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The friend with whom I planned to established a start-up did it by himself. Can he?

February 1, 2017
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Three friends developed an idea for a new venture and began formulating a business plan, a concept, logo etc., but like many other start-ups eventually the project was abandoned. One day, two of the friends discover that the third established a start-up based on the same idea. Do they have any right in the business?

A similar case was decided by the Tel Aviv Court at the end of 2016. Three businessmen had an innovative idea for a network of a nationwide discounted liquor stores.  To promote this venture, not only did they build a business plan, but they also began pitching the idea to investors, selecting locations for branches, designing logo, reviewing costs, meetings with expert advisors, etc.; Despite this, the Court dismissed the claim and held that the Copyrights Act does not protect an idea, but only protects methods of expression of an idea, and in this case all of the partnerss activity summed-up to initial searches, without any real actions.

As opposed to the case above, in another case the Court did receive a request of an entrepreneur to recognize him as the owner of the copyrights of his idea. That case dealt with a unique start-up for detecting dog owners who did not clean after their dogs by utilizing DNA tests.  The concept was suggested to a local authority, which began to utilize it by itself. The court accepted the claim and held that the entrepreneur holds the copyrights on his idea, not only because he initiated it, but also because he made many actions to implement his idea, including executing a study research and running a “pilot”, all while bearing all the financial costs. Thus, to determine whether the entrepreneur has the right to demand copyright recognition for his idea it is necessary to examine the uniqueness of the idea, but also the actions taken by the entrepreneur to promote his idea.

The above stresses the need for a founders’ agreement between co-entrepreneurs to ensure that even if the idea does not meet the prerequisites for copyrights of any one of them, the parties’ relationship shall be clearly regulated in order to avoid future disputes over who owns the copyrights in the idea.  When the lawyer structures the founders’ agreement, the document shall incorporate other important issues such as financing obligations and the sort.  It is certainly not advisable to download a standard agreement or other agreement that was prepared for different circumstances and does not fit the exact circumstances of the case.  Such may lead to devastating results, whether with regards to the rights of the parties, the tax aspect or other issues.  It is also not advisable to “save” funds and to approach an unexperienced attorney with not enough knowledge or experience in the field of start-ups.