By Frank Sardone
Carter, Deluca, Farrell & Schmidt
Whether you are an individual or a company, protecting ideas and documenting ownership of those ideas may be crucial to both your present and future success.
We have all heard the story of an individual submitting an idea to a company, and then discovering, sometime in the future, that the idea they submitted was developed, produced and sold by the company without the individual’s permission or any payment to the individual. On its face, this does not seem right or fair. How can this happen? Was there anything the individual could have done differently when submitting the idea? Did the company actually do anything wrong? Did the company actually steal the idea that was submitted to them?
As an initial matter, the reader should understand that not all ideas are protectable. In order for an idea to be protectable, the idea must meet certain criteria. It follows that those ideas not meeting these criteria are not protectable, and remain just plain ideas. However, if a protectable idea is actually protected, then various assertions of misappropriation or theft may be asserted. On the other hand, if an idea is not protectable or if a protectable idea is not protected, then an assertion that the idea was stolen is either not available or very difficult, if not impossible, to maintain.
Here are several ways individuals and/or companies might protect their ideas, and thus, position themselves against theft of their ideas.
A goal for individuals interested in submitting an idea to a prospective company or group, (e.g., for investment, licensing, manufacturing, etc.), is to pursue some protection for that idea prior to submission, and thus minimize the likelihood of theft or unauthorized use of the idea. Below are several suggestions that individuals can employ to achieve that goal prior to submitting any idea.
Prior to revealing an idea to a company, consider filing for patent protection so that at least have some basis exists to try and stop others from making, using and/or selling any product embodying the idea without permission. An initial consideration when filing for patent protection is determining whether the idea is even protectable via patents. In order for an idea to be protectable via a patent (i.e., “patentable”), the idea must be new, useful, and not obvious in view of existing prior art. In some cases, time constraints (a meeting with a company is coming up in a few days) or budgetary concerns (no funds to pay for a patentability study) may dictate that patent protection be sought whether or not a determination was made that the idea is patentable.
At a minimum, prior to revealing an idea to a company or to a third party, a Provisional Patent Application should be prepared and filed with the U.S. Patent Office. A Provisional Patent Application does not provide any immediate, enforceable rights in the idea until that Provisional Patent Application becomes a fully granted Patent. For many reasons, this may or may not happen. However, the Provisional Patent Application can serve as a valuable negotiating tool and provide evidence of ownership of the idea should the idea become the subject of theft or accusations of theft.
It is important to note that the Provisional Patent Application must be converted to a Non-Provisional Patent Application within one year of filing in order to take full benefit thereof. The Non-Provisional Patent Application will be examined by the Patent Office to determine whether the idea is actually protectable via a patent. Frequently the Patent Office will issue an initial indication that the idea is not protectable, but an experienced patent attorney can help overcome this initial rejection and assist in issuing a valid, enforceable U.S. Patent. One or more Patents issued relating to the idea provides an excellent position to protect against theft or unauthorized use of an idea.
To learn more about the patent process, visit the U.S. Patent Office website (which has an excellent overview of the patent process (http://www.uspto.gov/patents-getting-started/patent-process-overview)), and/or meet with a patent attorney or patent agent to explore the possibilities, the process, and the costs associated with seeking patent protection for your ideas.
RESEARCH THE COMPANY OR ORGANIZATION
Also prior to submitting or revealing an idea to a company (as a possible investor, client or contractor), some diligence and research should be conducted about that company. Information about most companies is readily available on-line. Many companies publish their idea submission policies and requirements. One important factor to consider when evaluating a company is the reputation of that company (or its representative(s)). Thus, when researching a company, see if the company has ever had any disputes regarding idea submissions, and/or if the company has established a positive reputation related to product development and acquisition.
DISCLOSE ONLY WHAT IS NECESSARY
Another way to protect an idea is to not disclose each and every detail about the idea (especially if it has been determined that the idea is not protectable), or to only disclose that information about the idea that is included in a Provisional Patent Application. In other words, consider only disclosing information about the idea that is absolutely necessary for the submission. In some instances, the exact details of the idea are not necessary in order to convey enough information about the idea to the company so they can make a decision. For example, the company may only be concerned with the function of the idea, and if the idea can be profitable. Accordingly, strategically determine if there is a way to present the idea to the company without disclosing the exact details or all of the details thereof.
A Non-Disclosure Agreement (NDA) can be an effective and cost efficient tool when trying to license an idea (e.g., a non-protected idea) to a company or third party. When approaching a company believed to be a good fit for the idea (following research of that company), it is good practice to ask the company to sign an NDA prior to revealing the plain idea to them.
An NDA is a document stating that confidential information that is disclosed, to the company about the idea, must remain confidential between the presenter and the company. NDA’s vary in format but generally include the following:
1 – a definition of what is and what is not confidential information;
2 – obligations of the party receiving the confidential information (i.e., the company);
3 – a term or duration; and
4 – consideration between the parties (typically agreement to evaluate the idea in exchange for disclosure of the idea).
Every NDA provides a definition of the confidential information. In some instances, the NDA may also specifically exclude some information from protection, meaning that the receiving party or company has no obligation to protect that information. It is important to note that information is not protected if that information was created or discovered before or independent of any involvement with the submitter.
The party receiving the confidential information (e.g., the company) generally must hold that information in confidence and limit its use. Under most state laws, the company cannot breach the confidential relationship, induce others to breach it or induce others to acquire the confidential information by improper means.
The term or duration of an NDA can be set between the parties, however, common terms of duration for NDA’s range between 1 to 5 years, with 2 year terms being common. A 2 year term should provide an individual with enough time to determine if full patent protection (following the filing of a Provisional Patent Application, as discussed above) should be pursued for the idea, while still being a fair amount of time, after which, the company (receiving information about the idea) should be able to use that information about the idea, if they so choose.
Some companies may want to use their standard NDA. In many cases, this is acceptable, and the NDA provided by the company will provide the individual with enough protection. However, as with any legal document, the NDA should be reviewed before signing, to become familiar and comfortable with the details thereof, and to protect against a situation where the NDA is completely one-sided (e.g., eliminating any protection that should otherwise be available to the individual).
In some instances, a company may refuse to sign an NDA pursuant to the company’s published idea submission policy. This does not necessarily mean that the company wants to steal the idea or take advantage of the individual. Many companies are worried about the prospect of being sued by individuals who feel that their idea was stolen by the company. Many times larger companies are working many different ideas that are at various stages of development. The concern is that an individual may bring to them an idea that they are currently working on, and when the company brings the product or idea to market, that the individual may think that the company has stolen that idea from them.
In the event that a company refuses to sign an NDA, the decision still remains with the individual if they wish to share the idea. In such instances, researching the history and reputation of the company and the existence of a Provisional Patent Application on the idea take on greater importance to the decision to disclose the idea to the company, in the absence of an NDA.