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Protecting IP when pitching

I have a product I've been developing on and off for the past 3.5 years.. the progress has been:

Nov 1999-Mar 2001: Lots of ideas and an architecture coming together but no time to work on it

Mar 2001-Jan 2002: Client I was consulting at had a need for exactly what I've been developing (or thinking about). Agreed with client that I would provide IP and they would provide development effort. At the end we would both get a copy; I would still own IP. This worked well but we ended up with a strategic implementation, with a compromised architecture, to meet their needs quickly. Best description in terms of development from my perspective is 'prototype'. They are still using it. More people are starting to use it and it is now one of their strategic products.

Jan 2002-Present: Using lessons learnt from prototype and redeveloping with a scaleable architecture. Still consulting but only 3 days a week. Remaining days and virtually every other waking hour spent developing the product.

Now what's starting to get to me is that the product is coming along well but progress is very slow. I'm not too concerned about missing the target market although it does nevertheless remain a concern. What's affecting me more is the fact that it is my number one priority. This is becoming difficult as I also need to balance other commitments; children, the missus, house repairs, general other chores, oh and having fun. These all have to take a back seat for a while whilst I complete the number 1 priority. Except that it is really starting to get me down! Feeling under pressure all the time.

My long term plan was always to get the product into the position where it was commercially saleable and then either make a living from selling it or (preferable option) sell it lock, stock and barrel to a software vendor who has the appropriate gap in their portfolio, one of which I'm thinking would be Rational.

As development drags on and on my latest plan is to get it into a demonstatable state but also into a state where my client could start to use it (the 'prototype' is functional; not elegant and, for example, all administration is achieved through editing tables) so they can become a reference site.

I then want to approach the companies I've identified and try to enter into some sort of partnership arrangement.

Now my concern is how do I deal with these companies and yet ensure that my IP rights are not lost. I don't know about NDAs; where you would go to get one drawn up and what protection it ultimately affords you. Perhaps there are even better mechanisms to protect IP rights, I really don't know!

What's to stop a company tasting the wares, thinking 'bloody great product' and then developing something similar themselves? I doubt the idea could be covered by any patenting (especially not here in the UK) so what's to stop someone ripping the idea off and claiming they stumbled across it themselves?

Hopefully what would stop them is that the product is a percentage complete so why redevelop the wheel? Also they don't necessarily have the intellectual thinking to get them the remainder of the way.

Any help gratefully received!

gwyn
Monday, July 14, 2003

Well, at some point you will realize that everybody has ideas and knowlege.  Ideas are not by themselves valuable.  It's the actual complete follow-through with all of the kinks worked out that is the valuable thing.

I mean, if the idea is so obvious and clear that anybody who has the idea explained to them that they could short-circuit 3-4 years of work, your idea isn't cool enough.

It goes back to the whole 10% inspiration, 90% persperation thing.  The idea of an electric lightbulb was easy, something that everybody who's ever seen lightning would think of.  Finding a good filament to use for the lightbulb that would work, that's the hard part.

Flamebait Sr.
Monday, July 14, 2003

Find your self a super lawyer.  Someone well versed in IP issues and software.  They are hard to find, but worth the money.

You've come this far, don't drop the ball over a few bucks.

Keep your chin up, a couple years down the road you'll thank yourself for all the hard work you've put in now.

canuck
Monday, July 14, 2003

“Family, friends, religion. These are the three demons you must slay if you wish to be successful in business. Any questions?” – Mr. Burns

On a more serious note, I wouldn’t worry about other companies “stealing” your IP. Remember, once you release a product to market, it’s fair game anyways. Always execute a non disclosure/not compete agreement with any partners you are working with. If you’re not sure what to do then consult a lawyer, or do some research on the web about the subject.

John Rosenberg
Monday, July 14, 2003

If you patent an idea (in the US) it can become very valuable, even without an implementation.

D
Monday, July 14, 2003

Forget the money.
Quit your other jobs.
Pay your bills with credit cards.

Spend 100% of your time on the project.

Capitalism is about taking risks, I am finding that most people don't have it.

Quit worring about what is safe, just ship it already, no more excuses.

--
ee

eclectic_echidna
Monday, July 14, 2003

I have worked in VC and with entrepreneurs for a long time, and this is nearly always their top concern- how to protect their idea.  But that is rarely ever the real issue- the real issue is will anyone buy it?

If you have a truly great product, you will be able to capitalize on it by getting to market first. If you don't, no one will want to steal it anyway.

Recognize that very few people will have the inclination to spend the time and effort you did to build this thing- they'd rather just buy a working solution and get on with whatever it is they do for a living. So go and try to sell it- you will find out quickly enough if you have a winner or not.

And don't spend any more time working on it! Go sell it now- you can fix/upgrade it later, if you find a bevy of waiting customers. If no one wants it, then you can quit now and reintroduce yourself to your family.

Seriously- step away from the computer! I'm not kidding. Go- sell, and see what happens.

Matt
Monday, July 14, 2003

I know some brilliant IP attorneys and would be glad to give you their names. I can vouch for their brilliance because I spent three years in law school with them. No, I'm not one of them  <g>

One's in Washington and the other in California, so if that jibes with your general geographic location, drop me an email and I'll give you a name.

Zahid
Monday, July 14, 2003

Thanks for the kind offer Zahid but I'm in the UK..

gwyn
Monday, July 14, 2003

Thanks for your words Matt. I suppose my next question is going to be 'how do I get in front of the right people?'

gwyn
Monday, July 14, 2003

VC's don't sign NDA's.... As far as I know no one signs NDA's.

Nowdays VC's and Angel Investors invest in ideas only when they see a clear value proposition or high no of customers (traffic).

So you need to go sell your product (Matt has given some pretty good advice)...

All the luck, keep us posted..

Prakash S
Monday, July 14, 2003

"Don't worry about people stealing your ideas.  If your ideas are any good, you'll have to ram them down people's throats." (seen on comp.lang.perl.moderated)

Reginald Braithwaite-Lee
Monday, July 14, 2003

I also know some IP lawyers, however they are almost entirely worthless at this point in your sales cycle.

Your software is copyrightable, make sure it is in every detail, issue non-disclosures (when push comes to shove unless there's a contract at the end they are worthless, but they are evidence for breach of faith, prior knowledge and breach of copyright).  Record every single shipping, contact and meeting you have with any potential buyer.

Do not boast about it in the pub, give ad hoc demonstrations to friends or publish anything about what the software does unless it mentions the product specifically.

If your software relies upon any third party component to the extent that without it it is worthless, give up.  You might well be able to sell it and distribute it yourself but expecting someone to pick up third party relationships is a real stretch, unless you've solved  global hunger and they can comfortably buy out the third party lock stock and smoking gun.

If you really want to, you could look at patenting some key component of your software, unless you are already independently wealthy this is not much use.  It only really protects you in the US and only if you have the money to pursue any suit.  You also have to renew annually.

If the EU goes for software algorithms as a patentable original idea (god help us all then), then that might change.

You have to give non disclosures before you ever disclose anything, don't do the presentation then hand out the useless bits of paper.  Do it first.  But, unless the people signing are officers of the company or could be reasonably thought to be so by their position and status then they are also worthless.

Don't be surprised if someone says to you that they can't sign non-disclosures due to non-poisoning policies at the company.  In that case either walk away or only present to a group which does include an actual officer of the company, not just a title that sounds like they should be, CTO or Technical Directors frequently aren't officers or board members.

Your software is infinitely easier to sell as a going product if it already has sales, its also a lot easier to prove IP.  But, if any customer in the past financed or provided resources for part of that product then be very sure that there is no smidgen of doubt that that customer doesn't share in your IP.

Good luck.

Simon Lucy
Monday, July 14, 2003

I tried to do something similar a couple of years ago. For a whole host of reasons, it never saw the light of day and I've moved on. Here's my comments: as a person, you don't really own any IP, or not directly. Legal entities own IP. You need to make sure you own your legal entity outright, which owns the IP outright. This comes down to the nature of your argeement with Client I. Companies will be very scared if any other company can make a reasonable claim to the IP. It's just not worth it to them.

Get a good lawyer, get the nature of IP issues between your company and Client I spelled out clearly. If your company owns 100% of the IP and Client I knows that you are marketing the product, they are willing to acknowledge that they approve, and they aren't expecting any kind of payment or discount in return, then you're in a position to approach other clients with NDAs. I haven't worked with VCs, but NDAs are pretty common for pitching large vertical market type apps. Match your lawyer to the lawyers used by your clients. If your marketing to Fortune 500 or large financial institutions, you'll need a blue chip (white shoe?) law firm. Though expensive, these guys will cut the crap and get it done. If you put some budget small-timer in with the sharks you'll just end up protracting things and may end up getting screwed, too. My clients were large banks and it took me about $15k to sort through this stuff and get a contract with Client II (not including incorporation and all that stuff). It took eight months - and that was for a four month project.

Pursuing patents may be a cheap way to greatly increase your bargaining power in the future and it may be a sensible defensive move. One of the books on Joels' list, "High St@akes, No Prisoners" is very good about this sort of thing. I wish I'd read it before I started my company.

I also suggest paying a lot of attention to your branding, i.e. website/business cards/letterhead, etc. High Production values matter. It has serious subconscious sway over how you will be perceived, and how your product will be perceived. You will fight this battle at the instant of first contact and you will have very little opportunity to re-fight this battle. Not doing this is one of the mistakes I made. From what I can tell it's another $15K to do this right. Maybe some other posters can shed more light on getting this done cheaper.

Jim S.
Monday, July 14, 2003

*sigh* How I long for the days when IP in our business meant "Internet Protocol".


Tuesday, July 15, 2003

Just one small point.  An individual is just as much a legal entity as a corporation, there isn't anything unusual in an individual having intellectual property rights and maintaining them outside of any other corporate umbrella.  Whether that is tax efficient is another matter.

Simon Lucy
Tuesday, July 15, 2003

Intellectual Property Rights at one time belonged almost exclusively to individuals.

I presume the point J-S is making is that the company the guy works for in his day job may have claims on the IP. I would doubt it though.

Stephen Jones
Tuesday, July 15, 2003


MATT's comment is absolutely correct, in my 8 years experience growing a business. Marketing leadership is a much safer protection than patents, etc.  I big company can hold you up in court while they're out there getting market share.

Bottom line: until you have sales, you don't really have anything to protect.

EXCELLENT ARTICLE
Here's a great article on the subject from Inc. Magazine.
A fellow who invented a new fire ladder but a large rival tried to steal the design.  Very very interesting.

http://www.inc.com/magazine/20020301/23930.html

Entrepreneur
Tuesday, July 15, 2003

Gwynn, tell me your product isn't open-source. You wouldn't be that stupid, surely, if you're developing something useful and intend to start a business on it?

I ask just because otherwise your question doesn't really make sense. If you have a good product, your protection is in the ramp-up time, but it's not absolute.

When you reach deployment stage, you must start marketing and building a customer base strongly. Together, they will form your protection.

.
Thursday, July 17, 2003

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