically, covering both the source code and the object code of the application as a creative expression of the author.

Despite this apparent ease, the question of ownership of the software developed within the dynamics of a start-up can generate considerable legal uncertainties (see my previous article: “Source Code: Is the Software House Obliged to Hand It Over to the Principal?“). In the absence of clear client agreements or dedicated covenants defining the terms of collaboration and intellectual creation, ownership of the software tends to remain in the hands of the developer. This situation represents a potential risk for the start-up, which could find itself deprived of the rights to one of the most valuable and critical intangible assets for its business (see the article: “Software valuation: technical, legal and economic aspects“).

When software development takes place in a collaborative context, with the contribution of several people or under the direction of one or more of the start-up’s partners, without prior agreements clarifying the nature of the ownership and licensing of the software produced, the start-up could face legal disputes or lose exclusive control over the use of the application, thus undermining its ability to fully capitalise on the potential of the innovation.

In these circumstances, the intervention of a lawyer specialised in commercial law and intellectual property protection becomes crucial.

IP competence to secure a strategic advantage

The complexity of regulations governing the protection of patents, trademarks and software requires specific expertise, capable of navigating the legal challenges and internal dynamics of the company. A lawyer with experience in Intellectual Property (IP) can offer indispensable advice, guiding the company in defining development agreements, licences, and non-disclosure agreements that clearly establish the rights and obligations of all parties involved.

This specialised expertise becomes invaluable when it comes to protecting the technological heart of the enterprise, such as software, which often presents the most complex regulatory challenges. An IP lawyer’s ability to devise legal defence strategies tailored to the company’s specific innovation allows the company to safeguard not only its creativity but also its integrity and competitive potential. In this way, legal advice becomes a tool for building a solid long-term growth strategy, ensuring that innovations remain protected and exploitable.

In conclusion, the effective protection of intellectual property in a start-up is not a luxury but a strategic necessity, which requires the intervention of legal professionals with in-depth knowledge of the specificities of the sector. Through their support, it is possible to transform innovative ideas into protected and exploitable assets that are fundamental to the success and sustainability of the company. Partnering with an IP lawyer is, therefore, an investment in the future, enabling you to navigate the complex world of IP with confidence, turning legal challenges into opportunities for growth and consolidation.

All rights reserved ©
Publication date: 21 February 2024
Last update: 22 February 2024
Avv. Arlo Cannela

Avvocato Arlo Canella

Managing Partner of Canella Camaiora Law Firm, member of the Milan Bar Association, passionate about Branding, Communication and Design.
Read the bio
error: Content is protected !!