Submitting Product Ideas to Corporations: What the Inventor Needs to Know

Wealth of Ideas Newsletter, March 2005

All too often, inventors submit their invention ideas to corporations in the hopes of selling their invention for a nice pile of cash. By and large, however, the outcome is that the inventor is either ignored or receives a nice rejection (form) letter.

This scenario is played out frequently and raises a number of questions. Is the company liable for stealing the idea? How different must the product be from the How different must the product be from the inventor’s description in order to constitute a different product? And if the product wasn’t already patented (or in the process of becoming patented), does the inventor’s action of submitting the idea constitute “public disclosure,” which starts the clock running on the one-year grace period the inventor has in which to file the patent application? (See our article “Patent Basics: Statutory Bars,” December 2004 issue, for more on the USPTO’s one-year filing requirement).

When approaching a corporation with a non-patented invention, the inventor should be aware that a non-confidential disclosure may result in a public disclosure – after all, the recipient is under no obligation to keep the information private. The inventor’s best defense against this problem, obviously, is to approach the corporation with a patent in hand or a filed patent application (at least provisional). However, patents are expensive, and inventors may wish to sell their inventions without the time, cost, and bother of obtaining a patent. Or the inventor may wish to file a patent application at a later date after determining if there is interest in the invention. In either case, the inventor must take extra precautions when dealing with corporations.

If at all possible, the inventor should have the corporation accept the disclosure of the invention in confidence by having the corporation sign a non-disclosure agreement (NDA). This, however, is not easily accomplished: corporations generally won’t agree to this because the invention may be identical to one they are already working on, or they may wish to reserve the right to do something similar in the future. Or they may simply wish to avoid the possibility of future litigation.

And if the corporation does sign an NDA, the inventor is not out of the woods yet. The corporation may accept the submission with certain exceptions (which will almost certainly be to the inventor’s detriment and the company’s advantage). Or the corporation may make minor changes to the idea and develop a similar product but refuse compensation to the inventor on the grounds that the product they eventually market differs materially from the idea disclosed by the inventor (details, details!).

If even those ideas that are submitted in a confidential disclosure can be circumvented and “stolen,” what is the inventor’s recourse? Unfortunately, there is not much the inventor can do. Many hundreds more ideas are submitted to large corporations than are actually accepted (with their inventors duly compensated).

In the world of licensing, there are no shortcuts. Before approaching a large corporation with your submission, secure a patent or, at least, file a patent application to protect your rights. When negotiating an agreement with a large corporation, read the fine print before you sign – and as we always recommend, consult competent legal counsel to be on the safe side.