From Inception Through Execution

by Ben Haltenhof

We’ve all had it happen. You wake up in the middle of the night with the next million dollar idea. (Okay, this has never happened to me, but certainly it’s happened to all of you). You start to sketch it out in your head and suddenly you’re unable to go back to sleep. You write down the outlines of your idea and begin an internet search. Does someone already make this product? Is the idea out there? Have I stumbled upon my Next Big Idea? Maybe this is it…!

So you have the idea, your internet research found nothing similar, but you’re just one person, and you can’t bring the product to market all by yourself, right? What do you do? And how do you make sure that no one is going to steal your idea in the meantime?

The first answer I’ll give you has nothing to do with what I learned in law school or in my practice; it’s advice you’ll get in every business school class: be first to market with a finished product. Facebook’s source code is available online (or it’s close enough), but if someone took that code and launched PersonCatalog, the reality is that they would not be able to convert that many users away from Facebook (despite the incredible name). That’s largely because Facebook was the first to market with a finished, albeit evolving, product.

The next answer is grounded much more in the legal field: Don’t go so fast to market that you forget about protecting your interests and your ideas. First and foremost, you should consider forming a business entity that will be responsible for the development, marketing and sale of your new product. While there are many entity choices that you might settle on for any number of reasons, at its most basic, forming an entity will help you limit your liability exposure and allow for an organized business structure which will help you in running your profitable company going forward. Forming the entity at the beginning with fewer members or shareholders will allow you more input on how you want the company to run, and how hard it might be to remove you from a position like CEO.

While forming your entity, depending on what your product is, you may want to look into filing a provisional patent application. While there is no such thing as a “provisional patent,” a provisional patent application is often the first step toward receiving a patent. A provisional patent application that adequately describes your product will establish your rights to the product and helps you meet the United States rule on being the first to file, not the first to invent. The filing fee is small, but you will likely need to consult with a patent attorney to make sure that you are properly describing your product and to confirm future deadlines concerning patenting your product.

Now that you have a good idea of how to protect yourself against the general public, you have to assemble your team. Best practices would be having a confidentiality agreement in place with anyone you approach to possibly work on the project. Especially if your idea is software-based, you’re going to have to make sure that your employees or partners don’t run off with your idea. Sometimes discussing the idea in vague terms will work until you have an enforceable confidentiality agreement in place with a partner or employee that would restrict them from taking your idea and making the product themselves. Yet another way is to combine these protections and offer equity in your company, which can create a duty for that developer to not compete. Adding a partner will, of course, allow others to have a say in your business and is something that should be considered carefully.

You should also consider who your potential partners are currently working for when approaching them to work on your project. In some situations, largely in the technology industry, an employer may have rights to anything that an employee develops while employed. That means that even if you are paying someone to develop a product outside of his normal employment, that other employer might be able to assert it owns your product! So make sure you know if your partners or employees are subject to agreements like this.

Lastly (at least for this brief article), you will need to consider trademark protection for your name, tagline, and logo. Marketing is expensive and there is very little that can drive up the cost of marketing like having to re-brand in the middle of a marketing campaign because you’re infringing on someone else’s mark or someone is creating confusion in the marketplace. Be proactive and create a unique identity for your idea. Once you have a name, tagline or logo, speak with an attorney about registering those. You can even file the application before you start using the marks.

With this overview in hand, go get some sleep, come up with that brilliant idea, and protect that idea as it becomes the product everyone waits in line just to see. Also, be sure to watch this space for future articles delving deeper into each of the issues outlined above.

Ben Haltenhof is an associate of Sandberg Phoenix, a St. Louis law firm.  Contact Haltenhof at 314-446-4374, bhaltenhof@sandbergphoenix.com or visit SandbergPhoenix.com.