How Protecting Your Idea Can Destroy It
A beginner’s guide to NDAs, Patents, Licensing IP, Copyrights & Trademarks
So you have an idea…
Too many people think that keeping an idea secret, getting a patent, and having everyone sign a Non-Disclosure Agreement (NDA) is the wise route. This is not the case in most instances. There is no perfect or effective way to protect an idea.
- Copyrights protect expression
- Patents protect inventions
- Trademarks protect brands
Nothing protects ideas except trust, the right team, and execution.
NDAs can help, but they are often burdensome to crucial conversations. Ideas are only the first step. Your idea might get stolen, but it more than likely won’t. Without a distinct embodiment of the idea there is no intellectual property to protect and no exclusive rights to maintain. An idea without a team executing it is worth nothing no matter how great it might be. Working with trust, the right people, and proper execution will give you the best protection possible for an idea by allowing other people who are critical to the idea’s success to see the vision and do their part to make it a reality.
Sometimes, with the right timing, market, and/or simple solution, it makes sense for added caution.
6 ways to reasonably protect your ideas
- Research any recipients of information. What’s their track record? Are there complaints? Not everything is true, but what’s the overall feeling?
- Have agreements in place with anyone working on the idea so that you own any and all improvements.
- Document as much as reasonably possible for a paper trail and proof of concept. Log where details were disclosed.
- Show what, but not how. Too much secrecy can soil opportunities and lack of trust never gets you far.
- Use a non-disclosure agreement (NDA). It won’t necessarily protect you, but it can discourage violations. Most people won’t sign NDAs and you can easily spend more time on NDAs and legal work than necessary. Going slow can be worse than being copied. Use NDAs when it matters most.
- Build mutually beneficial relationships with competitors.
The biggest risks for an idea are the market and inefficient execution. It pays to be open with ideas for rapid feedback and iterations. Be careful with promoting an idea before prototyping the idea. Ideas often change from their initial concept to meet their full potential.
For some great examples of ideas that changed (pivoted) and went on to become great companies, check out The Fractal Guide™. It will show you how you can too.
Non-Disclosure Agreements
Non-Disclosure Agreements (NDAs) are drafted to prevent ideas from being stolen. Very few investors who are serious will sign an NDA nowadays since they are a sign of mistrust. It’s important to know that NDAs are not always enforceable either. There are many loopholes in court and it costs a lot of time and money to enforce an NDA. If someone violates an NDA, you have to prove they did, show that the information wasn’t available in another way, sue them, and still win. There’s no true guarantee.
Asking an investor to sign an NDA can make you look bad more often than not. NDA signing is a trend of the past. Investors don’t steal ideas, they invest in entrepreneurs through trust. It’s often better to just add a confidentiality disclaimer to materials you share. If you insist on NDAs for most discussions, you will cut out most of your potential audience. Investors and partners don’t want to sign NDAs to limit their opportunities for other similar ideas.
An NDA makes sense if it’s for…
- Confidential information for potential partners, employees, contractors, customers, advisors, and/or board members
- A proprietary algorithm
- R&D data or implementation
- A customer leads database
- Customer data
An NDA should…
- Be either one-way or mutual
- Define what’s considered confidential information (technical data, research, projections, etc.)
- Define the purpose for the recipient to receive the confidential information
- Show steps for security and control of confidential information
- Provide details for returning confidential information
- Specify the term or period
Remember…
- NDAs can waste time, limit options, and be difficult to enforce
- Investors want entrepreneurs who pull ideas off. Anyone can come up with an idea.
- The investor is risking much more
- An investor would likely rather invest in your idea than steal it
“I’ve never heard of an investor ripping off an idea — few ideas are worth stealing. The hard part is implementing the idea, not coming up with it.”
-Guy Kawasaki
Connect with us for templates and tools such as our Non-Disclosure Agreement.
Preliminary Patent Application
A preliminary patent application (PPA) requires…
- A coversheet (USPTO form SB/16)
- A written description (to 35 USC 112). Should provide enough detail for an ordinary person in the same field to make and use the invention. The invention should be recognizable.
- Necessary drawings. These should include any drawing that would assist in the understanding of the invention. You need at least 1 drawing and you should show the different components from different views. Every feature specified in the claims should be shown. You can hire a professional patent illustrator, but it’s not required.
- A fee ($125)
A PPA is more of a placeholder than a patent. A successful PPA expires after one year without the option for extension / renewal. A PPA will never become a patent unless filed for. You can say “patent pending” for one year after receiving the PPA. You cannot file a PPA for a design. A nonprovisional application can claim the benefits of an earlier PPA filing date if completed with the USPTO before the PPA expires. PPAs are useful for extra time to develop an idea or seek funding. Oftentimes if you find someone interested enough in a PPA, you can negotiate for them to cover some costs for the utility patent.
The USPTO does not…
- Examine PPAs
- Conduct a prior art search on PPAs
- Review PPAs to make sure they meet minimum filing requirements
- Publish PPAs (unless claimed as priority in a later-issued or published non-provisional application)
PPA and patent applications can be filed and paid for electronically on the EFS-Web. Documents must be submitted in PDF files.
PPA applications can be mailed with the filing fee to the Commissioner for Patents.
PPAs can be a very useful tool if done right. If done poorly, a PPA can demonstrate that an inventor was actually not in possession of an invention beyond the idea stage.
Be very cautious of PPA courses and methods being sold online. Best practice is to familiarize with the USPTO website and consult a patent attorney and/or patent agent.
Intellectual Property & Licensing
For those who are new to U.S. Intellectual Property (Patents), the right place to start is the USPTO website.
Be prepared to protect your patent from foreign knock-offs. A good start for this is the Patent Cooperation Treaty (PCT), which enables U.S. applicants to file one application as an international common application. The PCT is an alternative to filing patent applications directly in the patent offices of each country that is a Contracting State of the PCT. Typically, a U.S. patent application is filed first. Then, within a year, an international application is filed through the PCT so that benefits of the U.S. application filing date can be claimed.
Factors for Licensing
- Reputation of the inventor
- Expected sales
- Selling price
- Profit margin
- Novelty
- Territory licensed for
- Furnishing materials / services
- The field of the patent
- Manufacturing costs
- Royalty rates in the industry
- Design & development
- Market life of product
- Exclusivity
- Competitors
- Coming to an agreement
- Startup costs (design / manufacture)
Be sure to check out:
Trademarks
A trademark is a word, phrase, logo, symbol, design, or combination of these to identify / distinguish the goods / services of one company from others.
Use of the word or logo without proper registration with the USPTO can still create common law trademark ownership rights, but those rights only extend to the geographical area where the mark is used. A Federal Trademark registration with the USPTO is much stronger.
- A trademark protects brand names and logos used on goods and services.
- A servicemark is a trademark, but specifically for services.
- A patent protects an invention.
- A copyright protects an original artistic or literary work.
™ — parties claiming rights to particular trademarks may use this symbol next to their marks at any time, even prior to filing a trademark.
℠ — parties claiming rights to particular servicemarks may use this symbol without necessary registration.
® — indicates that the trademark is a valid US federally registered trademark and is otherwise permissible. Filing is not enough, completion is necessary.
Considerations
- Domain availability
- Similar logos / marks (utilize TARR — Trademark Applications & Registrations Retrieval)
- Selecting a registrable mark
- Difficulty of protecting your mark
- What good(s) / service(s) the mark will apply to
- Hiring a trademark attorney (not required, but recommended)
- The application fee is non-refundable and does not guarantee registration
- Maintenance of registration
- The USPTO registers marks, but the owner is responsible for enforcement
- State vs Federal filing (State Division of Corporations vs. USPTO)
- Foreign filing
Registered trademarks can only prevent others from using the same or similar trademark for similar goods / services.
Your name, slogan, logo, and domain name are all separate trademarks and cannot be applied for in one application.
The first renewal fee for maintaining a trademark is within the first 5 years of ownership. The USPTO will not notify you of a due filing. After registration add the appropriate symbol, create awareness, monitor, protect, litigate, renew, and maintain.
Copyrights
Copyright protects the rights of creators of original works of authorship (published or not) such as literary, dramatic, musical, and artistic works (poetry, novels, movies, songs, computer software, photography, etc.)
Most businesses today have a website that should be protected through a copyright.
To register a copyright, you must be the original author or have rights granted by the author. For websites, typically, the HTML code and programming are owned by the developer and the content is owned by the company.
A copyright is technically automatic. Copyright protection exists without registration, but your work must be registered before filing a copyright infringement case. By establishing public record, filing makes it easier to prove ownership and collect more in damages. Copyright law gives the owner rights over reproduction of the work, derivatives of the work, distribution and copies of the work, and public display of the work.
You do not have to display a copyright notice on your website to preserve your rights under the law, however registering copyrights with the federal government and displaying the notice is recommended.
A copyright protects you for 95 years, but only on the elements that you’ve identified and submitted to the copyright office. Updates must be registered separately with some exceptions.
To register, you must submit to the US Copyright Office a completed application form, a filing fee, and copies of your work (these will not be returned to you).
Conclusions
- Protecting your idea in the wrong way(s) can destroy it before catching positive momentum.
- Worrying about unnecessary NDAs can waste time, limit your options, and be difficult to enforce.
- Anyone can come up with an idea, but the ultimate way you should protect it is by building trust.
- Investors trust entrepreneurs who pull ideas off with execution and the right team.
- NDAs, Patents, Licensing IP, Copyrights & Trademarks can help, but only if you start in the right places such as this beginner’s guide.
Learn more at www.FractalSolutionsLLC.com
All information gathered is believed to be correct as of publishing. Any corrections are encouraged to be sent to Fractal Solutions LLC for future editions.
