Intellectual property (IP) sucks because it’s nearly impossible for most entrepreneurs to wrap their heads around how to avoid claims of misuse or tripping over conflicting rights. And just when you think you have it figured out, the rules change. It’s a rare (and I would suspect a dying) company that doesn’t have data, software or something else byte based driving its success. The issues around IP aren’t limited to those companies which commercialize it as their business; they affect those who use it to simply run their businesses.

The myriad of underlying problems to the internal use of IP confound entrepreneurs. Companies can’t live without IP – no matter what industry or stage of development, yet few understand its complexities. Problematic rights to IP materialize at the most critical of times – usually during a financing or sale of your business (or often worse, a claim of misuse arrives out of the blue). And when they surface, they’re very hard to clean up.

Take data of others… While we’re all watching the travails facing data access and use by such behemoths as Facebook and Google, but here are some data headaches felt by companies of all stripes:

• For those who get customer or other third party data through their websites or on line transactions, do you have the right permissions in place for the use you disclose? When was the last time you matched your terms of use with what you actually do (let alone changes in the law)? As is often the case, do you use otherwise permitted data in ways you didn’t disclose? If you fix your terms of use, how does that impact data you received before? Do you share data or summaries of it with third parties with the right consent? Do you limit how third parties can use data once they have it?
• For those using data gained from commercial (B2B) relationships, have you made sure that your customer agreement (many times you’re using their form document) even allows for such use?
• Consumer data is rapidly becoming a minefield, with both European and Californian privacy rules increasingly raising the bar on how to gain consent and limitations on use. Do you really think you can avoid compliance by stopping at any given border?
• What happens when the data you acquired is used not only to make your business perform better but literally changes how you do business? Who owns that improvement? Did you get the rights (and equally importantly confirm your ownership) of any such improvements?
• For distributors, resellers and those who incorporate products and services of others into their offerings, there is increasing tension in what data you need to share (and who owns it) with your partners; there is pressure among all the players in such interrelationships to control valuable data that drives value with the ultimate customer.

These are very hard problems to correct down the road. Often the use of data is so tainted that there is little that can be done to fix it if the rights weren’t correctly acquired at the front end.

Take software… We’re not talking about packaged software applications from established businesses. We’re talking about interfaces, websites, programs, tools, applications that every company requires to make the rest of their systems work and their business function.

• Whether you use a third party vendor, an offshore development team, your own employees or something you downloaded, provenance matters, as too often these sources (yes, even your employees) use code that they don’t have rights to, either they built it or sold it to someone else, or they hacked it from some other source, or they brought it along from another relationship…
• The rules around who owns developed IP vary depending on who does the work for you, paying for it doesn’t always mean you own it…
• While a decent contract establishing rights and limiting exposure helps, it isn’t enough if you receive a demand to stop using software that someone else has superior rights to (I bought it first); you may have a claim against who “built it” but you might have to stop using it…
• Oh, and what keeps some of these groups from reusing what they built for you with your competitors? Contract terms with a Belarus developer? Really?

Intellectual property rights are inherently challenging and every entrepreneur inevitably ends up with some opacity in understanding how it can be used in their business. Having an awareness of the complexity and challenges, doing some diligence on potential partners, understanding that these rights (and how you handle them) will always be in flux, is at least a start.

With more than 30 years’ experience in law and business, Newt Fowler, a partner in Womble Bond Dickinson’s business practice, advises many investors, entrepreneurs and technology companies, guiding them through all aspects of business planning, financing transactions, technology commercialization and M&A. Newt can be reached at newt.fowler@wbd-us.com.