Pitching an idea to an investor can be nerve-wracking. If you have been rejected for your pitch, you may be wondering if the investors truly did like your idea and did not tell you. This can lead to you wanting to secure and protect your ideas from those not willing to do business with you.
So, Can an angel investor steal your idea?
In theory sure. And I am sure it has happened. Somebody somewhere stole somebody’s idea. But the risk of investors stealing your idea is low. Additionally, the friction of trying to protect your idea can get in the way of due diligence and make it harder for you to get an investment. Your best defense is to move fast, confidently, and get the money you need to define yourself in the market place.
That said, there are some things you can do. So, how can you secure and protect your ideas from investors? Securing and protecting your ideas are not as hard as it may seem. There are a few ways to do so by:
- Applying for a Patent
- Trademarking Your Product or Company
- Creating a Paper Trail
As you look through the ways in which you can protect your ideas from an investor, you will notice the extensive paper trail you are leaving for yourself to cover every angle. Knowing how to secure and protect your ideas from investors will hand you a leg up when pitching to anyone.
How to Secure and Protect Your Ideas From Investors (or Anybody Else)
When it comes to securing and protecting your ideas you do not have to worry about not having any options. Most individuals who are trying to bring their products to life may feel as though they do not have the financial backing of a big company to protect themselves with.
Taking the steps to ensure that your ideas are well protected is to understand the processes that will help you. So, here are the ways in which you can help secure and protect your ideas:
- Apply For a Patent
- Trademarking Your Product or Company
- Creating a Paper Trail
- Non-Disclosure Agreement
- Confidentiality Agreement
Apply for a Patent
Patents are great. Patents help to protect a product or a method that you have created and it hands over the rights to you in case any individual tries to copy your design.
There are three different patent types that you can apply for that include:
- Utility Patents: Any methods of process or physical products are covered by this patent. If you can prove that there is a specific and unique process to your idea you should be good to go.
- Design Patents: If there is a certain design aspect to a product that is only for that specific shape or object, this is the patent for it. So, if you created a unique lotion bottle with a specific design, you would need to file for two patents such as the utility and design patent.
- Plant Patents: This is for any plants that you may have developed and want to protect. The plant should not be able to be found anywhere else and must be able to reproduce asexually.
The cost of patents can range between $3,000 to $20,000. The price of a utility patent is approx. $7,000 to $20,000 as this covers the cost to prepare and file this type of patent. For provisional applications, the expense is around $5,000 to $10,000.
With non-provisional applications, the costs are higher as this includes the examination of your product or method. A member of the USPTO will look at your product and everything else that is needed in order for your product to gain its patent.
Design patents are less costly than utility patents. The design patents can cost around $3,000 to $5,000. Now, the reason for the patents to vary in price come from four different factors that include:
- The goals that the inventor has for their product
- How complex your invention or method is to create
- The place of business you will be creating your product
- How many years has your patent attorney been in business
There are two patent applications that need to be filled out and those are the Provisional and Non-Provisional applications. Provisional applications are there for those that have a method or process down but are still unsure about the logistics of everything else. You will then have up to one year to file for a non-provisional application, so be sure you are ready to start the patent process.
Non-Provisional applications are for individuals who are certain of their product or method and wish for it to finally be examined by the United States Patent and Trademark Office (USPTO). When you are ready to fill out a non-provisional application you will need to do the following:
- Have and product or design descriptions ready
- Claims of the product
- Drawings of any kind towards your invention or discovery
- An oath or declaration that you will have to take
- Ready to pay any fees necessary
Trademarking Your Company
The difference between filing for trademarks and filing for patents is that trademarks protect your words. Any of the following can be protected with a trademark that represents your idea:
- Anything that will identify your product
Just like a patent, you will file with the USPTO. With a trademark, any other similar ideas or products will be seen as a head scratch if you decide to take any legal action for copying your words of choice. In a court of law, every bit of documentation and dating is needed to make sure you are protected from an investor.
Creating a Paper Trail
Now, when you create a paper trail, you are covering everything behind you with facts and numbers. Even if you have a journal entry date from five years before you started actually working on your product, you should put it in your documents.
Filing your patents and trademarks will help. Any photos or drawings that you have hidden away, you can put them in the documentation process.
Register your company’s name, even at the beginning of the entire process, if you feel as though this is a product you wish to stick with. With a company name and the filings and documentation that are backed behind it, this will make your company look stronger and more put together to an investor.
A non-disclosure agreement should only be used for those around you and not an investor. It would seem ideal to shove an NDA towards an investor and for them to happily sign it, but this will not be a reality.
Most investors see tens to hundreds of ideas that are circling around one another. So, to sign an NDA would be a nightmare for an investor if they found someone else with the same idea. No doubt the investor would see lawsuit after lawsuit of those they signed an NDA for.
Just remember to keep the NDAs for those who are on your team or anyone else you may have mentioned your invention to.
A confidentiality agreement is something you can print into your business plan that the investor does not need to sign. This agreement is a great agreement to use as any other party would not be able to use the likeness of your product unless they are solely discussing it among others.
If an investor were to take off with your idea after reading this agreement or even ignoring it, you may have some standing to act. This goes back to creating a paper trail and showing that you did all that you could do to protect yourself.
Between confidentiality agreements and patents, confidentiality agreements take less time to prepare by attorneys. Often you can receive a confidentiality agreement within two business days if you need it expedited.
The reality of protection
The truth is that while patents are great protecting your idea is not possible, or necessary. Angel investors will not sign NDA’s but they also have no incentive to disclose your secrets. They will want to know everything about your business and if you want their money you will have to reveal everything about your business. But that is all a part of the process.