Dear Rich: Nolo’s Patent, Copyright & Trademark Blog

Dear Rich: A former co-worker developed a new business idea. I signed an NDA and we both worked on commercializing the idea and planned to form a startup. He lost interest. An attorney reviewed the now-expired NDA and said I was fine to pursue the idea on my own, that I was under no obligation by the NDA. Can I file a provisional patent on the business idea? I would like to protect the idea by fixing a date in case I decide to file a formal patent application within the year. Any thoughts? Our first thought is that since you mentioned that you've already hired an attorney, why not ask your attorney whether to file? The Dear Rich staff provides helpful information, but your attorney knows more details about your case and could provide specific, client-centric advice (and probably has malpractice insurance to boot). Our second thought is that there is no such thing as a "provisional patent" (a common misconception). There is only a provisional patent application (or PPA) -- a document that establishes an official U.S. patent application filing date. (Nolo offers a free guide to PPAs that you can download here.) 

As for filing your PPA with the USPTO, the PPA must be filed in the name of the inventor (or a co-inventor). A co-inventor is someone who contributes at least one novel and non-obvious concept that makes the invention patentable. If you didn't add anything patentable to the concept -- no Eureka! moments -- the PPA must be filed in the name of your co-worker. As for preserving the date of invention, you don't need a PPA to do so. Many inventors preserve their dates via an inventor's notebook. The important thing to keep in mind is that if you publicize or commercialize the idea, a patent application would have to be filed within one year in order to preserve patent rights. One way to avoid potential hassles is to work out a joint-ownership agreement with your former co-worker that will provide you with the right to exploit the idea while compensating him.

Dear Rich: My company has developed a database tool that allows people to review different rules in all 50 U.S. states. We're about to show it to some outsiders who might want to license it. Should we patent it? What should we do to protect it? I'm so glad you asked. The short answers to your questions are "Maybe" and "a few things." 

It seems like there are two things you'd like to protect: a database of information; and a tool that organizes and/or searches that information. As for the tool, if it is novel software code, that code may be protected under copyright law (PDF). The code and software process may also be protected under patent law. You say you're going to show this tool to outsiders soon. You don't need to be concerned about copyright protection, since you have a copyright on the software regardless of whether you register it. As for patent protection, you can preserve your rights by filing a provisional patent application before you show it to outsiders. A patent attorney can advise you, or your can use Nolo's online provisional patent application filing system. In reality, the filing is unlikely to do that much good because your right to go after those who infringe the patent won't kick in until you get the patent (which is years away). But don't give up! There is a way to protect your database tool (and we'll talk about it in a moment). 

As for your database of information, the various rules in the 50 states are likely to be public domain. But what may be proprietary (and protected under copyright law) are: (a) any explanatory or additional language you add; and (b) your selection and organization of the 50-state rules. According to the experts, there are really only six ways to organize data: alphabet, time, number, catergory, location, or hierarchy. According to public domain expert Stephen Fishman, the first three methods are unlikely to be protected; the other three may be protected if you can demonstrate a degree of creativity in the selection. If you're getting the feeling that protecting your database under copyright law will be difficult, you're on the right track. About ten years ago there was a rallying cry for legislation to protect databases -- but nothing ever came of it. (You'd have a better chance of protecting your database in Europe.)

So what's a database owner to do? According to the Dear Rich staff, your best approach is to use contract and trade secrecy law. End users who access your database should agree to an End User Agreement (EULA) that prohibits pilfering the tools or proprietary information. For example, that's the approach that eBay successfully used against Reverseauction.com to protect its customer database. Contractors who work on your database should sign nondisclosure agreements. When showing your database and tools to outsiders, use a typical nondisclosure agreement (here's an example). Some outsiders may balk at signing NDAs, particularly if they're already working on something similar, but a laywer can tweak the agreement to satisfy everyone. And of course, if you do license it, your license should require EULAs for end users and an assurance that the licensee won't challenge your proprietary claims to the database and tool.

Dear Rich: In your book, Patent, Copyright and Trademark: An Intellectual Property Desk Reference, you write, "Trade secrets that arise from research and development activities conducted by manufacturing concerns belong to the company sponsoring the research and development." Can you provide any case citations supporting that statement? I'm so glad you asked. As the entry from the book also indicates, these are general rules and dependent upon the circumstances of the trade secret's creation. As the Supreme Court established, trade secret laws encourage research and development by supplementing the patent system and supporting innovators who seek to retain the value of their discoveries. However, to be sure that R&D is owned by the company sponsoring the research, these criteria must be satisfied: (1) the R&D must have commercial value and be unknown by competitors, (2) the information must be treated with secrecy, and (3) the R&D must have been created by an employee within the course of employment or by an independent contractor bound by a nondisclosure agreement. If you're looking for trade secret case citations, the Dear Rich staff recommends R.M. Halligan's "Trade Secrets Case Database." BTW, the Dear Rich staff has created a website where you can find information about trade secrets as well as free NDAs.

Dear Rich: I have a question. I get a lot of emails that have disclaimers at the end like "This email and any files transmitted with it are confidential, etc. ... " Should my business include one of those disclaimers to protect our trade secrets? I'm so glad you asked. Feel free to use disclaimers but don't count on them to protect anything. Although there are no court cases to point to, the general consensus is that email disclaimers don't create a legally binding arrangement because the other party never agreed to the terms. (That's true even if you are a big megacorp like Time, Inc.) If something confidential is accidentally transmitted, a court will be more concerned with the contents of the email, the choice of recipient (that is, your existing relationship with the recipient), and the circumstances of the transmission. If you're concerned about protecting business trade secrets, avoid sending them in emails and take the time to create a basic trade secret protection program. Finally, the common placement of the disclaimer (at the end of the email) works against enforcement since disclaimers must be prominent (at the top of the email) to have any effect at all.

So why bother including one? It's mostly a matter of wishful thinking--that is, making a statement that an email is confidential may trick the recipient into believing it is confidential. (Another reason to use them is in the hope that yours will enter the Stupid Email Disclaimer hall of fame.)