Scott R. Hansen

Good morning from #Irvine – at Irvine, CA

DAY 13: Your investor’s lawyer will ask for these after the term sheet is signed! "Due Diligence" usually starts right after the term sheet is done. Gaps get fixed between signing and closing. Under a deadline, when you have the least room to negotiate. Expect a request for signed IP assignments from everyone who helped build the product, not just the coders. Expect questions about open source and about any university or former-employer claim. Patent assignments must be in writing. Recording them at the USPTO protects you against a later buyer of the same rights. But that recording covers patents, not copyrights. Register copyrights at the US Copyright Office. Build a Due Diligence folder now, before the request list arrives. Tomorrow: Two years in and nothing was signed? It can still be fixed. Source: 35 U.S.C. 261.

Day 12: Suppose one of your best engineers is now...an AI tool! Who owns the code it writes? Purely AI-generated code gets No Copyright. But suppose a Human modifies it. The Human modification of AI code often CAN still be protected. So keep track of which critical modules a Human wrote or substantially reworked. This matters when potential investors ask who owns the code. Also, use a coding tool whose business terms keep your code out of model training. Read those terms yourself before your team pastes in anything that matters. Tomorrow: what your investor's lawyer will ask you for after the term sheet is done. Source: U.S. Copyright Office, Copyright and Artificial Intelligence, Part 2: Copyrightability (Jan. 2025), p. iii.

Day 11: One little Open-Source library can put your source code on the table! AI coding tools often don't write everything from scratch. They pull in open-source libraries: ready-made chunks of code that other people wrote and published for anyone to use. But "free to use" isn't the same as "free of conditions." Every library comes with a License. Some licenses, called "copyleft," attach conditions to whatever you build on top of them. The AGPL, for example, is one of the strictest. If you modify AGPL code and users interact with it over the internet, you must offer those users the source code of your modified version. Source code is your Crown Jewels- the readable instructions behind your product. AI tools add libraries fast. They may not flag the license. So the check matters more, not less. You can run a License Scan of your codebase before you raise. Better YOU find it than your investor's lawyer! Tomorrow: So your best engineer is now an AI tool. Who owns the code it writes? Source: GNU Affero General Public License v3, Section 13.

Day 10: If you built it in a university lab, the university may own it! Take the University of California. UC owns the inventions its employees create on the job. It also owns inventions made even partly with university research facilities or with grant money that runs through the university. Employees sign an assignment when hired. Non-employees who use the labs or work on grants sign before they start. Most students fall outside the policy, according to UC’s own guidance. But a student who works for UC is covered. So is a student who uses its research facilities or works on grant-funded research. If federal grants paid for the work, the government also keeps a license to use the invention for the government. Other universities have their own policies. Read yours. Then get a license from the tech transfer office before you raise investment money. Investors will ask! Tomorrow: one open-source library can put your source code on the table. Sources: UC Policy on Inventions, Patents, and Innovation Transfer (eff. July 1, 2024); UC Patent/IP Acknowledgment; UCOP Policy FAQ; 35 U.S.C. 202(c)(4).

Day 9: Your Demo Day pitch may have already cost you a patent in Europe & China! In the US, you get one (1) year after you publicly disclose your own invention to file a patent application. That’s the "Grace Period." Europe & China & most other countries have no Grace Period for a pitch. Anything made public before you file counts against your patent. That includes a pitch you gave in the US. There are a few hard-to-get exceptions. Don’t count on any of them. If Europe or China (or almost any other country outside the US) matters to your business, file a patent application BEFORE you pitch. Not after! Tomorrow: if you built it in a university lab, the university may own it. Sources: 35 U.S.C. 102(b)(1)(A); European Patent Convention Arts. 54 and 55(1); Patent Law of the People’s Republic of China (2020), Arts. 22 and 24.

Day 8: Thirty (30) days. That's how long a founder has to file an 83(b) election! This can save you (potentially) a LOT of money over time. Founder Stock usually vests gradually. Without this election, you're taxed on the stock's value as each piece vests. By then the company may be worth far more. The 83(b) election moves that to day one. You're taxed on the stock's value when you receive it, less what you paid. Pay full fair market value and the taxable amount is zero. The deadline is 30 days after you receive the stock. There's no discretionary extension! The instructions to IRS Form 15620 say to file it by mail. One Catch: if you leave and forfeit unvested shares, the income you reported does not come back as a deduction. Calendar the 30 day deadline the day the stock is issued. And try to talk to a tax adviser about your own numbers. Tomorrow: your Demo Day pitch may have already cost you the chance at a patent in Europe. Sources: 26 U.S.C. 83(a), 83(b)(1)-(2); Treas. Reg. 1.83-2(b); IRS Form 15620 instructions.

The US Patent & Trademark Office won't register a trademark that merely describes what you sell! Trademark law ranks names. The strongest trademarks are completely made up words like KODAK. Called "Coined" trademarks. The second strongest are real words, but unrelated to what you do. Like APPLE for computers and such. Called "Arbitrary" trademarks. Third strongest hint at what you do, but don't actually describe it. Like NETFLIX ("network" combined with "flicks" for movies). Called "Suggestive" trademarks. Weak trademarks describe what you sell. Like ULTIMATE BIKE RACK for, well, bike racks. Called "Descriptive" trademarks. Usually can't get a trademark registration. Exception: you can try to prove the public already connects a Descriptive mark to you. That can be hard. So...Pick a name you can actually register. Make sure it is Coined or Arbitrary or at least only Suggestive. If it's Descriptive, consider finding a new trademark. Tomorrow: Founder Stock & the 30-day tax deadline. Source: Trademark Manual of Examining Procedure 1209.01, 1209.01(a), and 1209.03(a) (May 2026).

Your LLC filing is not a trademark! Registering your company with the state lets you do business under that name. But this does not create a registered trademark! Buying the domain doesn't help either. Registering a domain name gives you no trademark rights. Trademark rights come from using the name in the ordinary course of trade. Federal trademark registration makes those rights stronger. You do not have to wait for launch. You can file a federal intent-to-use application in advance. Once the mark registers, your filing date becomes your nationwide priority date, except against anyone who used or filed before you. Clear the name with a Trademark Search before you start using it, or pay for a logo or signage! Tomorrow: the name your team loves may be the one the USPTO refuses. Sources: USPTO, "Trademark process" and "Trademark basics" (uspto.gov); 15 U.S.C. 1127, 1051(b), 1057(c).

In California, your employer cannot claim everything you invent on nights and weekends. Many employment agreements assign your inventions to the employer. BUT...California Labor Code 2870 limits that. The assignment clause does not apply to an invention you developed entirely on your own time, without the employer’s equipment, supplies, facilities, or trade secret information. Two exceptions: One covers inventions that Relate to the Employer’s Business or the business's actual or demonstrably anticipated research or development. The other covers inventions that result from Any Work You Did For The Employer. Building a startup while still employed? Map your idea against those exceptions before you vibe code, build a prototype, make engineering drawings, or the like. Don't use the company laptop to do it! Tomorrow: your LLC filing did not give you a trademark. Source: Cal. Labor Code 2870(a).

Two words in your invention agreement decide who owns the invention. They cost Stanford its patent case against Roche. A Stanford researcher's agreement with the university used the words "agree to assign." A later agreement with a company called Cetus used "do hereby assign." The Federal Circuit held the first was "a mere promise to assign rights in the future." The second "effected a present assignment" of his future inventions. Stanford could not establish ownership and lost its standing to sue Roche. The Supreme Court affirmed on other grounds and left that contract reading untouched. Check your invention assignment. If it says "agree to assign," your company holds a promise, not the invention. Tomorrow: paying the contractor did not buy you what they built. Reply: Sources: Bd. of Trustees of Leland Stanford Junior Univ. v. Roche Molecular Systems, 583 F.3d 832 (Fed. Cir. 2009), aff'd, 563 U.S. 776 (2011).