Intellectual Property and the Law of Ideas
by Kurt M. Saunders, J.D., LL.M.
“Valuable ideas take many directions—ideas for new or improved products, marketing strategies, advertising slogans, manufacturing processes, television show formats and move plots, to name a few.”
“The law of ideas is the area of law involving employees, customers, inventors, and authors, who submit ideas capable of being reduced to practical application to business. It is a somewhat amorphous amalgam of contract law, property law, and tort law precedents that has been stitched together by courts over the years.”
Now there’s a book which pulls it all together.
“The law has come to treat certain ideas as not quite intellectual property, but cousins to it.”
Intellectual property law includes patents, copyrights, trademarks, and trade secrets. “Neither copyright law nor patent law protects abstract ideas, regardless of how original or novel they may be… An abstract idea is not patent-eligible because it is a general concept that is not applied to some particular apparatus or practical result… An important qualification to copyright protection is that it extends only to the expression found in works of authorship. It does not apply to ideas, concepts, and facts which are in the public domain… An idea or concept for a trademark is not a trademark. In the United States, trademark rights are gained from use of the mark.”
“Trade secret law protection is a somewhat awkward fit for idea protection… Ultimately, the idea must be disclosed to a recipient… The idea is no longer secret without some nondisclosure or confidentiality agreement in place beforehand… Unlike patent protection, once a trade secret is disclosed, even if improperly, the trade secret is lost.”
Contract law. “By means of the contract, each party receives a benefit from their agreement and each party incurs a detriment due to the agreement. This also represents the required element of consideration, or bargained-for exchange of value between the parties… Mutual assent between parties is essential. A contact is formed when one party makes an offer and the other accepts the offer.”
“An express contract results if, before or at the time of disclosure, the provider of an idea states that disclosure of the idea is on condition that he or she will be compensated if the recipient uses the idea and the recipient understands this condition and voluntarily accepts disclosure… The disclosure of the idea and the value obtained from the disclosure serves as consideration for the contract.”
The book cites Buchwald v. Paramount Pictures Corp as an example. “Buchwald sued for breach of express contract on the basis that ‘Coming to America’ was ‘based upon’ his concept. The court agreed…” Under the Statute of Frauds, contracts that cannot be performed within one year must be in writing.
“In an implied contract, mutual assent by the parties is communicated by their conduct rather than their written or oral promises… An implied promise to pay for an idea for a television series can be based on industry custom… Likewise, submission of the idea within the context of negotiations to purchase would be relevant… However, the submission of an unsolicited idea alone is not sufficient to lead to an implied contract, and courts will not imply a contract merely because the idea submitted is valuable. As the court in [Desny v. Wilder] explained, ‘unless the offeree has opportunity to reject he cannot be said to accept.’”
Breach of confidence. “If the recipient agrees to accept disclosure of an idea in confidence, then he or she has an obligation not to disclose it to third parties or use it without compensating the provider. The key to such claims is that the recipient must know that the idea is being disclosed in confidence before it is disclosed. There is no duty of confidentiality if the provider reveals the idea without giving notice to the recipient that the disclosure is confidential.”
Misappropriation of property. “New York law recognizes property rights in ideas but California law does not. Thus plaintiffs in California courts must assert their idea theft claims as a breach of express or implied contract… Essential to any idea misappropriation claim is proof of economic injury…. Misappropriation claims sound in tort, allowing for the possibility that the successful plaintiff may recover punitive damages.”
“The standard of proof is quite demanding for property-based claims. The plaintiff must demonstrate that the idea is absolutely novel and must be highly detailed and specific in order to be concrete and thereby warrant protection. These requirements are enough to preclude recovery in most cases. Moreover… there is a risk that most property-based claims will be preempted by the Copyright Act or Patent Act.”
Federal preemption. “Courts generally presume that states possess concurrent authority to regulate unless Congress has expressly displaced state law. When Congress has not done so, but state law directly conflicts with the purposes and objectives of federal law, the Supremacy clause of the United States Constitution dictates that federal law will supersede state law. This is known as preemption of state law by federal law.” This includes cases that fall within the scope of patent and copyright law.
Claims based on a breach of implied or express contract – “requiring the elements of offer, acceptance, and consideration” – are not generally not preempted. “Likewise, claims based on breach of confidence tend not to be preempted because they involve the extra element of a promise or duty of confidentiality between the parties… Finally, claims based on tort law or property, such as conversion, are the most likely to be preempted because they involve unauthorized use or theft of intangible property and are essentially equivalent to a claim for copyright infringement.”
Novel and concrete. “Not all ideas are entitled to legal protection… In general, to be entitled to legal protection, an idea must be novel and concrete, which are indicators that the idea has value… Ideas are novel if they are new and original, rather than obvious and well known… Ideas that are simply variations of familiar themes will not be considered novel… An idea is concrete if it is complete and detailed enough for immediate implementation.”
“In cases where the parties have entered into an express contract containing a promise by the recipient to pay for use of the idea regardless of its novelty, the courts have held that proof of novelty is not required. The courts reason that the contracting parties are free to decide the terms of their agreement.”
Litigating idea theft. “A plaintiff cannot recover for misappropriation of ideas unless the ideas are actually used by a defendant… The independent development defense can be understood as the obverse of the novelty requirement, since an idea already known or possessed by the defendant is by definition not novel.” In Teich v. General Mills “the defendant introduced uncontradicted evidence that it had optioned the same idea from an advertising agency before the plaintiff submitted his idea. The court stated that proof of independent development of the same idea negates an inference that the defendant copied the plaintiff’s idea.”
International law. “Of particular relevance is the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement among the members of the World Trade Organization (WTO).”
Sample agreements. In the final chapter, the author includes a sample Nondisclosure Agreement and a sample Idea Submission Agreement. Notably, the former seems to favor the submitter (“Recipient agrees to keep secret and hold in confidence the Idea by not disclosing it to any person or entity”) whereas the latter seems to favor the recipient (“No confidential relationship is created”).
“When an idea originator seeks to submit an idea unsolicited, the best approach to protecting the idea is to request that the recipient sign a nondisclosure agreement, also known as a confidentiality agreement, which describes the nature of the idea, states that it is being disclosed in confidence, and the purpose of the disclosure. The agreement should also precisely state what information is covered by the agreement and condition its disclosure on payment if the recipient decides to use the idea. The practical effect of such an agreement is to bind the recipient from disclosing or using the idea without compensating the idea provider. The recipient’s understanding that the disclosure is confidential is essential to maintaining an action for breach of confidence. If the idea provider wishes to rely on trade secret protection, a nondisclosure agreement will serve as evidence of a reasonable measure taken to maintain the secrecy of the idea. Although nondisclosure agreements are regularly used in most manufacturing and technology industries, they are not widely accepted in the entertainment industry. Furthermore, depending on the bargaining position of the parties, the recipient may be unwilling to enter into such an agreement.”
“In order to avoid or mitigate potential liability, businesses should institute internal procedures for handling the receipt and possible use of unsolicited ideas. In fact, many businesses simply refuse to accept or consider any unsolicited idea submissions and have instituted internal procedures to implement this policy. For instance, in the entertainment industry, it is current practice to return unread all unsolicited submissions and for screenwriters to have representation by an agent before a producer will accept a submission or agree to hear an idea pitched.”
“For businesses that are willing to consider unsolicited ideas, a useful procedure for handling such submissions is to segregate them from the marketing or research and development divisions within the company so as to allow the recipient to provide the defense of independent development if sued.”
“Another approach is to route all unsolicited submissions to a designated agent, who either returns the submissions unread or screens them as to their potential value to the recipient and passes the potentially useful ideas on to for further review.”
“Idea submission agreements are express contracts between idea submitters and recipients. They are commonly used in the entertainment industry… In addition, idea submission agreements typically provide that the recipient is not obligated to evaluate the idea but may choose to do so for the purpose of considering whether to purchase it while promising not to disclose it to others. The parties mutually agree under which circumstances payment will be required if the recipient decides to use the idea, or they will negotiate further as to compensation. Many product manufacturers now include online idea submission forms containing detailed terms on their websites.”
“An important caveat to enforceability of submission agreements is that overly broad general waivers of contractual or intellectual property rights are likely to be void and unenforceable.”
Saunders, Kurt M. Intellectual Property and the Law of Ideas. London: Routledge, 2021. Buy from Amazon.com
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