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How to Protect a Business Idea: 3 Important Steps

by Mike Abelson   October 5, 2021
There are many ways to protect a business idea from infringement. For example, it is possible to copyright, patent, or trademark a business idea to legally secure it from theft. This article looks at three essential steps that outline how to protect a business idea.
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In 2003, Cameron and Tyler Winklevoss hired a fellow Harvard student, Mark Zuckerberg, to develop a website that would connect students from different universities. Although the trio had an oral confidentiality agreement, it proved to be ineffective. The Winklevoss’ alleged that Zuckerberg stole their idea and established his own company — Facebook.

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What could the Winklevoss twins have done to prevent Zuckerberg from taking advantage of their business idea? There are many ways to protect a business idea from infringement. For example, it is possible to copyright, patent, or trademark a business idea to legally secure it from theft. This article looks at three essential steps that outline how to protect a business idea.

Please note that this article should not be interpreted as legal advice. This blog is for informational purposes only. We recommend consulting with an attorney to learn how to protect your business ideas.

Professional signing forms.When you come up with a business idea, you may first think of acquiring startup funding or advertising. However, you also need to think about the security of your business. Securing the business can relate to the business idea itself or a product that is being developed.

At the initial stages of development, you can protect your business idea by signing legal contracts with your team members. Those usually include written agreements that can have legal power in case of a breach. For instance, if the Winklevoss brothers signed a written contract with Mark Zuckerberg, he may not have laid his hands on the twins’ project that easily.

These are some legal tools you can use to protect your idea with an attorney’s help:

  • A non-disclosure agreement (NDA). You can sign a mutual agreement between parties on your team, vowing not to share information with a third party. As a result, all parties are legally bound not to disclose sensitive information to anyone outside the company. An attorney can help you draft an NDA with no expiration date.
  • Non-compete agreement. When you hire employees, you can have them sign a non-compete agreement that would prevent them from starting a similar business of their own. A non-compete agreement is usually limited to time and location. For example, if you own a barbershop, it can temporarily prevent your employees from opening an entity in direct competition with you across the street.
  • Non-solicitation agreement. This one is a less restrictive version of a non-compete agreement. The employees are allowed to start their own ventures in the same industry. However, the agreement prevents employees from soliciting their employer’s customers.
  • Work-to-hire agreement. When you hire someone to help improve your business idea, you can sign a work-to-hire contract with them. If they come up with something, their idea also becomes yours. However, if you file for a patent, you have to mention them as a co-inventor. Regardless of this, they will not have the rights to the patent.

2. Register With a Federal or State Office

There are three main categories for registered protection: copyright, patents, and trademarks. Each of these offers different types and lengths of protection. These protection techniques are not compulsory but can allow for legal intervention in case of infringement.

Programmer coding on computer.Copyright grants you a collection of rights to your original work. To obtain copyright protection, your business must meet three main criteria: it should be created by you, be original work, and be expressed in a tangible form.

It is possible to copyright an idea; however, it is only granted to tangible products. A copyright cannot be granted for an idea or strategy itself. Instead, copyright protection can be given to photographs, videos, writing, or computer codes. For instance, if you're developing a video game, you cannot copyright the game's rules or the plot. Instead, you can acquire copyrights for elements like the computer code, the graphics, or the layout. Similarly, the concept of a social network cannot be copyrighted. However, you can secure the layout, the design, or the computer code of the website.

To copyright a product, you have to register your work with the U.S. Copyright Office. The registration is done online and can cost around $50 to $100, depending on your product type. In most cases, copyright is granted for the duration of the creator’s lifetime plus 70 years after their passing.

Patent

Patents grant protection for using, making, and selling an invention. Patents are provided by The U.S. Patent and Trademark Office (USPTO). The idea itself cannot be patented, but a particular design or method of business can. USPTO outlines the requirements of a patent and how to patent a business method. The method must be novel, non-obvious, and clearly documented. This means that no one with the same skills has come up with the same method before.

There are three types of patents you can apply for:

  • Utility patents - 20-year protection for the way an invention functions.
  • Design patents - 15-year protection for the way an invention looks.
  • Plant patents - 20-year protection for asexually reproduced plants.

Patents usually take up to two years to acquire. They are also relatively pricey and can cost up to $45,000. If you're applying for a utility patent, you might want to consider the Provisional Patent instead. It provides a 12-month "patent pending" and a priority filing date if you wish to continue patenting it fully. During these 12 months, your invention will have some protection while you continue to test and apply changes to it.

Trademark

Graphic designer holding notebook in one hand and drawing logo on computer with the other hand.Trademark protects your business's marks from the use by other companies. You can trademark a word, phrase, or symbol that identifies and distinguishes your business from others. Trademarks include brand names, brand logos, and slogans, but you cannot trademark an idea.

One of the most publicized trademark infringements was with the French luxury brand "Louis Vuitton" and a South Korean fried chicken restaurant called "Louis Vuitton Dak." Because the name "Louis Vuitton" was trademarked by the fashion house, the court ordered the South Korean company to change its name and pay penalties. The case shows how important trademark protection can be for a company's reputation.

How to trademark an idea is up to you because registering a trademark is not mandatory in the U.S. Once you start using a trademark for your operations, it's automatically protected as yours. However, you can still register it with the USPTO to access additional protections. However, trademark registration is usually more complicated than copyright and can take months or even years. Trademark protection is valid for 10 years and can be renewed.

3. Keep It Secret

Stamped document Keeping your idea a secret can be one of the most effective ways to protect it from theft. The USPTO grants trade secret certificates to inventions that:

  • have proven or potential economic value and are generally unknown to the public
  • deliver value to others who cannot legitimately obtain that information
  • are subject to reasonable efforts to maintain their secrecy

A trade secret will be granted only if all three requirements are met. If one of them is no longer valid, then the trade secret loses its significance. Otherwise, there is no expiry date for trade secrets.

Trade secrets are relatively easier to establish than patents. Moreover, unlike patents, trade secrets do not make your information public. One of the most famous examples of a trade secret is Coca-Cola. The company has kept the drink’s formula unknown for about 150 years by maintaining a trade secret certificate. It has passed down the drink’s formula from generation to generation.

Bottom Line

The Winklevoss brothers ultimately sued Mark Zuckerberg for stealing their business idea. However, it was already too late. Zuckerberg did end up paying them $65 million in cash and Facebook shares. But he is still the sole individual attributed to Facebook’s superstardom.

The moral of the story is that anyone can pull the rug and take away your business idea if it's not protected. This article showed three basic steps you could take to protect your business from infringement. First, legal agreements could protect you from people working inside your company. On the other hand, patents, copyrights, trademarks, and trade secrets could prevent outsiders from copying your idea. Some of these protection methods may take a while to obtain, but they can help protect your idea.

Mike Abelson   Editorial Director
Mike is the Editorial Director at Lendza. He enjoys helping entrepreneurs and startups succeed through smart, innovative strategies. He’s partnered with CEOs and executives to grow businesses from the ground up. Before his work at Lendza, Mike was a stock market analyst. When he’s not traveling for work, he enjoys reading adventure and science fiction novels.