Sometimes, It’s Good To Be Careful

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James Irving
James Irving
James Irving
James Irving

Marcus Holmes, in his article “Ideas Are Worthless!” (Feb 10, 2014), correctly points out that an idea, by itself, isn’t worth very much. If a person has an idea, but can’t develop it into a product or service, and can’t deliver that product or service effectively to a market, what is it really worth? Accordingly, from Marcus’ point of view, NDA’s (non-disclosure agreements to protect confidentiality) are also pretty much pointless. Unless you have the resources and the stamina to run a court case to enforce the NDA, usually against a better-resourced opponent, what use are they, really?

I don’t disagree with these ideas, but, being a lawyer, I’d like to say: “Not so fast, Mr Marcus!” In some cases, being careful and getting an NDA signed may be the smart thing to do.

Another point made by Marcus in his article is this: “If someone else can come along, see your idea and steal it to make a company that will put you out of business, then you shouldn’t be in that business in the first place.” That may be true of small-scale businesses, but surely it can’t be true of people who consult or contribute concepts to large-scale businesses. Remember the movie Flash of Genius (2008)? Starring Alan Alda as a lawyer? Erm, you know, the one about the engineer who came up with the idea for the intermittent “dwell” windscreen wiper?

The engineer, Robert Kearns, patented the invention, i.e. he was careful. Then he engaged in negotiations with the big three US car makers of the time (Ford, GM and Chrysler) to license the technology to them. Ford and Chrysler went ahead and used the technology without paying him royalties, Kearns sued, and won $30 million against Chrysler. The bad part was that the court case took forever and that his marriage fell apart during that period.

If you invent a gadget that is genuinely new, i.e. it is a patentable invention, but can only be implemented by collaboration with large industrial companies, like car makers, why should you miss out on being rewarded for your idea because the people you disclose your idea to – out of necessity, you can’t implement it all by yourself – are unethical? The only way to put yourself in a position to assert your rights is to be careful: get an NDA signed, and patent the invention, register the design, or trademark the catchy phrase.

Marcus also says this: “Taking someone to court after they’ve done what they said they wouldn’t doesn’t actually stop them from doing it. The damage is already done, all you’re doing is taking revenge.” The civil court system doesn’t deal in revenge, at least not directly. It deals in money. When people inquire if they can get compensation for something that has gone wrong, I always ask them the same thing: can you put a price tag on it? If you can price the loss, a court can award you damages. If you can’t, stay at the pub and cry in your beer.

In Robert Searle’s case, the intermittent wiper concept was his property. He had a registered patent to prove it. Chrysler took his property and misused it, no different to someone walking into your house and walking off with your TV. One way of looking at court enforcement of IP rights is that it is for grumpy losers who want revenge. Another way of looking at it is that it is a matter of simple justice. If you stole my TV you should give it back or pay me its value. What’s different about my idea?

The difference between Robert Searle and the average idea, of course, is that Searle’s idea definitely was valuable. Searle was an engineer of many years’ experience and excellent academic qualifications. His idea was an advance on prior technology, and was capable of being patented. It was also useful enough to earn the attention of the major car manufacturers. Most ideas are nowhere near this level of monetisability. Like Marcus’ idea, disclosed to the public domain in his article, of glow-in-the-dark keyboard stickers, they are just ideas. Maybe the only feasible way to make keyboard stickers glow in the dark is to infuse them with plutonium, which causes users to get sick and die? Not a great idea, after all. But, on the other hand, what would Marcus think if he had devoted a few years of his life to creating genuinely novel and functional glow-in-the dark keyboard stickers that were a patented invention to boot, and then saw someone else come along and rip off his idea and get rich from it?

An NDA, like any contract, is just a piece of paper. It has to be backed up with action. Sometimes, people don’t have a choice about taking action: they have a legal responsibility to do so. Say your business is incorporated, and you are a director of the company, and the company owns certain IP, which is plagiarised by a competitor. If you don’t take any action to enforce the company’s IP rights, you may be in breach of your duty as a director to the company and its shareholders. The option of saying “revenge is for losers” and declining to do anything may not be an acceptable option, from the law’s point of view. Why? Because the law regards IP as intrinsically valuable, like any other form of property. A director’s duty is to preserve and protect the property of the company.

I appreciate that I have made what are, to some degree, run-of-the-mill lawyer’s comments: be careful, take precautions, get NDAs signed and be willing to enforce those agreements where necessary. My key point is that if your idea is truly valuable, because it is capable of being commercialised, then it is more than just an idea: it is property. And like any other kind of property, you as its owner have a right to benefit from the exploitation and commercialisation of that property. Sure, litigation is not cheap and it’s not certain. In Robert Searle’s case, litigation paid off handsomely. There is a legal doctrine called “accounting of profits” which permits an aggrieved plaintiff to recover the profits a defendant has made from exploiting the plaintiff’s property. If you haven’t got an NDA, you won’t have the option of enforcing it, or of selling your company to another person who will. Legal claims are worth money. Believe it or not, some people make a profit from litigation by buying other people’s rights to make legal claims, at a discount, and then enforcing them. This is one of the things that the “patent trolls” in America do. But if you haven’t taken the precaution of getting an NDA signed in the first place, then you won’t be in the game.

If you want to learn more, or need a general legal assessment visit irvinglaw.com.au to get in touch.

3 COMMENTS

  1. Welcome aboard James 🙂
    And nicely put. I have, of course, a thousand rebuttals, but you’ve argued your corner well. We should definitely debate this sometime!

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