Haven’t incorporated in Singapore yet? Make sure you protect your app from being stolen by contractors

protect intellectual property singapore

Many founders don’t quit their jobs immediately to incorporate a startup. There’s usually a period of time when the founding team executes their idea on the side, conducting market research, developing a prototype of the product and testing that prototype with their target market to see if the idea will fly.

More often than not, this happens before the formation of the business entity. The logic behind the founder’s reasoning is to have a reasonably validated product before moving forward. While it’s debatable whether this is a good strategy in itself, there are a number of risks involved in delaying the formation of your business entity for too long.

These risks can arise regardless of what you’re creating. Intellectual property can be in the form of market research, trademarks, occasionally patents or even a business plan. In the aftermath of the gold rush of creating mobile apps for sale in the various app stores, software code has become one of the more important intellectual properties to protect.

The Risk

Many non-technical founders outsource the development of their apps for their startups. When they do so, many assume that they automatically own the code. After all, if you pay someone to develop software, you should own the code, right?

Unfortunately, this isn’t always the case. Generally, in Singapore, the person who created the work owns the intellectual property in the work. One of the exceptions to this general rule is when the work was done in the course of employment. However, independent contractors aren’t considered employees. There is another exception that can possibly be relied on – that the work was commissioned, in which case the commissioning party owns the copyright.

However, this exception in the Copyright Act is vague and you may wish to be on the safe side and avoid all doubt by having an independent contractor agreement drafted, stating explicitly that the work product is assigned to the hiring entity. If you haven’t incorporated a company yet, you’re the hiring entity.

After Formation

There’s going to come a time when you’ll probably want to incorporate your startup. Subsequently, when you do eventually form a company, the first thing you should do is to assign the assets and contracts to that company. It’s easy to forget this when you’re working hard on your startup so do keep this in mind. Remember, anything that was created before the company was formed doesn’t belong to it unless it has been assigned to the company!

When it comes to raising money, potential investors (the more sophisticated ones at least) will want to make sure that your company owns all the intellectual property you say it does during the due diligence process. Stay one step ahead of your investors by making sure you don’t mess up this often-overlooked step.