For start-up companies and small businesses, collaboration with other companies can provide great opportunities. However, the benefits of opening the door to outside collaboration can bring exposure to substantial legal risks. Because small businesses lack the capacity to absorb litigation costs, it is essential for a small business to obtain legal protections when working with other companies. Consider the following scenario:
A start-up business has developed what it believes to be the next hot item, the mobile Widget-App. It pitches the idea to Big Company, and Big Company loves it. Big Company grants a license to use its App software in creating the prototypes. With Big Company’s software, and the money borrowed from friends and family, the start-up begins to create several versions of the application.
