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Idea Submission Agreements
Understanding Risk of Submissions
□ Determine whether you collect “submissions”
□ Implement an idea submission agreement
□ Determine if purchase or license agreement is required
□ No compensation for submissions (unless provided in an agreement)
□ No confidentiality of submissions (except under an NDA or as required by an idea submission agreement)
□ No submission of ideas without idea submission agreement (e.g., via e-mail)
Key Provisions of Idea Submission Agreement
□ Simple agreement or “full-blown” agreement
□ No compensation
□ No confidential treatment
□ Writing requirement
□ Demonstration of IP rights
□ No obligation to return
□ No obligation to provide any confidential information to the other party
□ Ability to contest IP rights in submissions
□ Avoid broad feedback provisions
Every business has some form of product or service that it offers to its customers and business partners. In general, those products and services are comprised of various types of intellectual property. As is frequently the case, the business’s customers, business partners, and even third-party vendors may make suggestions, provide ideas, or offer feedback that may be useful to the business in improving its products and services. This type of information is sometimes generally referred to as a “submission.” While submissions can be an excellent means toward product and service improvement, the unsolicited nature of this information can also create intellectual property ownership issues. That is, the submission may itself constitute intellectual property.
Businesses must be careful to ensure their product development efforts are not contaminated by outside intellectual property. If the business allows its developers to be exposed to submissions from the outside, those outsiders may later claim the business did not have authorization to use their intellectual property. They may demand license fees and other compensation for use of their submissions.
Uris type of risk occurs all the time in the movie and television industries where people constantly offer ideas for new shows to the studios. If the studio later creates a show similar to one of those ideas, even though it developed the show completely without reference to the idea, they could still potentially be sued for misappropriation of the idea. The studio would then be in the position of needing to prove a negative: that it did not use the idea in the creation of its program.
Businesses that receive outside submissions run a similar risk. To minimize the potential for disputes and litigation, businesses must implement measures to control how submissions are made and ensure they have proper rights to use the submissions if they choose to do so.
Key Risks of Submissions
The first step in developing an approach to managing submissions is to define what they are and appreciate their inherent risks.
■ Often businesses will solicit or receive unsolicited ideas, feedback, and submissions (“submissions”) from customers, suppliers, business partners, and other third parties. Submissions can provide valuable and important information for the business, but they can present significant risks—particularly with regard to intellectual property ownership.
■ Tire threat to intellectual property can be significant. If a submission is already under development by the business or would have been arrived at in the ordinary course of the evolution of the business’ products and services, its development process may be irretrievably tainted. That is, the business will be placed in the position of having to prove it independently arrived at the idea without reference to the submission. This can be a difficult hurdle to overcome and could require litigation to resolve.
■ If the business obtains ideas or other intellectual property from third parties and subsequently modifies or improves that intellectual property, the modifications or improvements may be owned by the third party or jointly owned by the business and the third party. These situations should be avoided if at all possible and can be managed by using an appropriate “idea submission agreement.”
■ Some third parties may expect compensation for their submissions. If the company accepts submissions without a clear understanding regarding compensation, it may face a claim from the third party for compensation it did not intend on paying. In the event the business desires to purchase or acquire patentable ideas, copyrighted materials, or other intellectual property from the third party, this must be accomplished through use of a separate agreement, usually a purchase or license agreement.
■ Accordingly, the business must not accept submissions without a clear understanding about whether the third party will be entitled to compensation. Typically, businesses only accept submissions on the condition that the third party agrees it is not entitled to any compensation, except in a narrow range of instances in which the submission is provided under an express understanding that compensation will be paid.
■ Third parties may want their submissions to be treated confidentially, or assume that the business will keep their ideas and materials confidential. If submissions are accepted without a clear understanding regarding confidentiality, the business may find itself unknowingly bound by implied confidentiality obligations.
■ Accordingly, the business should not accept submissions subject to any confidentiality restrictions unless it has made an informed decision that the submitter has valuable confidential information that the business is comfortable receiving subject to confidentiality restrictions. If the business is willing to accept submissions under an obligation of confidentiality, an appropriate nondisclosure agreement should be negotiated. In all other situations, the idea submission agreement should make clear that submissions are not subject to confidentiality restrictions.
■ Common sources of submissions are e-mails and communications made through business websites. Submissions in the form of e-mails should be returned to the sender with a clear statement that submissions cannot be considered without an appropriate idea submission agreement. Submissions presented through websites should be addressed by the addition of language to the relevant website terms and conditions, making clear the conditions under which submissions may be made.
We have already discussed several key elements to be included in any idea submission agreement (e.g., compensation and confidentiality). Several additional areas should also be addressed in agreements governing submissions. Note that a “fullblown” idea submission agreement is likely not warranted in many situations. In those situations, a brief paragraph may be included about submissions as part of an overarching contract or in website terms and conditions.
■ Submissions should be made in writing. If the submission is not in writing, it may not be clear what was submitted, resulting in uncertainty and risk in the event of a claim for compensation by the third party. Verbal submissions should be avoided to the maximum extent possible.
■ In most cases, the third party should be required to disclose any patents, copyright registrations, or other documentation evidencing its intellectual property rights relating to the submission.
■ The business should not have any obligations to return any submissions or related documentation.
■ The idea submission agreement should clearly state that the third party will be entitled to no compensation for the submission.
■ The idea submission agreement should clearly state that the submission will not be treated as confidential information. If the situation warrants confidential treatment, then an appropriate nondisclosure agreement should be used.
■ The third party should represent and warrant that it has the right to provide the submission at no cost and under no obligation of confidentiality.
■ The idea submission agreement should make clear that the business has the right to use or disclose the information as it deems appropriate in connection with its business.
■ The business should be under no obligation to provide any of its own confidential information, trade secrets, research, test results, or other information to the third party.
■ The idea submission agreement should clearly state that the business reserves all rights to contest the validity and enforceability of any patents, copyrights, or other intellectual property rights claimed by the third party. For example, although the third party may have a patent, it may not have been validly issued.
Beware of Reverse Submissions
Businesses must also be cautious of situations in which they are asked to accept another company’s submission terms (i.e., the reverse situation of the one discussed in the previous section). This occurs most often in the context of software licenses and other technology agreements. In those cases, the business is licensing a third party’s intellectual property. As part of that license, the contract may include some form of “feedback” or submission language, granting the third party broad rights in any suggestions or feedback the business may offer relating to the third party’s products. These provisions should be carefully scrutinized and narrowed to ensure the business does not give up any of its preexisting intellectual property rights and to limit the provision to only information specifically directed at the third party’s product. In some instances, it may be appropriate to request the language be made mutual such that each party can benefit from submissions regarding its respective products and services (e.g., in the context of a lengthy software implementation engagement, the licensor may make suggestions to improve the licensee’s operations).
Submissions can be an excellent way to gain valuable information and feedback from customers, business partners, and others about your products and services. Caution must be taken, however, to ensure that information does not taint your development process or expose your business to infringement claims or demands for compensation. Finally, care should be taken whenever you are asked to accept submission language in a contract offered by one of your vendors. Train your personnel to be on the look for situations where submissions may be made and ensure the procedures described in this chapter are implemented.