You are excited about your invention. You designed it, you patented it, you manufactured it, and you trademarked its name. You spent years working on this product and now people are clamoring to purchase it. However, in your rush to sell your invention, do not forget to protect yourself and your personal assets from product liability.
What is Product Liability?
Generally speaking, when you offer an item for sale, you are offering an implied warranty to purchasers that the item is safe to use for its intended purpose. Such a warranty creates a legal duty for you to protect consumers from defective and unsafe products, which extends to the design, manufacture, and marketing of your products.
Even if you have thoroughly tested your product, you cannot be completely sure that the product will not cause an injury. In many product liability cases, the defect in the design or manufacture of the product was only discovered once the product was widely used outside of the controlled setting of laboratory testing. Such injuries may not seem foreseeable but under strict liability laws you may still be held liable. So how can you plan for the unforeseeable?
Protect Yourself Through Business Entity Formations
The first step is to protect your personal assets from liability by setting up business entities to conduct all aspects of your business relating to your invention rather than operating as a sole proprietorship.
A business entity provides the highest level of protection from liability claims by separating business assets from your personal assets. While in many cases businesses elect to operate under a single business entity, the most desirable business structure is to form one business entity to hold all assets (such as intellectual property, machinery, real property, etc.) and to form another business entity to conduct business operations. This structure is highly advantageous as it further isolates personal assets from business liabilities and attempts to protect business assets from operational liabilities.
By setting up the appropriate business entities to own your business assets and to conduct business operations, you can maximize the probability of long-term business success. It is important to contact Garcia-Zamor Intellectual Property Law, LLC to prepare the proper contracts between your business entities to formalize their respective roles.
Protect Yourself and Your Business with Product Liability Insurance
The second step is to protect your business assets by obtaining product liability insurance. Under product liability laws, your business may be held liable for damages resulting from the use of the product. If you have product liability insurance for your business, the insurance provider may pay legal fees and court costs for defending a product liability claim for personal injury or property damage caused by your product even if your business is not held liable. If the injured party does obtain a judgment against your business, the insurance provider may also pay the assessed damages on your behalf.
If you have questions about setting up business entities, preparing proper contracts between business entities, or protecting yourself or your business from personal liability , please contact Garcia-Zamor Intellectual Property Law, LLC for more information.