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Every great business starts with a “perfect” idea. In the fast moving, dog-eat-dog world of corporate business, however, ideas are stolen, duplicated and imitated as soon as they are conceived. If you have that million dollar idea, how can you go about protecting it while still attracting the attention of prospective investors?
Your first step, before presenting your idea to any companies or investors, is to hire a lawyer experienced in patent laws for your industry. Have this lawyer help you patent your idea, if applicable, which is a time consuming and expensive process. Depending on the complexity of the idea, it can cost you $1,000 to $100,000. Patents generally take over two years to clear and last approximately 20 years once in effect. As your patent clears, instruct your lawyer to write a nondisclosure agreement, which forces companies to promise they won’t copy your idea, under penalty of litigation. Penalties should be strict but fair, as to not frighten off investors. Penalties in nondisclosure agreements are usually monetary.
Be aware, however, that companies often have their own teams of lawyers whose sole purpose is to circumvent nondisclosure agreements and patent laws, modifying your design just enough to avoid litigation. In this case, your lawyers can first serve a cease-and-desist letter, followed by a lawsuit, if the company does not cease production. Taking on an alleged copycat in court can be extremely costly and time consuming. In many cases, the court will not rule in your favor unless you can prove monetary damages as a result of the copycat’s actions, which can be difficult if your product’s sales have been rising. This can also be difficult to prove if your idea is still in the nascent phase, and has still yet to turn a profit.
There are three questions to always remember when sharing an idea: whom, when and how much.
- Remember who you’re speaking to about your idea – is it a partner whose business would be aided by its success, or an employee who can steal your idea and make it his or her own?
- Record when you disclosed information. If the meetings are documented clearly, with an attendance record, then they are admissible in court to prove the theft of intellectual property.
- Entrepreneurs often don’t know how much information to disclose. It is a good rule of thumb to disclose the minimal amount of information of the production phase when presenting your idea. In some cases it may be beneficial to mislead investors about the production process, as to detract any potential copycats. It is important, however, to get across the specific need your product fills, and its production margins. These are important factors that investors and companies will pay attention to.
In the corporate world, ideas are more valuable than cash. Major legal wars are fought over ideas, and a sub-culture of corporate espionage has even emerged to steal valuable trade secrets from competitors. Keep your valuable ideas clutched close to your chest and tread softly, when negotiating, but carry a big stick – in case those investors turn out to be copycats.
