Business Law

Protecting Your Great Idea

You’ve got a great idea for a new product or screenplay and you want to send it right off to a company or movie studio, but how do you make sure that you will benefit if they love the idea as much as you do? Here are some proactive protective measures you can take to make sure you profit from your great ideas.

Our last blog post discussed how companies can protect themselves from accusations of theft when they receive unsolicited ideas. Here the tables are turned: How can those with great ideas get them out to those who might bring them to life without the risk of being cut out of the deal altogether.

Here are some steps that you can take to get your great ideas out there while protecting them from theft:

  • Propose that the recipient enter into a nondisclosure agreement (NDA) that requires the recipient to pay if the idea is used. It may be difficult to specify the amount or rate of payment at the time of submission, but the NDA can at least make clear that disclosure is made with the expectation that payment will be forthcoming if the idea is used.
  • If, as is usually the case, an NDA is unacceptable to the recipient, use a cover letter to convey your expectation of payment if the idea is used. At a minimum, the cover letter would unilaterally establish that the idea is submitted in confidence, with the expectation of payment if the idea is used, and that you reserve all rights to the idea, subject to the parties reaching a later agreement covering use of the idea.
  • Specify a commercially reasonable or customary royalty or other payment in the NDA or cover letter. This may support your later arguments for a market rate of compensation.
  • Consider submitting only a skeleton of the idea—just a “tease.” This may give you more leverage and opportunity to negotiate for payment than disclosing all of the details initially. This tactic does, however, carry the risk of not attracting the recipient’s attention when compared with the alternative of initial full disclosure.
  • Make sure that all submissions and later contacts are in writing, either initially or confirmed after the fact.

For an entire chapter on idea submissions, go to CEB’s Trade Secrets Practice in California, chap 3. Also check out material on implied-in-fact contracts in CEB’s California Law of Contracts and the general discussion of copyright law in CEB’s Internet Law and Practice in California and California Business Litigation. The complete article on which this post is based can be found in the July 2011 issue of CEB’s California Business Law Reporter.

© The Regents of the University of California, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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