They say imitation is the sincerest form of flattery. Unfortunately, it can also mean big trouble if you are trying to launch an original and innovative small business. However, while business owners cannot completely eliminate the possibility of future duplicate products or services, there are
several precautions you can take to legally protect yourself and your ideas. In episode #106, Elizabeth Larkin and Gene Marks offer advice on how to prevent your small business idea from being stolen.
1:10— Today’s Topic: How Do I Prevent My Small Business Idea from Being Stolen?
2:48—Because ideas can be copied so easily, small business owners can choose to respond in one of two ways: pursue legal action against their competitors or simply stay focused on improving their own business.
4:13—If you own a B2B service or small business, you should consider using a non-disclosure agreement (NDA) or other contract that makes it illegal for potential employees or investors to duplicate your idea.
7:22—Small business owners who believe that they have a patentable idea need to seek legal counsel from a patent attorney; they can also apply for a provisional patent which will protect any products that are still in the developmental stage.
8:57—Documenting all the activities and developments that involve your idea is another way to protect it since these records could serve as evidence in a court setting.
10:22—If your business idea is an attempt to improve an existing product or service, be sure to verify whether it has any existing patents, otherwise you run the risk of being sued.
13:27—Gene discusses how young cities can often be the most profitable ones for aspiring entrepreneurs.
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Elizabeth: Welcome back to the Small Biz Ahead Podcast. I’m Elizabeth Larkin.
Gene: Oh, I’m Gene Marks.
Elizabeth: Today we’re gonna be talking about-
Gene: Crime. High crime of the highest levels.
Elizabeth: That high crime is someone stealing your startup ideas.
Gene: Yup. Yup. Yup. It happens.
Elizabeth: It happens, definitely.
Gene: People are scared about that all the time. It does happen. The question is, “What do you do? How do you protect yourself against your startup?”
You know you come up with a great idea. How do you know that somebody isn’t gonna take ti for you. Let’s talk about that in detail.
Elizabeth: Right after we hear from our sponsor.
Gene: Sounds good.
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QUESTION: How Do I Protect My Startup Idea?
Elizabeth: And, we’re back. So, we had this question submitted a couple different times. I combined it into one question. It’s called, “My startup idea can be stolen, what do I do?”
So, Gene, what do you do?
Gene: I wish these people would tell us what the idea is, you know. That’d be pretty good, Elizabeth. You and I can steal it and do something-
First of all, okay, you’ve got an idea for a startup. Your genius idea; which by the way, it’s probably been though of before. But, that’s a whole other conversation for another day. But, you know, you want to try and protect yourself against these ideas. It’s not easy to do. When something is just an idea, or just a thought, it’s kind of easy to be duplicated.
The best example I can give is, there’s an ice cream store that started up in Philly a couple of years ago. I’m not gonna name them but, they make these really cool rolled ice cream. It’s kind of like Cold Stone Creamery used to do, but better. Custom made ice cream and they put it on sort of a stone and they roll it out. They roll it out into a thing on a cone.
I remember when they opened up. It was lines around the block for this ice cream shop. Low and behold, what happened the following summer? There were like 10 of the exact same ice cream stores around the city because, what can these guys do? They came up with a really good idea for a special way to roll up ice cream and people just copied it.
It’s very tough to protect yourself against that. No matter what you wanna do, if someone wants to steal your idea, you can fight them. You can spend a lot of your time an money fighting them in courts and with lawyers and all that kind of stuff. Or, you can just stay focused on what you do and continue to do it that much better. The world has made up a lot of competing businesses that sell-
How many stores sell tires? How many stores sell pharmacies and food service. You come up with the idea and people duplicate it. You just gotta figure out a way to do it better. That’s the ultimate thing.
I’m gonna get a little bit more specific as to some steps that you can take.
Elizabeth: I just wanna ask a question. Rolled ice cream for like an ice cream store. That’s pretty easy to duplicate.
Gene: Well yeah, it is, I agree. But, I think a lot of businesses, there are certain different levels of difficulty in duplicating. If you have some real technological thing or whatever, maybe it’s harder. I don’t know. In today’s world, even if you develop a software or some type of machine; if you have the right people, most things can be duplicated some what easily.
Elizabeth: The difference between that and ice cream though is, everybody has experience with ice cream. Not every-
Gene: I couldn’t do it. I couldn’t duplicate that.
Elizabeth: You couldn’t go ask someone, like, “Hey, how do you do this?”
Gene: I guess I could. It would be work to do.
Elizabeth: Google searches.
Gene: I don’t know if I would do it very well. I guess there’s a …
Elizabeth: This leads in to, okay, so, we’re gonna talk about nondisclosure agreements.
Gene: Yes. We are.
Elizabeth: Can you do that for an ice cream shop?
Gene: Certain things you can, you can’t. Elizabeth, you’re right. There are certain things that you can try to do to protect yourself. Nondisclosure agreements are used for businesses where the technology or their idea is not so public facing. Can you do that for an ice cream store?
No. Everybody can walk in and buy an ice cream and whatever. If you’re in a B2B business, you’ve developed some type of technology, or some kind of proprietary service or something like that. It’s not a consumer facing thing. Then, yeah.
Before you bring people into your business, before you talk with potential investors, a lot of times, you have people sign nondisclosure agreements. You can get one on … An attorney can draw it up or really, there are some standard ones you can find online.
I subscribe, by the way, every year to LegalZoom.com because they have all the standard legal documents that I go to. I love that site.
Elizabeth: Tell me about that. How do you use that?
Gene: LegalZoom.com. I forget what I pay; I don’t wanna get the pricing wrong. They offer two things as the part of the package I have. They offer every single legal document you could possibly want. From nondisclosure agreement, we’re talking about, employee compensation agreements, or board of directors forms. That kind of thing. It’s all there for the taking.
Elizabeth: So, you customize it for your business?
Gene: Sure. They’re continuously updated to stay current with the law.
Elizabeth: If your state law is different from another state-
Gene: Correct. Correct.
Gene: Correct. So, it’s not only federal but, it’s also state basis. Then they keep them updated. That’s what they do; they’re attorneys. They keep this updated.
Then I can download them at any time and customize it to myself and use it for my business. Not only that, but the package I have-
By the way, I do not work for LegalZoom.com. I use them and they have attorneys on staff that is part of my package. It gets you a free legal consultation if you want to.
I’m not saying if you use them, if you’re gonna be in some type of complicated lawsuit or whatever.
Elizabeth: Oh yeah, you need to talk to an attorney.
Gene: Yeah, but just for the basic-
People say, “Look, how do we protect our information?” A nondisclosure agreement is a basic thing that people do. The big question is not should I have one. Fine, go ahead. Are they even worth the paper that they’re printed on? They serve a legal purpose, but, again, if somebody does violate it, you’re gonna have to go after them and pay money now to sue somebody. That could take money and resources away from growing your own business.
Anyway, nondisclosure agreements are a very- I get asked to sign them all the time. I work with technology companies and they’ll be like, “Before we work together can you please sign-“. And I’ll be like, “Really? Like I’m gonna take your tech-“. I don’t even know how to turn on a TV set. I’m not gonna sit there and steal your technology.
Elizabeth: If you have an idea and your starting a business, nondisclosure agreement, good first step.
Gene: It is a good first step. Now, there is something you can also do. You have to talk to a patent attorney about this. You can apply for what’s called a Provisional Patent. If you think you’ve got a patentable idea.
Elizabeth: So, not roll-up ice cream? But…
Gene: Right. Something- I don’t know, maybe roll up ice cream is a patentable idea. That’s something you really have to ask a patent attorney about. If you got something that can eventually be patented, but you’re not ready to go through the process of patent, you can get some protection by applying for what’s called a provisional patent from the FTC, the Federal Trade Commission. You can look in to that as well.
Trademarking your name is a very easy thing to do. Again, states can do that, on the federal side, LegalZoom.
Elizabeth: How much does that cost?
Gene: Oh, they- Nothing. Hundreds of dollars at most. Even less than that.
Elizabeth: Like nothing? Or hundreds or dollars.
Gene: Well, when I say a-hundred bucks, two-hundred bucks, it’s not like some large, large expense. I don’t wanna minimize. Cost for any startup is expensive.
Elizabeth: You can trademark it by your state or federal?
Gene: Federal is what you wanna do. Again, this is with the FTC and then that gives your own thing. You gotta be good at using the trademark code whenever you mention you name or, your product.
Elizabeth: You have to put it in your logo and your signature handles?
Gene: Right, but that doesn’t protect someone from stealing the idea. I could trademark Big Mac, but then somebody can go and create their own version of a Big Mac and call it Large Mac. Maybe something else. I think about that, I just had a Big Mac the other day.
Elizabeth: Every four episodes we talk about Big Mac’s.
Gene: I know, they’re so good. They just- Anyway.
The other thing I can also say do to is; if you do have some kind of proprietary thing and you are concerned, keeping a diary of any potential issues with your proprietary service idea technology. For example, who you’ve been meeting with about it, when you think somebody might have stolen the idea or their product. You document all this down into a diary because we forget things.
It’s important to do that kind of stuff if you have an inkling that could be exposed to this. Because if you do go to court, think about how amazing it would be to pull out a diary of all the details from the specific days. About specific things you noticed that happened on that day. That really will help job your memory and provide some type of evidence if you get that far.
Elizabeth: I wanna be clear on that. Gene’s not actually advocating you go like, “Dear diary…” You can do that online, use your calendar, like-
Gene: She’s correct. Even a word document or whatever. What I mean by a diary is you’re keeping track of any activities or information related to this sort of proprietary thing. Bottom line is, you can take all these steps to protect your idea. I still say, it’s one thing to come up with a great idea. It’s another thing all together to execute on it.
Elizabeth: That’s my next question. You didn’t know I was gonna be asking this. It’s kind of a curve ball. Let’s say, you see businesses out there doing the same thing and none of them are really doing it that well. Your job is to come in and do what they’re doing, do what they’re doing, but do it much better.
Gene: I love that you brought this up. I was talking about this to somebody recently as well, Elizabeth. When you start up a business… I don’t wanna say that there isn’t room for innovation. Of course there’s room for innovation in this world. But, honestly, in 2018, a lot of the good ideas have already been though of. You know what I mean?
The smartest people I know, when they start up a business, is they look at existing businesses. Where there’s an existing market. Something that’s actually being sold already, or provided. Then they get in to it because they can do it a little bit better. I’m looking at a styrofoam cup. We know there’s already a market for styrofoam cups and there are styrofoam cup makers. But, maybe some day you get this idea to make a styrofoam cup something a little bit better.
Gene: Something about, I don’t know, maybe you make it biodegradable or foldable. Whatever is it, right. You get in to an exiting market, an existing industry. To me that is a way better plan or success than trying to just start a whole new thing.
Elizabeth: What if you’re not innovating? What is you’re just saying, “Hey they do rolled-up ice cream. But, it takes forever when you’re standing in line. I could do the same exact thing. But, I can get people in and out of the store more quickly.”
Gene: And that’s not innovating?
Elizabeth: That is innovating, but-
Gene: That’s always innovating. Innovating means coming up with a way of doing something a little bit better.
Elizabeth: What kind of research should you do to make sure you don’t get sued for stealing someone’s idea?
Gene: When you’re saying about research into stealing somebody’s idea… First of all, if I was gonna go in to the rolled-up ice cream business, for example. I certainly would be doing patent searches and you know… With the FTC, just to make sure these guys don’t have a patent on rolled-up ice cream. I build something and then I’m gonna get sued and put out of business.
Other than that, that’s pretty much it. You can tell what the market it. People protect themselves with patents and trademarks.
Elizabeth: I think that covers it.
Gene: Awesome stuff. So, go forth and eat rolled-up ice cream.
Elizabeth: We’ll be right back with Gene’s Word of Brilliance.
WORD OF BRILLIANCE: Young City
Elizabeth: We’re back with Gene’s Word of Brilliance.
Gene: My Word of Brilliance today is, well it’s always two words. It’s startup city. Not just startup city, let’s call it young city. Okay, Elizabeth. Young city. That’s my Word of Brilliance. Words of Brilliance.
The reason why I bring that up is, recently, LendingTree, which is an online marketplace for getting loans, did a report. They did a report, they did some analysis. Their analysis was, what is the best city to be a young business in? What is the best city for a young- Now, not necessarily to start up a business. But to be a young business.
What they did is, they looked at more than 80,000 queries for loans on their site over a period of time, in 2018. From all around the country. They picked out from all of these the companies that were had revenues of less than seven and a half million dollars a year and had been in business for less than five years.
These are existing companies and they might not necessarily be just startups. Small businesses but, they’ve only been around about five years. They said, based on all of that, because people were submitting data for their loans… They had to report what their profitability is, what their revenue is. They were getting some data.
They came up with a formula saying, based on profitability and revenue and revenue growth among all these, what city is the best environment just by the numbers, for a young business. What city do you think it is, Elizabeth?
Elizabeth: I’m gonna say Denver.
Gene: Denver? Is Denver in the- First of all, Denver is in the top five.
Elizabeth: Let me guess again.
Gene: I am really impressed that you actually came up with that city out of all the other cities. You’ll never get this number one city. You’ll never get it.
Elizabeth: Dubuque, Iowa.
Gene: Okay, why would you even say Dubuque, Iowa? Where did that even come from?
Elizabeth: Did I win?
Gene: No, that’s not even close.
Elizabeth: Pittsburgh, Pennsylvania.
Gene: No, although, Pittsburgh is a nice city. Dubuque I’m sure is a very nice city too. I’m not gonna have people from Iowa yelling at me.
Elizabeth: I’d say Austin. But, you’re saying I would never guess it.
Gene: Yeah, you would never guess it and I never guessed it. Ill give you a hint. You ever seen the movie Lady Bird?
Gene: Sacramento. By the way, Lady Bird, how awesome was that film?
Elizabeth: I haven’t seen it yet. But, I know all about it.
Gene: Oh, fantastic, great film. Anyway, yeah, Sacramento, California. What’s funny about this is that Sacramento was rated as the best city in the country- When LendingTree looked at all the profitability and revenues and revenue growths of these young businesses, the numbers said so. The formula, it’s Sacramento. The businesses are making the most money there, of that age. Their profitability.
The other cities in the top five. Grand Rapids, Michigan; Portland, Oregon; Knoxville, Tennessee; and Denver. Let me give a shout out for Knoxville, Tennessee. Beautiful town. Gorgeous.
Elizabeth: Were you just there?
Gene: I was just there. Actually, in the fall. Absolutely gorgeous place and growing. Beautiful place to raise a family and clearly to run a business. When I thought these cities- I wrote about this separately. I’m assuming this must jive in to data about where the best place to live is. Like, oh, I’m assuming the Sacramento one, I’m sure it’s on the charts for like best place in the country to live and quality of life. Whatever.
None of these cities in this top five- Nothing was consistent with all the other things that are done by Forbes and US News and World Report. All these other publications say the beat cities to live, the best quality of life, whatever. There was no consistencies among that. I could not draw connection between running a business in Sacramento and actually having the best quality of life in Sacramento as well. Do you know what I mean?
It basically just said, out of all the businesses, out of all the 80,000 businesses that we looked at, young businesses seem to be doing the best in Sacramento, California. Yeah, it’s the state capital.
Elizabeth: Servicing government…
Gene: One of the other ones I just mentioned, I don’t think, Grand Rapids, Portland, Knoxville, Denver, they’re not state capitals, I don’t believe.
Elizabeth: I don’t know, I’m not in second grade.
Gene: The other thing I thought that was interesting is… What do you think the average revenue is for the young business in Sacramento, California, less than five years, and less than 7.5 million dollars in revenue? The average revenue, 316,000 dollars a year.
Elizabeth: Okay, I’m not joking, I was gonna say 256,000 dollars.
Gene: That’s unbelievable. I mean, there are employees at some large companies that make more than that. We’re talking about the entire revenues of a business. Cause we’re talking about-
Elizabeth: It could just be one or two people.
Gene: Sure, coffee shops, restaurants, merchants, retail store, little consultants.
Elizabeth: Small tack.
Gene: Small tack, yeah, whatever.
That’s my take away. Young cities. That’s my words of the day. It is Sacramento, California, seems to be the most profitable place to be.
Elizabeth: Thanks for that, Gene. So, I wanna-
Gene: Oh, before I let you go, Philly was in the bottom three. We’ll leave it at that.
Elizabeth: Of course. What were the other bottom three?
Gene: Cincinnati, Ohio; Rochester was in the bottom, Rochester, New York. It was Cincinnati, Ohio; Rochester, New York; and Philly.
Elizabeth: Thank you for joining us this week everyone. We’ll be back- I always say this week but, we’re more than-
Gene: We’re back in a few days, baby.
Elizabeth: Yeah, every couple days. I want to remind everyone to subscribe on Apple Podcast, to leave us a review. We would love to get your feedback. Even if the review is telling us that we’re terrible. We don’t love it, but we still wanna hear that. Leave a comment at the bottom of the show notes. Give us your feedback. We are always happy to hear from you and interact with you.
We will be back in a couple of days. Thanks for listening.
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