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In the pre-financing stages of your company, handling some basic legal issues (NDAs, patent drafts) by yourself may be useful - good start-up law firms are overloaded these days. It's common for law firms to ask for a small equity stake in your company, and/or to defer legal fees until you raise venture money.

Non-Disclosure Agreements (NDAs)
Early-stage companies need to share their ideas with a variety of people -- potential partners, employees, customers, advisors and board members. Before talking to these people, getting them to sign an NDA is highly recommended. It's a useful deterrent to IP leaks, and also signals that you are serious about making sure your plans remain confidential.

Most VC's don't sign NDA's. A verbal assurance that your ideas will remain confidential is probably the best you can hope for from them.

Many people (especially those who work at large companies, or other start-ups) will not sign your NDA, but will offer to sign their own corporate version (typically mutual). If this happens, make sure that it's worded to protect your ideas adequately. Here's a template of a
one-way NDA, and one of a mutual NDA.

Patents and Intellectual Property
If your ideas are new or unique enough, its worth trying to patent your business model/process. If your company is based on some kind of technological innovation, it's crucial that you file patents to protect your IP. Expect to wait at least 2-3 years for a response on an Internet business model patent -- less for technology patents. If you have the time, it may be worthwhile to draft your own patents (though this is not advisable unless you don't have the funds -- attorney fees run between $5000 and $10,000 per patent filed, and there are a number of good patent attorneys in both New York and the Bay Area).

Informative Web resources:
Articles about business model patents: Partial List of Law Firms
These firms specialize in start-up law, and can help in the fund-raising process. Some (like Venture Law Group) actively invest in their client companies.

Copyright © 1999, 2000 Arun Sundararajan. All rights reserved.