THE LEGAL PATENT DOCUMENTATION DISASTER: WHERE IS THE NEGLIGENCE TRAP AND WHAT LESSONS CAN STARTUPS LEARN ABOUT BUILDING BARRIERS TO PROTECT INTELLECTUAL ASSETS?

1. Summary of the Real-Life Situation

Mr. M and Mr. K are two co-founders and long-time close neighbors in the [LOCAL] residential area. In 2024, the two invested their own capital to establish TechPatent Digital Solutions Joint Stock Company [LOCAL], a company specializing in 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 overseeing research and development of the core hardware [V02Q6Y]. Because of their long-standing neighborly relationship, Mr. K entrusted Mr. M with full authority to negotiate commercial contracts and manage administrative procedures.

At the beginning of 2026, Mr. K successfully developed a new microprocessor circuit component. The invention increased network data transmission speed by 200%. Mr. M immediately began using the technical documentation describing the technology to market the product on an exclusive basis on a weekly and quarterly basis. He negotiated and secured a VND 3 billion investment package from a major foreign investment fund.

However, due to Mr. M’s careless and rushed management style, he completely failed to prepare the legal patent documentation or file an application and obtain a lawful filing receipt from the Intellectual Property Office to establish the priority date. During the due diligence process, the investment fund discovered that the product had no legal protection framework, leaving it highly vulnerable to unrestricted copying by third parties. The fund immediately canceled the deal and urgently froze the disbursement. The technology was subsequently exposed to external parties, and the project collapsed [V02Q6Y].

The joint capital was completely lost, leaving Mr. K extremely furious [V02Q6Y]. Mr. K demanded that Mr. M compensate for the entire economic loss from his personal assets. Their long-standing neighborly relationship immediately broke down [V02Q6Y]. The two families engaged in heated arguments and exchanged serious insults in the neighborhood. They threw dirty substances into each other’s homes, causing public-order disturbances and forcing the local police to intervene.

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 the patent filing and priority date constitutes a critical administrative loophole, depriving the organization of an essential layer of legal protection.

Principles governing the establishment of rights and priority dates for inventions: Pursuant to Articles 6 and 90 of the Law on Intellectual Property, industrial property rights over an invention are established on the basis of a protection title granted by a competent state authority. Vietnam applies the First-to-File principle, under which protection belongs to the party with the earliest valid application. Mr. M’s act of using technical documents for commercial solicitation under Article 162 of the Law on Enterprises 2020 before obtaining a filing receipt from the Intellectual Property Office directly exposed the company’s trade secrets and constituted a serious management-process failure. This careless management decision effectively nullified the organization’s ability to protect its intangible assets under Article 122 of the Civil Code 2015 and deprived it of the right to initiate a claim for non-contractual damages under Article 584 of the Civil Code 2015.

Non-contractual civil liability arising from individual management negligence: Pursuant to Article 165 of the Law on Enterprises 2020, managers are required to exercise their assigned rights honestly and with the highest degree of care in order to protect the company’s interests. Mr. M’s negligence in handling documentation, which led to the collapse of the company’s fundraising and financial structure, constitutes direct individual management negligence. Under Article 585 of the Civil Code 2015, Mr. M is legally responsible for compensating the economic losses caused by his unilateral and negligent management decisions from his personal assets to the company and shareholder K [V02Q6Y].

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

Psychological and Educational Perspective

The psychology of pursuing short-term achievements creates carelessness and encourages cutting corners: Mr. M was driven by the desire to obtain cash quickly and enhance his personal profile, while viewing the fund’s inflated valuation figure as an irresistible opportunity. His impatience caused him to underestimate the importance of daily and quarterly safeguards for intellectual assets and the efforts invested by his long-time neighbor and business partner. When the incident occurred, Mr. K became psychologically distressed and feared losing all of his accumulated assets, triggering intense distrust and ultimately destroying their long-standing friendship [V02Q6Y].

Insufficient education regarding legal ownership of intangible assets: Many startup executives in business-oriented roles mistakenly believe that because they personally developed a technology, they automatically own and can freely commercialize it, present it to potential bidders, or use it for fundraising without legal risks. They lack sufficient awareness of administrative compliance procedures and the importance of legal compliance in corporate governance. They fundamentally confuse flexibility in commercial fundraising negotiations with the obligation to establish a formal legal protection framework through records maintained by the competent authorities.

Governance Perspective

Critical failure in external intellectual property portfolio risk management (IP Portfolio Risk Failure): Mr. M placed the survival of TechPatent [LOCAL] entirely at the mercy of the confidentiality and discretion of affiliated partners. Managing a company while leaving its patent documentation framework empty is an extremely serious governance failure. The absence of procedures for reviewing and filing applications for exclusive protection eliminates a critical layer of defense against the risk of losing control over the company’s technological intellectual assets.

Crisis in the control process for releasing confidential product materials: TechPatent [LOCAL] completely lacked a compliance-approval process for new products. A properly governed enterprise should establish clear rules requiring that 100% of core technologies must have documented confirmation of a lawful application filing number from the competent authority before being presented to potential customers or investors. The legal department should also conduct a compliance review, and the Board of Directors should approve the external release of such materials through a written resolution with dual signatures before any related bank funding is disbursed.

4. Comprehensive Solutions Proposed by Expert Nguyễn Hữu Long

Step 1: Urgently File for Priority Protection and Mediate the Neighbor Dispute (Short Term)

Urgent neighborhood mediation: Mr. M and Mr. K must immediately stop throwing dirty substances into each other’s homes in order to avoid potential administrative or public-order consequences under applicable law. 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 record of the neighborhood mediation and obtain commitments to protect the safety of both families before addressing the economic dispute [V02Q6Y].

File an additional patent application and execute an external confidentiality agreement: Mr. M should immediately coordinate with a professional lawyer to complete the technical documentation and file a patent application with the Intellectual Property Office in order to secure the earliest possible priority date in accordance with the Law on Intellectual Property. A Non-Disclosure Agreement (NDA) containing strong contractual sanctions under the Civil Code 2015 should be sent to the investment fund to control potential data leaks and demonstrate the project’s legal and information-security safeguards, in an effort to revive the VND 3 billion fundraising process.

Step 2: Restructure Governance Procedures and Provide Internal Compensation (Medium Term)

Agreement to assume personal financial responsibility for correcting the mistake: To compensate for losses caused by interruptions to business operations and ease internal concerns, the two parties should enter into a supplementary agreement based on the Civil Code 2015. Mr. M may voluntarily use his existing personal assets or reduce his future dividend entitlement to fulfill his obligation to compensate Mr. K for losses caused by his negligent management, thereby rebuilding trust and restoring clean cash flow for the company [V02Q6Y].

Establish an IP Due Diligence and dual-approval mechanism: Immediately develop and issue a new Corporate IP Portfolio Management Policy based on the Law on Enterprises 2020. The policy should establish a strict rule prohibiting the CEO from independently taking technical documents or source code into negotiations without documented confirmation of a lawful application for exclusive protection. The process for releasing external documents should require a quarterly cross-review and approval by both founders to ensure full internal control.

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

Clear legal documentation is one of the most civilized ways to protect a business: The painful lesson for startup managers is: “If a startup’s technological invention is not clearly defined and firmly secured through formal legal documentation for exclusive protection before being used for fundraising, a founder’s rushed decision-making can ultimately destroy the entire business” [V02Q6Y].

Clarity and discipline in the strategic management of digital assets, together with respect for legal requirements from the very beginning, do not reduce a company’s ability to expand its ecosystem. On the contrary, they constitute an essential shield for protecting personal assets, safeguarding corporate capital, and preserving strong neighborly relationships in the face of commercial challenges.

EXPERT PERSPECTIVE

This article was developed based on professional consultation and advice from Nguyễn Hữu Long, LL.M. – an expert in Leadership, Law, Psychology & Education. With an interdisciplinary approach, we provide not only a strong legal shield but also comprehensive risk-management and psychological-empathy solutions for the sustainable development of the community.

If you or your organization are facing similar issues relating to land or education, please contact us via our hotline or submit your questions through the website tuvanphapluattamlygiaoduc.vn or call 0898.627.762 for timely support.