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Does Your Startup Idea Violate Your Contract?

By Brett Snider, Esq. | Last updated on

Taking the first steps to get your startup off the ground may mean taking some final steps with your current employer, ensuring you don't burn any bridges or breach any contracts.

The last thing your new business needs is a lawsuit from your old employer. So you'll want to avoid some common startup mistakes.

How can startup ideas violate employment contracts, and what can entrepreneurs do to not get sued? Here are some issues to consider:

Non-Compete Agreements

You may be all ready to open up your new pop-up venture, "Hipster Joe's Bacon Cupcakes," but you should remember that your employer might not want you as competition.

As you will learn as a new business owner, many employment contracts contain non-compete agreements that reasonably restrict where, when, and how an employee can work once she leaves that company.

Although courts may refuse to enforce these agreements if they are too broad, provisions that prevent a former employee from working in very close proximity in the same field will likely be upheld.

A startup creator will want to examine her past employment contracts to see if a non-compete agreement will prevent her from moving forward on her startup idea.

Non-Disclosure Agreements

If your former job involved working with any sensitive information, you likely signed a non-disclosure agreement meant to protect trade secrets and other valuable information from slipping out when employees leave the company.

Startup hopefuls should check these former non-disclosure agreements to see if they include information within the ambit of their new businesses.

A new business owner may be required to keep an old employer's proprietary information confidential long after her duty to not compete expires.

Patent/Invention Issues

Many startups have their genesis in a product, invention, or idea that forms while working for a previous employer. But this may mean trouble if your old boss wants to claim that your startup's product or service belongs to him.

It would be prudent to consult a patent attorney in your area before your startup's next big thing becomes the center of an infringement suit.

Tying up any loose ends with old employers will ensure your new startup can flourish without draining any investment capital in court.

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