Intellectual property rights are important to protect your bottom line. From the proprietary recipe for coke to famous patents for the lightbulb, telephone, gas motor engine, and refrigerator, entrepreneurs and investors have worked to protect their business ideas for centuries, and you should, too.
As of 2022, Samsung is the world’s largest patent holder, with 6,248 patents granted during the year. Protecting your business concept is important even if you haven’t invented a new cell phone or lightbulb. Read on to know about how to protect a business idea and grow your business.
Why Is Protecting a Business Idea Important?
Protecting a business idea is crucial as it helps prevent others from copying or stealing your concept, ensuring that you have a competitive advantage in the market. For example, while “smartphone” is a broad idea, and most perform similarly to the end user, key differences drive Apple, Samsung, and every other major cellphone producer to protect their unique offering.
Whether you’re developing a line of children’s clothing, a hair business, planning to become a nurse entrepreneur, creating a seasonal business, or developing a type of business coaching, you’re bringing something into the market that is fundamentally unique and valuable.
When you protect those business ideas, mass producers in China or stores down the street can’t legally replicate it and sell it for half the price, driving away your business. From design patents and trademarks to intellectual property rights, read on to learn how to protect a business idea.
How to Protect a Business Idea in 7 Ways
Businesses, including Wyoming LLCs and other LLCs and corporations, rely on IP protection, patents, copyrights, and trademarks to protect their ideas, logos, and other intellectual property. Here’s how each of these work:
1. Intellectual Property (IP) Protection
According to the World Intellectual Property Organization, intellectual property or IP refers to creations of the mind or intellect, including inventions, literary or artistic works, designs, symbols, names, and images used in commerce. Patents, copyrights, and trademarks are the primary means companies use to protect IP, although companies may also hold IP rights for trade secrets, geographical indications, or industrial designs.
IP law allows individuals and businesses to earn recognition or financial benefit from what they invent or create.
Patents are generally granted to the inventor of something new. When someone invents something unique, a patent gives the owner the right to decide how or whether others can use the invention. Interestingly, to hold a patent, the patent owner must make technical information about the invention publicly available in the patent documentation.
Meanwhile, widely used inventions that have patents include the slinky (toy), hula hoop, and television.
Trademarks are signs that distinguish the goods or services of a company. Think of Nike’s swoosh symbol or the Starbucks logo as common examples of trademarks. Interestingly, the history of trademarks dates back to ancient times. Artisans would put their signatures or marks on their products, making them the first trademarks.
Copyrights are used to protect the rights of creators over their literary and artistic works. Works covered by copyright can include books, music, paintings, sculptures, films, computer programs, databases, advertisements, maps, and technical drawings.
2. Trade Secrets Law
Trade secrets are specific IP rights related to confidential information that may be sold or licensed. According to the US Patent Office, trade secrets include any information with actual or potential independent economic value that is not generally known. It must also have value to others who cannot legitimately obtain the information, and a company must demonstrate reasonable efforts to maintain its secrecy.
The unauthorized acquisition, use, or disclosure of trade secrets is considered unfair business practices and a violation of trade secret protection. You can file claims against an individual or company who has illegally acquired company trade secrets.
3. Non-Compete Agreements
A non-compete agreement, non-compete clause, restrictive covenant, or clause is commonly used with employees. Under a non-compete agreement, the employee, who could also be a trade partner, generally agrees not to enter into or start a similar profession or trade in competition against the company requesting the non-compete agreement.
For example, a software company may ask employees to sign non-compete agreements for five to ten years after they stop working at the company before allowing them to see its proprietary software or other trade secrets.
4. Non-Solicitation Agreements
Non-solicitation agreements are another way businesses protect their connection with employees and client bases. A non-solicitation agreement is a contract clause that states, again usually for employees, that if they move to work for a competitor, they won’t solicit any current business clients or employees. Non-solicitation agreements usually extend to confidential information connected to the employee’s current job, adding additional protection to trade secrets.
In the example of the software company employee above, with a non-solicitation agreement, the employee can’t share details about the original company’s clients, employees, or trade secrets if they went to work for a new software company.
5. Non-Disclosure Agreements
A non-disclosure agreement (NDA) is signed between companies or with an employee. It simply states that one or more parties agree not to disclose confidential information related to the business. For example, if two companies enter into a partnership or collaboration, both may agree to sign a non-disclosure agreement to protect their IP.
6. Work-For-Hire Agreements
A work-for-hire agreement is a one-time contract that allows companies to hire freelancers or other professionals for a set upfront cost or another form of payment in return for their services. Work-for-hire agreements are commonly used for writers, actors, or other professionals who create unique work.
In the case of a work-for-hire agreement, the copyright or trademark is passed on to the company. For example, if you hire writers to produce a screenplay or write regular blog posts for your company, with a work-for-hire agreement, your company owns the screenplay or blog posts.
7. Provisional Patents
According to the US Patent Office, when you apply for a provisional patent, you may file without a formal patent claim, oath, declaration, or any information disclosure statement. Generally, a provisional patent filing will protect your company for 12 months after which you need to file a non-provisional patent application.
Other Tips to Protect Your Business Ideas
In addition to the legal protective structures, there are other steps you can take to protect your business, including:
1. Employ Secure Communication Channels
Employing secure communication channels includes secure, password-protected company wifi and strong and unique passwords for real-time communication channels, including email and chat. Basic security precautions and company-wide protocols can help ensure information doesn’t fall into the wrong hands.
2. Timestamp Your Ideas
Timestamping allows businesses to secure and protect ideas and includes the ability to record the current time of an event from any computer. Common mechanisms, such as Network Time Protocol, allow networked computers and applications to communicate effectively while securely protecting information.
3. Only Share Your Idea Once It Has Received Protection
This is the simplest protection. Until you’ve established IP protection for your company’s idea, don’t tease it on social media or tell investors or anyone else about it. Ensure the protection of company ideas, and then move on to the next steps, from securing funding to marketing.
4. Monitor for Infringements of Your Protected Business Ideas
There are various software protocols online to monitor for infringement of your protected business ideas. Brand protection software like PhishLabs, Adthena, Allure Security, Corsearch, EBRAND, and Red Points can help you monitor for infringements on a large scale to help protect your business ideas and IP.
What to Do if Someone Steals Your Business Idea?
If you suspect someone has stolen your business idea, consult an attorney to understand your legal options, gather relevant evidence, and consider pursuing legal action if necessary. The sooner you take action, the better. Specialized IP lawyers can help you take the relevant actions and secure your IP, even without going to court.
Building in Business Protection
From starting a small business to developing one-person business ideas, Doola business formation and compliance services can take your idea into reality. While working to protect your intellectual property, Doola can help you secure the legal structure, EIN, and business bank account to get your company up and running. It can also ensure legal compliance. Get Doola formation services here!
What legal documents can help protect my business idea?
You can protect your business idea by filing for the relevant copyrights, trademarks, patents, and trade secrets.
How do I prevent others from stealing my business idea?
You can prevent others from stealing your business ideas with copyright protection, trademarks, patents, trade secrets, and provisional patents, as well as non-compete, non-solicitation, non-disclosure, and work-for-hire agreements.
How can I prevent employees from using my business idea for personal gain?
You can prevent employees from using your business ideas with non-compete and non-solicitation agreements.
Is it safe to discuss my business idea with potential investors?
Discussing business ideas with potential investors is safe if they have signed a non-disclosure or non-compete agreement. You can speak with an IP lawyer to ensure you protect the company with the best possible options.
Can I protect my business idea forever?
Yes, you can protect your business idea indefinitely with copyright, patent, trademark, or trade secret laws.