Have you developed an original idea for a new service or product? If so, you’re now facing a dilemma. The easiest way to make money from this idea is to license it to another business that will invest in producing, marketing, and selling it. In pitching this idea to potential investors, however, you risk revealing too much information and having someone steal your invention.
The good news: there are a few ways to shop your idea around without jeopardizing your rights. Here are three common strategies used by amateur and professional investors alike.
- Use Common Sense
Do your research when looking into potential investors, clients, or contractors. For example, what does that work portfolio look like? If they’re a competitor, why would they be interested in getting into business with you? Get recommendations from others in the industry before putting yourself in a position where you may give up vital information about your invention.
During the pitch, provide only as much information as you need to. If you’re pitching the idea to potential clients, for instance, it should be enough to convey what your service or product can deliver. Of course, if you’re pitching to lenders or investors, they’ll likely want to know a bit more about your idea before committing financially to it.
- Draft and File a Provisional Patent Application in the United States Patent and Trademark Office (“USPTO”)
If your invention qualifies as a patent, consider filing a provisional patent application (PPA). Filing a PPA allows you to use the term “patent pending” for your invention, which indicates you’re serious about protecting your rights. Once you file a PPA, you have a full year to follow it up with a non-provisional (standard) patent application and make a decision regarding international patent rights if that is of interest.
Keep in mind that filing a PPA is a lot simpler and less expensive than filing the standard patent application. For small entities, such as individual investors or companies with fewer than 500 employees, the filing fee for a PPA is $128. For micro-entities, or small entities that meet additional patent filing and income requirements, the filing fee is $64.
Once a PPA has been filed, your priority date for the patent is the date the PPA has been filed. It is not necessary to proceed with a Nondisclosure Agreement, as discussed below, as long as what you intend to disclose has been “enabled” in the PPA. An enabling disclosure is a disclosure that provides enough information concerning the invention such that a person having ordinary skill in the art of the invention may practice the claimed invention. You likely will want to consult a patent attorney to assist with drafting and filing the PPA in the USPTO to ensure that it has the needed information to protect your invention.
- Use a Nondisclosure Agreement
Before revealing your invention to potential buyers, it’s always a good idea to have them sign a nondisclosure agreement (NDA). That way, if the other party violates the NDA, such as by sharing your idea without authorization, you can sue for monetary damages. Depending on the information used, you may also be able to get an injunction from the court.
Most NDAs contain three important elements:
- a definition of confidential information
- obligations of the party receiving confidential information
- applicable time periods
The first two points are self-explanatory, but defining how long the information must be kept confidential is often a subject of negotiation. You’d prefer a longer period, whereas the potential client would likely want a shorter one. The result may depend on the bargaining power of both parties. The most commonly applicable time period in the U.S. is five years.