THE DISASTER OF LACKING LEGAL PATENT DOCUMENTATION: THE TRAP OF NEGLIGENCE AND THE LESSONS ON PROTECTIVE BARRIERS FOR A STARTUP’S INTELLECTUAL PROPERTY

1. Summary of the Real-Life Situation

Mr. M and Mr. K are two founders and long-time close neighbors in the [LOCAL] residential community. In 2024, they pooled their capital to establish TechPatent Digital Solutions Joint Stock Company [LOCAL]. The company operates in the field of smart data-processing chip systems.

Mr. M serves as Chief Executive Officer (CEO), responsible for business strategy, external relations, and fundraising. Mr. K serves as Chief Technology Officer (CTO), directly responsible for researching and developing the core hardware [V02Q6Y].

Because of their close neighborhood relationship, Mr. K entrusted Mr. M with full authority to negotiate commercial contracts and manage administrative procedures.

In early 2026, Mr. K successfully developed a new microprocessor circuit component. The invention increased network information transmission speed by 200%.

Mr. M immediately used the technical documentation describing this technology to market the product for exclusive commercial opportunities. He negotiated and secured a VND 3 billion investment package with a major foreign investment fund.

However, due to Mr. M’s careless and rushed management, he completely failed to prepare a legally compliant patent dossier or file a patent application and obtain a valid application number from the Intellectual Property Office of Vietnam to secure the priority date.

During the investment fund’s Due Diligence process, the fund discovered that the product had virtually no legal protection framework and faced a substantial risk of being copied by third parties without effective legal protection.

The fund immediately cancelled the transaction and urgently froze the disbursement order. The technological information was subsequently exposed to external parties, and the project collapsed.

The entire joint investment capital was lost. Mr. K became extremely angry [V02Q6Y] and demanded that Mr. M compensate for the full economic loss using his personal assets.

Their neighborhood relationship immediately broke down completely [V02Q6Y]. The two families engaged in heated arguments and exchanged serious insults in the neighborhood. They threw dirty substances at each other’s houses, causing public-order disturbances and requiring intervention by the local police.

2. Legal Perspective – “A Strong Shield”

From the perspectives of civil law, enterprise law, and intellectual property law, the failure to establish documentary evidence of a patent application and priority date constitutes a critical administrative gap that may seriously weaken an organization’s ability to defend its patent rights.

• Principles Governing the Establishment of Rights and Priority Dates for Patents

Pursuant to Articles 6 and 90 of the 2005 Law on Intellectual Property, industrial property rights over an invention are established on the basis of a decision granting a protection title by the competent state authority.

Vietnam applies the first-to-file principle, under which patent protection is generally granted to the valid application having the earliest priority date.

Mr. M’s decision to use technical documentation for commercial solicitation before obtaining documentary evidence of an application being received by the Intellectual Property Office of Vietnam may expose the company’s confidential technological information and may represent a serious failure in corporate governance.

The careless managerial decision may substantially weaken the organization’s ability to protect its intangible assets and may give rise to potential claims for compensation for damage under Article 584 of the 2015 Civil Code.

• Civil Liability Arising from Personal Managerial Fault

Pursuant to Article 165 of the 2020 Law on Enterprises, managers are required to exercise their delegated rights honestly and with the highest degree of care in order to protect the legitimate interests of the company.

Mr. M’s careless handling of documentation, which contributed to the collapse of the company’s fundraising process, may constitute direct managerial fault.

Under Article 585 of the 2015 Civil Code, the person responsible for causing damage may have a legal obligation to compensate for the economic losses caused by their fault in accordance with applicable law [V02Q6Y].

3. Psychological – Educational – Management Perspective – “The Human Key”

Psychological and Educational Perspective

• Short-Term Performance Pressure Creates Carelessness and a Tendency to Cut Corners

Mr. M was influenced by the desire to obtain cash quickly and enhance his personal professional profile. He viewed the investment fund’s proposed valuation as an attractive opportunity that could easily distract him from the underlying risks.

His impulsive pursuit of short-term results caused him to underestimate the importance of protective barriers for intellectual property and the efforts invested by his long-time neighbor and business partner.

When the incident occurred, Mr. K experienced severe anxiety and fear that the company’s accumulated assets could be completely lost. This triggered an intense breakdown of trust and destroyed their long-standing friendship and neighborhood relationship [V02Q6Y].

• Lack of Education in the Legal Ownership of Intangible Assets

Many startup business executives mistakenly believe that because they developed a technology themselves, it automatically belongs to them and can be freely presented in tenders, negotiations, and fundraising activities without significant legal risks.

They lack sufficient awareness of administrative compliance and the importance of legal governance within an enterprise.

They fundamentally confuse the flexibility required in commercial fundraising negotiations with the obligation to establish a secure legal documentary framework through the relevant regulatory authorities.

Management Perspective

• Critical Failure in External Intellectual Property Portfolio Risk Management

Mr. M effectively placed the survival of TechPatent [LOCAL] in the hands of the confidentiality and self-discipline of external partners.

Managing an enterprise without a properly documented patent-protection system creates substantial risks. The absence of a systematic process for reviewing and filing exclusive-protection applications significantly weakens the organization’s protective framework against the unauthorized appropriation of its technological know-how.

• Serious Gap in the Process for Controlling the Release of Confidential Product Information

TechPatent [LOCAL] completely lacked a procedure for verifying the legal compliance of new products before confidential information was disclosed externally.

A properly governed enterprise should establish clear requirements whereby 100% of core technologies must, before being presented to potential customers or investment funds, have documentary confirmation of a valid application number issued by the competent authority, be reviewed by the legal department, and be approved by the Board of Directors through a written resolution with dual signatures before any bank funds are disbursed.

4. Comprehensive Solutions Proposed by Expert Nguyễn Hữu Long

Step 1: Emergency Filing to Secure the Priority Date and Neighborhood Mediation (Short Term)

• Emergency Neighborhood Mediation

Mr. M and Mr. K must immediately stop throwing dirty substances at each other’s houses in order to prevent further public-order disturbances and potential legal consequences.

Mr. M should remain calm, put aside his personal pride, and proactively invite the neighborhood leader to act as a mediator and organize a private meeting.

The objective is to prepare a written neighborhood mediation record and establish commitments to protect the safety of both families before addressing the underlying financial dispute [V02Q6Y].

• Filing a Supplementary Patent Application and Executing External Confidentiality Agreements

Mr. M must immediately cooperate with qualified legal counsel to complete the technical design documentation and urgently file a patent application with the Intellectual Property Office of Vietnam in order to secure the earliest possible priority date in accordance with the Law on Intellectual Property.

The company should also execute a Non-Disclosure Agreement (NDA) containing appropriate contractual remedies under the 2015 Civil Code with the investment fund and other external parties to control potential data leakage and demonstrate the security of the technology, with the aim of preserving the VND 3 billion fundraising opportunity.

Step 2: Restructuring Corporate Governance and Internal Financial Compensation (Medium Term)

• Written Commitment to Assume Personal Financial Responsibility for Corrective Action

To compensate for the losses caused by the interruption of business activities and reduce internal uncertainty, the two parties should enter into a supplementary written agreement based on the 2015 Civil Code.

Mr. M may voluntarily agree to use his existing personal assets or reduce his future dividend entitlement to secure the obligation to compensate Mr. K for losses attributable to his negligent management, thereby rebuilding trust and restoring the company’s financial stability [V02Q6Y].

• Establishing an IP Due Diligence Policy and a Dual-Approval Mechanism

The company should immediately draft and promulgate a new Corporate IP Portfolio Management Policy governing technology acquisition and the secure management of intangible assets, based on the 2020 Law on Enterprises and other applicable regulations.

The policy should establish strict controls prohibiting the CEO from independently taking technical documentation or source code into negotiations unless there is documentary confirmation of a valid application number for exclusive protection.

The process for releasing confidential documents to external parties should require quarterly cross-review and approval by both founders in order to establish a comprehensive internal control mechanism.

Step 3: Long-Term Lesson on Separating Personal Relationships from Business Assets

• Clear Legal Documentation Is the Most Sustainable Way to Protect an Enterprise

The hard-earned lesson for startup managers is:

“If a startup’s technological inventions are not clearly defined and securely protected through legally compliant exclusive-protection documentation before being presented to investors, a Founder’s rush to pursue opportunities may ultimately destroy the entire business.” [V02Q6Y]

Clarity and discipline in strategic management of digital assets, together with respect for the legal framework from the very beginning, do not diminish a startup’s ability to expand its ecosystem.

On the contrary, they constitute an essential protective shield for safeguarding personal assets, protecting corporate capital, and preserving strong neighborhood relationships against the turbulence of the business environment.

EXPERT PERSPECTIVE

• This article was developed based on professional consultation and advice from Nguyễn Hữu Long, M.A. – Leadership, Legal, Psychology & Education Expert. Through an interdisciplinary approach, we aim not only to provide a strong legal shield but also to offer comprehensive risk-management and psychologically informed solutions for the sustainable development of the community.
• If you or your organization is facing similar difficulties relating to land or educational matters, please contact us via our hotline or submit your questions through the website tuvanphapluattamlygiaoduc.vn, or call 0898.627.762, for timely assistance.