Last week we ran an article from Liam Mc Morrow called “Starting a Business – Who Can I Talk to About My Idea and How Much Can I Say?”
Craig Daniels, a solicitor with Harper Macleod, responded to the article with this advice.
The issue Liam Mc Morrow tackled in his article – To what extent do you need to protect your idea when talking to people – is an familiar one for entrepreneurs who have developed a new business concept or a better and innovative product or service.
As Liam rightly points out, depending on who you ask you’ll be presented with conflicting views on the level of discretion and secrecy that he needs to employ. We lawyers are usually considered more conservative than most people (fortunately we’re also more thick-skinned), so it’s little wonder we might be expected to advise you on the need to remain silent.
However, I also know from my own experience that the entrepreneurial eco-system in Scotland is flourishing and while this is driven by a number of factors, collaboration has been central to that growth. It is important that we allow this collaborative approach to continue, and in light of this the balance of disclosure becomes more important.
So what do you do? You will no doubt be happy to hear that the common sense approach you advocate is a good one, with, of course, some caveats. There has to be a commercial balance struck between protecting your idea to the fullest extent and openly discussing it with people who could well provide valuable insight. A failure to strike this balance could either prevent you from having the discussions that could very well take you to the next level, or allow someone to replicate your idea.
Every week I speak to many clients who want to know where they stand in terms of protecting their ideas. Without going into the specific details of either their businesses or yours, the straight answer is that you cannot protect a business concept alone. What you can protect is confidential information and/or tangibles such as documents and products that arise as result of your concept.
Non-disclosure agreements (NDAs) have benefits for entrepreneurs as they place the recipient under a contractual obligation to preserve the information that is the subject of the non-disclosure agreement. If you do decide to use an NDA you should ensure that it is clear as to what confidential information is being disclosed by you and that is to be protected from further disclosure by the recipient. However, non-disclosure agreements can also, in certain circumstances, appear too heavy handed. Here, as you suggest, your intuition and knowledge of your audience makes you best placed to decide whether to insist on one.
In some circumstances an NDA may be a necessity. For example, patents are a form of intellectual property that require to be treated very carefully as regards confidentiality. If you disclose a potentially patentable idea then you may lose the potential to register the patent. Where you believe that you have a created a product or a process that is patentable then you are advised to consider NDAs more closely.
If you are not disclosing a patentable idea or specific confidential information, then you may determine that the risk of onwards disclosure is low and that you can freely enter discussions with someone
about your business concept, without the need for an NDA.
Even without an NDA, entrepreneurs can still enforce rights in information or products disclosed to a contact. If you have created an original work (for example a business manual or a literary work) copyright arises on the creation of that original work. If a recipient copied an original work then the
copyright holder could seek to enforce their rights against the wrongdoer. Also if you have created a new product, you may be able to enforce design rights that arise in the look and feel of a product.
The key for all entrepreneurs is to do your diligence on the nature of the intellectual property you possess, on the people you are speaking to and to generally use your instincts to determine how much information you choose to provide to each person you speak to.
If in doubt, it’s always good to talk to a lawyer!
Craig Daniels is a solicitor with Harper Macleod. The firm works with hundreds of startups every year and is the legal partner of business incubator Entrepreneurial Spark.