You have an idea. An idea that you think will make you loads of money. A business idea. And you are anxious. That somebody might steal your idea. Make millions off of it. And you don’t get a single cent. And then you spend millions, which you don’t have, in suing them and hoping you get royalties or a settlement. Which you might or might not. Mostly might not. And rather than being richer by millions, you are poorer. That's why we presenting today an entrepreneurs' guide to prevent Idea thievery.
Let’s escape this hypothetical. Because the chances of it coming true are rare because it requires a special set of circumstances. And they are:
- Your idea is in the hands of a company with the means to execute the idea
- You just presented your idea to a potential competitor while pitching for funding
- Your Co-founder fired you or quit to start the same company with a different set of people
An idea is never of any worth unless it is executable and has the potential to be successful. For instance, would you predict that Kindle would be as popular ten years back as it is today? People opposed the change and most found it classier to pretend to be in love with the musty smell of books (Disclaimer: I‘m only talking about the majority that pretended) until they realized the potential of the device.
The mistake lies in assuming that your idea and idea alone has value. No, it does not. Except for the special circumstances mentioned above. Don’t be paranoid about the idea you have for a product or service that you are offering.
Having said that, it is reasonable to want to protect your idea until your startup turns into a business. Let’s see what steps we can take to ensure its safety without handicapping it.
Need-To-Know / Reveal Selectively
Be it to investors, outsourced firms, or employees, tell them only what they need to know. Nothing more, nothing less. It is enough to pitch how your product can solve a problem or how your service makes life easier, to the investors. Explaining the inner workings to them is unnecessary. It is easy to reverse engineer any product if one had the means.
It is good practice to consult a lawyer to go over the legal technicalities of your business. Here are certain legal ways to protect your idea.
Non-Disclosure Agreements (NDA)
These bind the party to absolute discretion when it comes to your business idea. When you outsource talent, these come in handy. But don’t use them when you are the funding stage. Investors do not want to be tackled with legalities before they even hear your pitch. Instead, add a confidentiality clause.
These are especially for the talent on your team.“One party (usually an employee) agrees not to enter into or start a similar profession or trade in competition against another party (usually the employer).”This is to prevent your ideas worked on by the employee from being reused or influencing the competitor’s product. These come with a time period, meaning the employee will likely be out of work for a while, so you need to carefully work out compensation.
This agreement is again for the talent hired. It states that all work done on improving or developing the business idea belongs to the employer alone and to be used as the employer pleases. The employee cannot claim the credit.
Applying for a patent is a tedious process with huge amounts of money involved, money which can be well spent on marketing strategy. Instead, applying for a provisional patent gets you the same rights as a patented product with the label ‘patent-pending’ for a year. You thereby get a year within which you can work on your idea in peace.
A copyright gives you control over the use of your intellectual property. If you have a prototype in place, copyright will prevent misuse and unauthorized usage. And if anyone does use the product without your consent, you can sue them for copyright violations.
A trademark is the signature of your company. It can be a phrase, a symbol, or just the name. It protects the product/service and all of its features associated with the company.
“It is a recognition of that company's ownership of the brand.”
Vet Whom You Work With
This applies to your employees, clients, partners/ potential partnerships, and investors. Ask for letters of recommendation before you hire. Investigate if the client is a potential customer or a competitor in disguise. If any investor or client shows a sudden interest in your product, apply need-to-know. Look for any red flags in their credentials. Trust your instincts. Do a background check if necessary. Corporate espionage is not just a theme for a book or film. It happens in real life.
Build Partnerships With Competitors
The competition is the one most likely to steal your product. What if you worked through your competitor? You would have the means, and they would have no reason to steal ideas because they get a cut of profits! It is a win-win situation, even if not an ideal one.
Beware of Your Colleagues
Remember when I said there is no use of an inexecutable idea? That’s true. But your colleagues hold the execution in their hands. That is why you carefully choose who you hire or going to partner with. Also, it is not desirable to have a founder who does not believe in the idea. Let him/her go. Make sure that they sign a confidentiality agreement that prevents them from disclosing proprietary information beforehand. And always trust your instincts. If you find unprofessional behavior from any of your employees when it comes to your product, fire them immediately.
Keep a record of what is discussed whenever possible, from board meetings to pitching investors. Creating a log of all business transactions will guarantee you evidence in the unlikely event you need to take it to court. Keep track of what information you share with whom. A paper trail builds a sturdier case.
When You Should Sue If Your Idea Is Stolen
It takes time for any idea to become profitable. If your idea is stolen, they require the same time as you do to get it into the market. Don’t use your advantage to sue them for stealing when, if you are fast enough, you can launch your product before they do and make a profit out of it.
If your idea is stolen and your startup fails but theirs is successful one.Then with the help of proper documentation and any agreements you have put in place, it should be easy enough for any lawyer to win your royalties or at least a settlement.
Don’t let the fear of your idea getting stolen prevent you from pitching it to potential investors, customers, or anyone who can give you valuable feedback. Hiding your prototype until it is finished without getting it continuously evaluated by your circle is a reason for startup failure. Very rarely does an idea get stolen. As long as you take care of all legal necessities, you may worry about other aspects -such as marketing and development- in peace.