Trade Secrets Aspects of Unsolicited Ideas for New Products

Companies must ponder potential liability under trade secret law when consider submissions of unpatented ideas or inventions from outsiders interested in having the company commercialize the idea or invention by bringing new products to market.  While it would seem that a company would welcome innovations from outsiders, there are real risks involved in accepting such disclosures that often drive companies to refuse to accept unsolicited ideas.  For example, if the company has already developed the idea or invention on its own (or something reasonably close to it) and later seeks to make use of its own independently developed idea, which it is generally allowed to do without being subject to liability to another that has similarly come up with the idea on their own, another party who has disclosed the idea to the company may claim that his or her idea has been misappropriated by the company even though the company had learned nothing from the outside party’s idea.  Companies are also exposing themselves to great risk by accepting unsolicited ideas from outsiders since employees may inadvertently disclose the ideas and thus create liability for the company based on failure to protect the trade secrets of others.  This may occur due to lack of effective security procedures within the company or when a company employee discusses the idea with prospective marketing partners who have not been required to sign a non-disclosure agreement with the company before disclosures are made.

Rather than operate under a policy of not accepting outside submissions of inventions or ideas companies may elect to do so on the condition that the submitting party executed and deliver a “reverse confidentiality” agreement.  Such an agreement includes an express waiver of any duty of the company to maintain the confidentiality of the submission and the acknowledgement and agreement of the inventor that he or she will rely solely on patent law for protection of the submission.  Inventors should carefully consider the practical effect of entering into such an agreement given the costs associated with filing and prosecuting a patent application and such an arrangement may simply be unworkable in situations where the inventor believes that it may be necessary to rely on trade secret protection for all or a significant portion of the invention or idea.

The content in this post has been adapted from material that will appear in Technology Management and Transactions (Fall 2008) and is presented with permission of Thomson/West.  Copyright 2008 Thomson/West.  For more information or to order call 1-800-762-5272.

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