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The serial entrepreneur and product inventor says most disputes that reach a courtroom were decided years earlier, in decisions nobody thought of as legal ones.
Small product companies tend to think about court the way they think about a fire: something that happens to other businesses, handled by professionals if it ever happens at all. Steven Capuano has spent more than two decades building companies across consumer products and health and wellness, and he sees it differently. In his view, litigation is rarely a surprise. It is usually the delayed bill for an ordinary business decision made quickly.
We asked him five questions about where those decisions hide and what founders can do about them before a judge ever gets involved.
Where do most small-company disputes actually start?
"Almost never where people think," Capuano said. "Founders picture a competitor copying their product or a customer filing a claim. Those happen. But the disputes I have seen most often start inside the company’s own circle: a supplier, a former partner, a contractor who did early design work. They start with people who were friendly at the time."
His point is that friendliness is what keeps the paperwork thin. When a relationship is going well, nobody wants to slow it down with a formal agreement. When it stops going well, the absence of that agreement becomes the whole case.
What is the single most common gap you see?
Ownership of work product. A company pays a freelancer to design a part, a package, or a piece of software, and assumes that payment means ownership. In many cases it does not. Under U.S. copyright law, work created by an independent contractor generally belongs to the person who created it unless there is a written agreement saying otherwise.
"You can pay someone in full and still not own what they made," Capuano said. "That surprises people. It surprises them a lot more when it comes up in a dispute or during a sale."
Does a patent keep a company out of court?
Capuano, who holds multiple U.S. patents across his product ventures, is careful here. A patent is a right to exclude others, and the only place that right is fully enforced is in court. It does not prevent litigation. In some cases it invites it, because a valuable patent is also a target. Competitors can challenge its validity in federal court or through review proceedings at the Patent Trial and Appeal Board.
"A patent is not a shield you hang on the wall," he said. "It is a set of claims you should expect to defend. The question is whether the filing and the records behind it were built with that in mind."
What should a founder do this year, practically?
Read every agreement the business currently runs on, he said, and ask one question of each: if this relationship ended badly tomorrow, what would this page say? Supply agreements, distribution terms, contractor arrangements, licensing deals. Anything that exists only in email or memory goes on a list. The list becomes the year’s cleanup work.
Most of the fixes are small. A short written assignment. A signed version of terms both sides already follow. A clause stating how disputes will be resolved and where.
Is there a sign that a business is drifting toward a dispute?
"When two people describe the same arrangement differently and neither of them thinks it matters," Capuano said. "That gap is small when everyone is cooperating. In court it becomes the only thing anyone talks about. The cheapest time to close it is the moment you notice it, while you are still on good terms."
Steven Capuano is a serial entrepreneur and product inventor with more than two decades of experience in consumer products, health and wellness, and innovation-driven markets. More at stevencapuano.com.