How to Protect a Business Idea 46

We are often asked by clients how to protect their ideas. The best way, of course, is to keep them secret. Any facetiousness aside, it is a sincere recommendation. Often people talk about their ideas to brag, to brain storm, and to make themselves feel as if they are adding to discussions. These are not good reasons to disclose information you want kept confidential. However, barring total secrecy, having a Confidentiality Agreement can help protect your ideas.

When to disclose information

Disclose information in increasing amounts as the deal progresses. Be sure that the balance of power in the deal remains relatively even in terms of oral commitments, commitments through information disclosure, money or contracts. The information disclosure should start with general concepts and progress to detail at the contract stage. Be sure to keep careful notes on what, when and where information was disclosed and who else was present at the meetings. These records can be extremely helpful if you ever end up in court.

Always disclose the minimum necessary to close the deal, without being fraudulent or misleading. This allows you maintain the most control over your product or idea, as well as protecting your options for changing the timeline or details later if needed. Once the deal is closed and the contract is signed, both parties should be more committed to the process and protecting information.

However, saying the minimum needed does not mean withholding material information that substantially affects the deal. For example, if your idea requires FDA approval, does not have it, and no one brings this up, it would be wiser to disclose this up front rather than to wait for this bomb to blow up after the deal has progressed. If a party feels angry or mislead then trust is broken, and, contract or not, it will be hard to proceed productively.

Consider who you are talking to about your product or information. Is the party a competitor who would greatly benefit from the stealing the idea or product, a customer who will be helped by the idea or product, or a partner whose own business would be complemented by your success? The other party’s interests should always be kept in mind. Also, be aware of who at the company you are dealing with. Dealing with the CEO is entirely different than dealing with a programmer or sales person. Remember to also consider the employee’s personal interests in having the information. For example, the head of product of development might think she would get a promotion if she presented your idea to the company as her own for a new product line. Risks of Exchanging Information: Confidentiality agreements can help protect the parties both receiving and disclosing information and are available as legal forms.

A surprising fact is that the party receiving information is often taking a greater risk than the party disclosing information. A good example of this risk is a movie studio. Script writers are dismayed to discover that studios not only refuse to sign a confidentiality agreement, but typically make the submitter sign an agreement stating that if the studio later develops something that looks like his or her idea, the submitter agrees not to challenge this.

Studios are in the business of coming up with ideas and making them into movies. Every time the studio receives a script or a pitch, it is receiving an idea. If a studio were to agree to keep this information confidential and that the submitter owned the idea, the studio would be subjecting itself to potential lawsuits for every idea submitted, even those already developed by employees who have never seen or heard of the submission. In court, the studio would have the burden of showing that despite the receipt of the submission, its employees who developed the similar idea never saw or received any information from the submission. This would be virtually impossible for the studio to prove and costly when multiplied by the huge number of submissions received. For studios, venture capitalists and other groups that work with large numbers of ideas, it may simply be too risky for them to sign a confidentiality agreement. Remember that in these circumstances you are usually the less powerful party and thus the other side forces you to assume more risk. Be sensitive to these considerations when you are disclosing to a competitor, by signing the confidentiality agreement you present, a competitor is risking a law suit from you even if it already knows, or has in development, what you are about to tell them.

For the disclosing party, the risks can also be great. The disclosing party risks (a) disclosure of such information to its competitors; (b) disclosure of the information to the public; and/or (c) use of such information to compete or gain market advantage against the disclosing party.

About the Author Milton Zlotnick was the founding and managing partner of a midsized CPA firm in NYC before joining Plan4Biz.com, LLC. He served for a number of years on the New York State Society of CPAs' Financial Planning Committee. He is currently a Community Leader and Host for AOL's Business Know How division, providing advice on business… Read more »

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  • Raj

    Hi,
    This is a very good article. Well I have a question, appreciate if you could answer, I am starting up a business and the organisation which provides the license requires a business plan, the service or solution is not currently provided in the market but there are big players in the market who do not provide similar solution or services. What precautions I should take inorder to preserve my idea till I get approve and implement in the market. I also once implemented there will be competitors emerge into the market.

    Regards

  • Dewanda Redwine

    I have a great business idea, I have shared with a few . So in order to keep my plan mine. How do I secure my business plan and the name of my business so no one can steal my idea.I have not got it started yet, but I sure would like soon. Thank you for any input.

  • seo

    Hi,
    I have a good business plan but i am not able to open a business so what can I do Please let me know how can I able to open a business.
    Thanks

  • MUSONERA Dominique savio

    i have got a good business plan but i am worry that my business idea should be run because i don’t have necessary capital to run it myself. i have started to aproach some of the very known investors in my country but i don’t trust in them because they may take me out of the business after getting the full sens of the business. please tell me what to do.
    MUSONERA Dominique Savio
    Student at School of Finance and Banking
    KIGALI RWANDA

  • j brown

    Hi there.
    I have drawn up some plans of a product that I would like to get manufactured overseas, but before i approach anyone what should I do to protect my idea and product. Patents are very expensive and i don’t know if one would even be necessary.
    Thanks

  • Paula K

    What should I do to protect my idea from being stolen by others once I’ve launched the company. As it is a service which can be provided (but isn’t) by others, I’d like to know what can I do to protect myself.

    thank you!

  • Bryan

    I am starting a apparel company, and my question is how can I get a loan from a bank if your personal credit is not that good and you do not have nothing for them to hold ?

  • ruth

    i want to build a theme park,so i want to apply for funding at the financial institution my problem is i don’t have collateral and security

  • Alex

    Do I need a business plan to license and idea?

  • luvo

    I’m almost finished writing my business plan for providing a service that is not yet available in a particular country.
    How can I secure my plan and its details?someone suggested copyrighting the plan, would work? What can I do to secure legal rights to business plan, its details and the service it will provide? So others interested in offering the service will have go through me and/or be able to offer franchise to people interested.

  • luvo

    How can I secure my plan and its details?someone suggested copyrighting the plan, would work? What can I do to secure legal rights to business plan, its details and the service it will provide? So others interested in offering the service will have go through me and/or be able to offer franchise to people interested.

  • luvo

    I have a Business Idea that will do wonders but I have not yet started with Business plan but I first make sure the Idea is protected before I make some presentation to my potential clients

    How do I protect my Idea from being stolen

  • http://notyetdeveloped Jimmy

    I need to perform a Business Plan and I’m in the first phase of it. How can I begin from the beginning with my right foot?

  • http://Debbieallie.Com Moses Olude

    You have sincerely showed me another way of life in business world. I appreciate you the more. A question:i have an idea in which i want to execute with a nonprofit organisation. How would i go about it. Thank you.

  • Lisa

    I have a great idea for a business and really not sure if I want to run it myself. I really just want to sell the idea and let someone else have fun with it. I want to know though how to protect the idea when I present it to them. I do not want to present it and then they just kick me out and build it anyway without paying for the idea. What should I do?

  • http://www.kcctanzania.com Angel

    This is great! I thought how I could protect my ideas, but I had no great crue, as now I feel comfortable on how to protect my ideas. Thanks

  • Catherine

    Thanks for all the great information. I found the article very helpful. I have come up with a great buisness idea which I think has the potential to be an extremely profitable and global venture. However I am not an engineer and the idea needs to be made into a working design and prototype. How do I get someone to build something for me? Does this mean handing over partial ownership to someone else in order for me to get the prototype designed and built. I also need an investor as I wouldnt have the money required to begin. Can you give me some much needed advice. Thanks

  • Seh

    This is something I constantly worry about, because I’ve chose to move forward with my idea without protection from theft. I haven’t had any problems up to now, but I know I need to do something, because I am getting tons of trafffic. I am posting online videos to http://www.Adwido.com and they’ve boosted my traffic with keyword targeting. The more traffic I get now I worry about someone stealing my idea. I appreciate this article for pointing me in the right direction.

  • Issahaku

    I have a great business idea, I have shared with a few . So in order to keep my plan as mine. How do I secure my business plan and the name of my business so no one can steal my idea.I have not got it started yet, but I sure would like soon. Thank you for any input

  • orescofas

    I’m a medical student. Planning to go ahead wit residency in surgery. I’ve a wonderful business plan. Should i start up n run both, or wait 6yrs till residency’s over? N if i’m to wait, how do i protect my idea that long?

  • Chad

    I have an idea but it will require the help of engineers and/or IT personnel. How do I go about finding someone to partner with to make this come to fruition? It’s a product that will eventually need to be patented. Any feedback is appreciated. Thanks.

  • Goodman

    I am a first year university student and want to start my own business, already have a business idea but i am in need of someone (mentor) who will help me through out…stucturing my business plan and so forth. thanks

  • Nana

    I have a brilliant idea of how a certain company can generate profits and bring services to people and i havent written the business plan yet i have never done it before and dont know where to start.I went for protection of the idea and i was told it falls under copyright and i figured there is no point of copyrighting the name yet the idea will be stollen.I need to know who is the right person to talk to when i present my idea to the company and how do i do that ,what if they reject my proposal saying that they are in the process of implementing the idea yet they are not just read yours and because they dont want to pay they come up with tricks ,What do i do in this regard?.

  • David Wallace

    I have a great business idea to start a specialty restaurant that could grow in to a chain of restaurants, but I do not have the experience to finish my business plan without gettting outside help. How do I protect the name of my company and my ideas? My ideas are so innovative that they are more important than the company name.

  • http://non Max

    Dear sir/Madam
    I have 3 ideas which I made a sample of it, how can I protect my ideas which no one can copy of it. I have a company by register a patent am I protecte.
    Please advise what to do and where to go.
    Truly Yours
    Max

  • martin

    The article is quite nice. It tackles the basic issues involved in protecting a business idea. Everyone seems to know these intuitively, but there is the need to read a clear and orderly presentation like this.
    Thanks for the article.

  • satesh

    i am just wondering about something ..well i am 18 and i have a product that i invented for one of my business class project..and i am thinking about selling my idea to the company .. and well my question is how do i protect my idea etc from the company and preventing them from taking credit for something i invented.

  • Etete

    Thanks 4 reminding me that i need to keep a secret about my ideas. even when i want to introduce it to someone i knw how to do it. an adage says: if you want to eat with someone who’s very cunning, make sure you hold a long spoon.

  • christine

    Hi, this is a really good article but the only question I have is… When writing up a disclosure letter to protect your new venture do you need it to get notarized, or have a lawyer that represents you to be present, and can I have a lawyer write up the agreement for me to legalize my letter of disclosure to pretect myself and my new venture? Please and thank you for your time! Mrs. Christine

  • Mr. C

    I have the same concerns as you it seems… It is very difficult to know how much to disclose without giving away the idea or concept. Sometimes the best ideas are the simple ones so when explaining the product or service a few words is all it takes to give away the entire concept.

    Confidentiality contract is a great start…I think.
    Documenting ideas and concepts is always great. Date stamp and put your ID to everything so it is easy to prove in a Court of Law should it ever get to that stage, heaven for bid.

  • Augie

    I’ve had this wonderful idea for over a year now and would like to start talking to some investors about it now, but I am afraid that the idea will be stolen from under me without me even having a chance of profiting from it. My question is how do I protect my idea? Do I have to patent it or copywrite it? And if I do, does it cost much?

  • Bob Cain

    How do I approach a company with a new use for their product and protect my idea so they don’t steel it from me without payment?

  • http://www.jasonmt.com jason

    How are you? I have an original idea for a new company. How do i legally protect it? Under a copyright? A patent? Or a trademark? Or other documents? Thanks.

  • Muriel

    I have developed an original business idea which has become my best seller, there are similar products being sold locally, what actions should i take to protect my product? Thanks

  • http://www.gsndesigns.co.za luther

    Hi, i just open a business { graphic design } i need a very good idea on how to run it and get more clients. South Africa

  • Dhaval

    Hey, I need copy of a simple Non Disclosure Agreement Form. Where can I find it? Could you please e-mail it to me if you have a copy? I would like to protect my idea.

  • http://lagosbusinesses.blogspot.com Business Ideas and Tips

    Interesting Post! it is unfortunate that some people can’t value innovative solutions and would want to take undue advantage of others efforts. Posts like this do a good job in enlightening people about the risk of being too trusting

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  • https://me.yahoo.com/darlaimports1#4a1e2 importexporthomestudy.com

    Business is all about taking risks, thats why it’s great to have good management skills and just give it great faith so you hire the right people and not the ones who will ruin you. Business is not all about money, its treating workers right.

  • Hlophegcinumuzi

    I would like to just see a draft of this confidetiality agreement just sample it.

  • Belgarat000

    What if the idea is so simple that no one have thought of it yet(like facebook on its time) that even by revealing the smallest part can compromise the idea’s security? how do we defend against idea theft as well build the idea? NDA forms are great on paper but in the end they don’t really defend the idea holder entirely…

  • diyplus

    I pitched a website business idea to a friend and I offered him to join me in helping me make this happen, after a few months, we are in disagreement in many things , so decided to break it off. and i am worried that he will take the idea and develop it himself ( because he has the money – the reason why i proposed the idea in the first place).

    we don’t have a written agreement on anything, can he get away with it if he decides to go ahead and develop it himself? or do i have a legal right on this

  • http://PriceSpot.com Jason Rowe

    Interesting information. Seems the major downfall everyone is having is understanding how to safely pitch their idea’s. I can answer that. Write down a detailed business prospectus and mail it to your self. Make sure it’s a sealed tight envelope. When you receive it in the mail hide it like treasure and never tell anyone you did that. If you went to court, the judge could open the sealed envelope with post marked date stamps and your story will match that this was your idea first. Now I know all these posts are 5 years old… But I am so curious if any of you ever did anything with your ideas?

    • hari

      thank you jason. i’ve been searching for this answer on the web since long.

      • Fred Young

        Thanks Jason, I wish I’d have done just what
        you have suggested when I saved Verizon millions of dollars in the planning
        process for FiOS deployment. As it turned out, I never even got a thank you.
        Large corporations protect themselves by using methods called teams and teamwork.
        They get everyone in a room together for a brainstorming session and the leader
        asks if anyone has any ideas as to how to improve the process. I made the
        mistake of discussing my idea before protecting myself. After complaining about
        not getting credit for the idea, the company came to me and wanted me to sign a
        statement, which basically stated that any ideas, while working at the company,
        using company resources such as computers, office space, etc, belong to the
        company. Yes they have such a huge legal department that no single attorney’s
        will even attempt to flight them in court.

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  • prince bill

    i have an idea for how a certain company can start generating profit & bring good service
    to the guest or customers that may be coming in

  • Eileen

    Do successor’s in interest have rights to IP that is disclosed earlier?