If you partner in an invention, get expectations in writing.
Because getting a new product on the market requires many skills that we may not be comfortable with, some inventors benefit from teaming with someone who has complementary talents. But for a partnership to work, you should outline your expectations in an agreement—even if it is a checklist—to share with prospective team members:
Explain clearly what each party is responsible for doing and what each party is financially committing to the project.
2 Decision making.
You should state that the final decision is yours but that you will discuss each major decision with the parties and take into account their input.
3 Ownership of the idea, or partnership arrangement.
It may be too early to form a company, but you should state how much of the idea is owned by each member of the team. Include a statement that each party’s ownership may change if additional members or investors are added.
4 Patent ownership.
The simplest way of doing this is starting a company or LLC, then assigning the patent to the company—with each team member owning the percentage discussed in item No. 3. All team members should agree to assign the patent to the company.
5 Profit/revenue sharing.
This should be along the lines of percentage of ownership. But you should also discuss taking money out. You may need to take money out of the company, while your partners might want to completely reinvest any profits.
6 Adjustment procedures.
Agree that the percentage of ownership can change if a team member’s participation changes from the original agreement.
7 Commitment levels.
Be clear in what commitment level, in time and money, each member can expect from other members.
8 Product Review.
The team should meet every quarter to review the project status and discuss how it will move forward in the next three months.
9 Expected business model after product is launched.
In many cases, you might just license the idea—in which case the ownership percentage will stay the same. Other times, you might expect to go into business. If that is what happens, be sure to discuss that people will be paid a salary, agreed to by the partners, based upon the time commitment to the company.
10 Derivative products.
You should state that the team is for just the one product and its product improvements, and that any derivative products that might come out of the project belong to you. Or, derivative products could belong to the team.
11 Dispute resolution.
You might want a clause that any disputes will be settled with arbitration. Most areas will have services that offer low-cost arbitration or dispute resolution.
This might seem like a lot of items to discuss before starting a team partnership. But my experience is that airing out the possibilities before starting keeps everyone’s expectations in line and helps focus members on their responsibilities and commitments—and the team’s eventual success.