An Ounce of Prevention: How Skipping the “Boring Stuff” Cost One Founder Millions
You have probably heard the phrase “an ounce of prevention is worth a pound of cure.”
In business, that ounce often looks like the unexciting stuff: corporate records, ownership agreements, intellectual property paperwork, and meeting minutes. Easy to postpone. Easy to tell yourself you will get to it “once things slow down.”
This is the story of what happens when you do not.
It starts like many great businesses do.
Two founding partners formed a corporation in 1999. They had a strong idea, real talent, and the willingness to grind. They struggled through the early days, reinvested, and pushed until the company started to gain traction. From the outside, it looked like a success story in motion.
Then growth did what growth often does. The partners began to see the business differently. Over time, they decided to go their separate ways. Each wanted to keep building, just not together.
That alone is not unusual. The real problem was this:
They had almost no organizational documents and nothing meaningful in place to guide a breakup.
No clear buy-sell agreement. No well drafted IP assignments. No detailed records about who owned what and who had which rights.
And the heart of their business was intellectual property: patents, trademarks, and trade names. Early filings had been made without proper legal help. Questions about ownership, authorship, and inventorship were left hanging.
So when they agreed in principle to part ways, they immediately hit a wall:
- Who owns the patents
- Which trademarks belong to whom
- Do the rights belong to one partner, both partners, or the company
Each partner’s future depended on the answer. Neither was willing to give in.
The First Round: The 250,000 Dollar Lesson
One partner hired me in February 2011. The fight lasted until March 2013.
We were able to resolve the dispute without filing a full lawsuit in court, which kept the cost from exploding further. Even so, between the two partners, the combined attorneys’ fees landed somewhere between 250,000 and 300,000 dollars.
They spent a quarter of a million dollars or more battling over issues that could have been largely handled upfront with solid IP assignments and a buy-sell agreement.
Realistically, that ounce of prevention would have cost in the range of 10,000 to 50,000 dollars early on.
Instead, they paid at least five times that amount to unwind the mess later, and that is only counting legal fees, not the lost time, energy, and focus.
And remember, this was the “cheaper” version of events. If a full lawsuit had been filed and carried all the way toward trial, their combined fees likely would have landed somewhere between 400,000 and 800,000 dollars. One of them would also have been at real risk of being ordered to pay the other’s attorney fees.
An ounce of prevention versus a pound of cure is not just a saying. In this case, it is a math problem.
The Long Tail of Neglect
You might think the story ends when the partners’ dispute finally settled. It does not.
My client stayed with what was left of the company and tried to rebuild. One of his key directors and executive officers was convinced the company would not survive the damage from the owners’ split. So he quietly took what he could and left.
Specifically, he took the company’s newest invention, which had not yet been patented, and used it to start a competing business.
We sent a strong cease and desist letter. He ignored it. He knew the company was in survival mode and could not afford another expensive battle.
At that point, I advised my client to take a breath and clean up his corporate records: hold proper meetings, document decisions, clarify patent ownership, and tighten corporate governance. He agreed in principle but simply did not have the time, money, or emotional bandwidth right then. Like many founders, he put his head down and focused on operations and cash flow.
The “ounce of prevention” got pushed onto a shelf again.
Four and a half years passed.
The good news: his hard work paid off. The company grew, cash flow increased, and he finally had the resources to enforce his patent rights against the former executive who had taken the invention.
By the time he called me again, he was already deep into the fight. He had hired patent litigation counsel. There were three separate actions in front of the Patent Trial and Appeal Board and two lawsuits in U.S. Federal District Court, all tied to that same former executive.
They were already two and a half years into litigation when I stepped back in.
This time the core problem was not the original invention itself. It was the lack of clear, consistent, well kept corporate records. If appropriate corporate meetings had been held and properly documented, and if the company’s decisions about ownership and patents had been cleanly memorialized, I believe most of those fights would have been dramatically reduced or avoided entirely.
Instead, my client spent over 1.5 million dollars in attorneys’ fees before it was all over. My firm received about 135,000 dollars of that total, and I was only involved for five months.
All because the “boring” governance work never got properly done.
The Turning Point
Once we were engaged, our mission was simple: stop the bleeding.
After months of intense negotiation and mediation attempts, we finally reached a global settlement. It took what felt like everything from everyone, including one marathon 28 hour session with four attorneys locked in a room negotiating more than 170 pages of settlement documents. But the case resolved. The constant drain of litigation finally stopped.
Within weeks, something interesting happened.
Freed from the weight of lawsuits, my client and his team were able to focus again on what they did best: innovating. Within a few weeks, they made major progress on new technology. Within six months, they had applied for six or seven new patents.
The very patents that had been the subject of years of fighting suddenly became far less important in light of what they were building next.
Once the pound of cure was finally paid, the business could get back to creating value.
What This Means For Your Business
Most business owners do not set out to ignore governance or documentation. It just feels less urgent than the next sale, the next hire, or keeping the lights on.
But the cost of neglect shows up later as:
- Ownership fights over IP and equity
- Confusion about who controls what
- Weak positions in negotiations and litigation
- Years of energy and millions of dollars poured into fights that could have been prevented or simplified
An ounce of prevention for your company might look like:
- Clear buy sell and ownership agreements between founders
- Proper assignment of intellectual property from individuals to the company
- Regular shareholder and director meetings, documented with minutes
- Simple written resolutions for major decisions
- Periodic “legal health checkups” to catch gaps before they turn into disputes
None of that is glamorous. All of it is cheaper than years of litigation.
The founder in this story is now thriving. The company is strong, the records are clean, and systems are in place to avoid repeating the past. But the journey to get here came at a very high price.
You do not have to repeat that story.
An ounce of prevention really is worth a pound of cure. Spend the ounce while it is still small, and give your future self the gift of never having to find out exactly how heavy that pound can be.
