When Antsy Labs, maker of the Fidget Cube, decided to delay production because of a fault they found in the first few units, they took a massive risk with heavy consequences. Their manufacturer was contracted by another entrepreneur to produce the same design, and that entrepreneur made more than $300,000 on the idea, while Antsy Labs struggled to ship units.
One of the risks that a startup owner faces in working with freelance developers is theft of intellectual property (IP) or trade secrets. The right developer/manufacturer can help you create an application that accomplishes amazing things, but an unscrupulous partner can steal your idea and make it that much harder to launch.
Here are some ways to protect your intellectual property as you begin to develop your product for sale to the general market.
Be Prepared for Enforcement
Before you ever look into protecting your IP at the legal level, make sure you understand the costs involved. You may need a lawyer to help you establish an argument, and some method of evidence gathering (like Internet or cell phone forensics), to prove a theft occurred.
It’s not necessarily the easiest or least expensive way to fight someone, but it is your last resort and one you should be prepared to use. Always do your best to work out disputes directly with contractors. Pay your people on time and you will most likely never face this problem.
It will help greatly if you also follow the advice outlined below.
Explain Your Ideas at a High Level
When you’re hiring for a project, no matter how passionate you are about your ideas, explain everything at a high level. Talk about what your project will accomplish, rather than the specifics of how it might do that.
Think about phrasing everything in a manner similar to “I want to build something that helps the user…”
When you speak about high-level concepts, you also leave open the possibility for feedback. Suggestions help you better assess potential talent, but they minimize your risk of IP theft. Once you’ve agreed to work with someone, you can look into a non-disclosure agreement (NDA) as a form of legal protection.
Hire from the Top Percentage of Developers
Developers and manufacturers have an incentive to keep their ratings as high as they can. Those ratings often make them highly sought after, and well trusted. They won’t tarnish that reputation trying to steal your idea on the chance it might be successful. That’s a massive risk, and a litigation hazard, when there’s a guaranteed paycheck in being honest.
When you hire, pay fair and maintain good communication with the people you work with. Communicate changes to the scope of work as soon as possible, and be sure you provide specific criticism and changes when you find something that isn’t to your standards.
The reason to be so careful is to reduce disgruntled developers, another risk that may lead to IP theft. Treating people well also has long-term benefits, like contractors accepting work from you even if they are busy or your pay isn’t as high as another job.
There are some guidelines about what qualifies as a “work for hire”, but if your project falls within this scope then this important distinction would provide some extra protection. This way, you can hire a contractor and define the work as projects owned by you.
Ownership is the most important component of IP law. Document what you own, and what rights you’re granting to people using and working on the project. And always consult an attorney before pursuing enforcement.