People start companies because they have an idea. Whether it’s an idea for something new, something better, something unique, it all begins with an idea. Not only are ideas the foundation for great companies, ideas may also be the company’s most valuable asset. This post is the first in a series about strategic practices for intellectual property protection for entrepreneurs and inventors.
Ideas, regardless of how great they might be, are of little value on their own because the law does not grant much, if any, legal protection to them. Therefore, it is necessary to take steps to protect ideas to retain their value. The easiest way to protect an idea is to not tell anybody the idea. However, founders and inventors must be able to share their ideas. Sharing ideas is necessary for research and development, raising funds, market research and team building.
Courts have recognized some protection where ideas have been shared where there is either a contractual duty to not use an idea or a confidential relationship between the parties. Therefore, it has become common practice for people to execute confidentiality and non-disclosure agreements when discussing their ideas with third parties. A confidentiality and non-disclosure agreement is a contract between parties in which one or both parties agree to protect confidential information and not use the information in a competitive manner. Additionally, the agreements are necessary to protect the disclosers’ interest in the underlying idea if it qualifies for patent protection.
Confidentiality and non-disclosure agreements generally provide the person receiving the information will:
*Hold the information in confidence;
*Not use the information in a manner
*Not disclose the information to third parties except in certain defined circumstances.
While confidentiality and non-disclosure agreements have become commonplace, with forms and templates available across the Internet, not all versions are the same. In fact, some language can be used in the agreements to negate the purpose, allowing the receiver to use the information for its own purposes. Additionally, many people, including investors, will not execute the agreements because it could expose them to liability down the road. Regardless, even if the receiver has executed the appropriate agreement, it costs money to litigate to enforce the contracts and such enforcement may be too late for a founder to get to market first.
Therefore, from the outset founders should consider what intellectual property rights could be available to protect their ideas. Technically intellectual property does not “protect” ideas. However, patent, copyright, trademark, and trade secrets each provide founders, inventors and creators a different basket of rights which can protect the manifestation of their ideas. Some rights are automatic, while others require the person claiming the right to take some action.
1) Share your ideas sparingly, with people on a need to know basis;
2) Have your own Confidentiality/Non-Disclosure Agreement form which you understand ready to be executed; and
3) Consider what intellectual property rights are available to protect your interests.