The starting point in evaluating whether an idea is protectable is to understand
that there is no abstract right in law to prevent competition, or to protect an
idea. The courts and governments of the day for centuries have supported
competition between rival traders and have been reluctant develop laws encroach
on a freedom to compete. Ideas may be protected to the extent that they fall
under the relevant areas of law, the primary area being intellectual property
law.
Confidential Information
Confidential information is a well established area of law that that protects
ideas and information regardless of its form (whether spoken, or in a recorded
form such as electronically or on paper), provided that the confidentiality of
the information is maintained. The law of confidentiality plays a part in other
areas of law. For instance, that a disclosure of particular information at a
relevant time completely dissolves the right to obtain patent protection.
There are traps for the unwary when dealing with business ideas. When
entrepreneurs are looking to disclose sensitive information, they should enter
into a non-disclosure agreement prior to any disclosure to at least enshrine the
terms of the disclosure in writing. To be legally enforceable, the agreement
must be properly drafted and ideally lay out some background to the
circumstances of the disclosure, so that if worse comes to worst there is some
documentary evidence of the disclosure and what it related to. This does not
mean that the information itself should be disclosed in the non-disclosure
agreement, but rather the circumstances and general subject matter of the
disclosure. If the company or person to whom the idea is to be disclosed is
reluctant to enter into a non-disclosure agreement, then the business idea
should probably not be disclosed to them in the first place. It would not be the
first time that a company says after the disclosure that they are "already
working on something" similar. A well drafted NDA will cater for this
contingency.
When a business idea has been implemented and trading commenced, it will of
course lose its confidentiality and fall into the public domain. At this point
(and in keeping with our comments about rival traders at the outset of this
brochure) there is nothing preventing any other company from copying the essence
of business idea and altering it or improving it and by doing so creating a
competing product or service – subject to the following. If parts of
the business idea can be protected by intellectual property rights, then
competitors will not be able to copy the business idea to the extent that the
intellectual property rights protect the idea.
Overview of intellectual property rights
Each of the different intellectual property rights serves a different purpose.
They all apply independently – if subject matter qualifies for protection under
more than one type of intellectual property protection, then the rights
associated with the particular intellectual property right may be enforced
independently of the others. No one IP rights serves all purposes, and the best
right depends on what the business idea is and how the business wants to use it.
Loosely speaking, copyright protects written and recorded material from
copying; registered trade mark law protects business names and logos
from being used by other businesses; patent law protects truly
innovative products and processes from being copied or offered for sale; the
law of passing off protects established reputation in a business from being
exploited by others; the law of confidential information and that of
trade secrets protect information from disclosure or misuse provided it
remains secret. Lastly, designs law primarily protects the aesthetic
features of a design as it is applied to a product. There are different tests
for infringement in each case.
So, if a logo is created that is intended to be used to identify a business, it
may qualify for trade mark protection. It will also qualify for protection from
passing off. If the logo is an artistic work, it will also qualify for copyright
protection and protection as a registered design. Likewise, if a design has been
created it may be registered as a design, the unregistered design right may also
protect it, and if it is to be used as a trade mark, it may qualify for
registered trade mark protection as a shape, and protection from passing off if
it has accrued the requisite goodwill for the business.
It is important to realise the intellectual property rights are territorial. For
instance, there is no such thing as a worldwide patent or trade mark. A
reference to a worldwide patent usually means that registered patent protection
has been obtained in many individual countries or ‘territories’. With trade
marks, there is an important exception where a single trade mark may be obtained
covering all of the countries in Europe (except Switzerland) with a single
application.
Individual Areas of Intellectual Property Protection to Business Ideas
Copyright Law This area of Copyright law is said to protect the fine
arts, whereas patent law protects the industrial arts. Copyright protects
materials in their recorded form whether it be art, photographs, graphic works,
music as a embodiment of a business idea. Copyright will not against someone
reading the written work, extracting the concepts from it and implementing their
own version of it, provided they do not copy the way it is expressed. It will
protect against someone copying the materials that they read word for word. It
does not protect against someone extracting the ideas from the document and
using them for their own purposes.
Patent Protection and Business Ideas Some people say that patents
protect ideas. They say this on the basis that at the time the patent
application is filed you do not need an existing invention, because the patent
invention only needs to be produced when the application proceeds to
examination, about 9 months after the application is made. Strictly speaking,
patents do not protect ideas – it protects products and processes that have been
invented, that has not been seen before and contains an advance over what
existed in the market at the date of the application.
The UK and Europe do not allow protection for pure business methods (amongst
others). This contrasts with US patent protection that does allow for protection
of methods of doing business. A good example is the “One-Click” purchasing
method used at amazon.com – it is patentable in the US, but not in Europe.
Design Rights Design protects the appearance of a product brought about
by its shape, contours, ornamentation and surface decoration. There are
exceptions to these rules. Nevertheless if the design is new and has an
individual character, it may be registered for protection. The unregistered
design right applies automatically in the same way as copyright and has some
similar characteristics.
Trade Marks If the business idea is the name of a business or a logo,
it may be registered as a trade mark. A trade mark is simply a name or symbol
that indicates that goods or services originate from a source associated with
the trade mark. For instance, if Google were to produce a mobile telephone with
word ‘Google’ applied to it, you know that the Google, Inc had a hand in
producing it. Trade marks do play a role in the promotion of a business idea,
because it allows the business to associate the business idea when it goes to
market with a distinctive name, which is readily differentiated in the market.
Contracts Contracts, when properly prepared, are simply agreements in a
legally binding form. Contracts may be verbal or they may be written. In a
commercial context, there is real difficulty in proving what the terms of a
verbal agreement are. It is commonly said that contracts are not required unless
things go wrong. The problem with this approach is that when a value judgment is
made at the outset of transaction that all will go well, there is no decisive
written record of what was actually agreed, which makes enforcement of the
contract more difficult and in our opinion, for most cases too risky to try.
When dealing with intellectual property rights, some transactions dealing with
intellectual property must be in writing, such as transfers of ownership and
grants of exclusive licenses.
Furthermore, contracts with employees may be drafted with a view to preventing
competition from employees and freelancers when they leave finish their
engagement with their employer
Conclusion
The focus of this article has been the application of intellectual property
rights and contracts may used to protect a business idea and their limitations.
Intellectual property rights and contracts may be tailored to maximise the level
of protection that is available by law for a particular business idea in the
circumstances that it is intended to be used. The way this is done for any
particular business idea relies on the nature of the business idea and its
origins.
By not taking measures at the outset, you run the risk of losing rights that may
otherwise have been enforceable and in the process, compromising or losing a
powerful negotiating position in the event of infringement of legal rights that
you otherwise might have had.