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HOW TO PROTECT YOUR IDEA
Peter Freedman, October 2002
Protecting an idea for a new business is harder than protecting an idea for, say, a new invention. But new online services, plus the prospect of a major change in patent law, could benefit those worried about having their ideas stolen. Peter Freedman reports...
Sam Shemtob has an idea for a new dot.com. It is such a good idea, he feels, that... well, he is reluctant to reveal what it is. "It's probably best described as a web-based business, providing creative services to major brand-marketing companies... but with a twist." It is at a very early stage, he says. "I have not yet formally approached any venture capitalists."
Shemtob thus faces the dilemma of many an aspiring dot.com entrepreneur: how to develop a business idea, assemble the team and capital to execute it, while minimising the risk that someone he shares it with along the way might steal it.
Shemtob's problem might not be an entirely new one but it is an ever more prevalent one in today's "knowledge economy", where ideas are the means of production and, says Jeremy Rifkin in his new book on The Age Of Access (Penguin, £20), "intellectual capital is the driving force of the new era". The days, at any rate, are gone when all a business needed to protect its main assets was a barbed wire fence and a pair of underfed Dobermans.
Meanwhile, First Tuesday, the Internet networking club, recently strengthened security measures, including printing a warning on its introductory leaflet, after a spate of reported "thought-thefts", in which delegates to First Tuesday events complained of having their dot.com ideas stolen. Julie Meyer, co-founder of First Tuesday, plays down the problem, saying that the cases involved naive individuals, who had not even taken the basic steps of securing their domain names and trademarks.
If the theft of business ideas is, indeed, on the rise, the good news is that so are the number of ways of protecting ideas and other forms of intellectual property. They include new ways of registering ideas, both on the Internet and off, and the prospect of a major change in patent legislation, which might for the first time soon allow business methods, as well as products and inventions, to be patented, in the same way that they now can be in the US. (See box.)
At least two new services have sprung up to help people protect their business and other ideas. The most ambitious of these is Firstuse.com (www.firstuse.com), which, in its own words, "Can digitally fingerprint, timestamp and register any file, to strengthen legal documentation and create a tamper-proof audit trail for personal or business records, copyrights, patents, trademarks, and trade secrets". Such a trail would then provide evidence that could potentially be used in court.
Launched last year, Firstuse already has clients in over 60 countries and 50 professions. "We ultimately wish to become the world's central registry for record authentication", says Cliff Michaels, its CEO. 'It's not a substitute for copyrights, patents and trademarks but rather a tool for proving ownership of such intellectual property.'
"For example, if Firstuse is used to register a trail of all the machinations of an idea, then even if the final draft is stolen, it would still be possible to prove ownership of the copyright to the idea." Since all documentation, says Michaels, can be backdated and altered, Firstuse's methodology is the only sure-fire way of guaranteeing authenticity.
The process works by digitally fingerprinting files. Firstuse applies some of the world's most complicated algorithms (mathematical formulae) to the binary code of a digital file, so as to produce a unique fingerprint. The latter identifies only that exact file - even the slightest change to the file produces a different fingerprint.
The European Copyright Index is another new venture, offering the owners of intellectual property - anything from a piece of software to an industrial design, song, play or novel - with a new way of protecting it by furnishing them with evidence that they registered it on a particular date.
"Just an idea is almost impossible to protect in English law", explains Nisrine Barkeah, an intellectual property lawyer with the firm Abbey Legal Protection. "What is protectable is copyright. As soon as you write or draw or design something, you own the copyright in it."
"Anything that is copyrightable can be registered with us", explains Andrew Jones, director of ECI. The cost is £50 per item. "We then supply stickers for people to put on their letters and samples of their work, which say 'Registered with ECI'. It provides evidence to a court that you have put work into a project, and done so by a particular date."
Launched unofficially in March, ECI allows people to register either by post or by using an application form downloadable from its website (www.eci.org, or www.copyright protection.net). Unlike Firstuse, however, it also requires registrants to send in a hard and sealed copy of the item to be registered. "People are still suspicious of emails as evidence", feels Jones.
Alongside the likes of Firstuse and ECI, there is still a role for such traditional methods of protecting business ideas as confidentiality letters or non-disclosure agreements (NDAs). Exactly what role, however, is a matter of opinion. "If you ask most VCs [venture capitalists] to sign an NDA, it's a negative sign - that you don't have the confidence to execute", feels Julie Meyer of First Tuesday. "If you ask a VC in Silicon Valley to sign an NDA, they won't sign it and they won't take you seriously."
Tom Teichman, chairman of New Media Spark, the venture capital firm which first backed lastminute.com, among many others, gives a different perspective. "Most of the VCs I know do sign NDAs, but certainly, some don't. Some US VCs won't sign any NDAs. They say, 'You just have to trust me'. Yes, we sign them. But we don't use any form that comes in. We have our own short, legal form."
Sam Shemtob, meanwhile, has had mixed experiences with NDAs. "Some of the VCs I met at First Tuesday told me that NDAs were irrelevant and they didn't sign them, because 'every idea under the sun has been thought of' and it was the management team that counted. Plus, they simply 'didn't have time to steal other people's ideas'. The VCs that I struck up longer conversations with, however, were more understanding of my concerns. One said he would have been surprised had I not wanted him to sign one."
Shemtob also spoke to Bainlab, an Internet incubation company, about their policy. "They said they don't sign confidentiality agreements because they would preclude Bainlab from working in that area, but if I wanted to maintain confidentiality, I could send in a very brief summary, not giving anything away and explaining that confidentiality was a concern. Someone would then have a chat with me, and if they felt the venture had potential, something could be arranged."
Yes, agrees Julie Meyer, you have to take basic precautions to protect your idea, such as registering the domain name and securing the trademarks. Beyond that, however, the best way to protect your idea is to get on and do it.
"If you don't have some formal barrier to entry, such as a patentable technology, then the truth is that someone else out there is probably doing it anyway." In that case, the best way of protecting your idea is simply to think faster, work harder and be smarter than anyone else. She cites the example of First Tuesday itself. It's a very simple idea. Others are have also set up Internet networking organisations. "But we had the momentum."
In the end, the best way to protect your idea is to execute it faster and better than anyone else. Or, as General Macarthur once advised: "Have a good plan. Execute it violently. Do it today."
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