Technology companies often worry about ownership of ideas they hear. If a contractor or partner gives us an idea, do we need a license to use it? What if it’s an idea about our own product or service? The concern often prompts a “feedback license”: a sentence or two tacked onto a contract about professional services or co-marketing or something like that, granting a license to “any idea Contractor may develop related to Company’s products.”
The good news is that you don’t have worry about ownership of feedback or other abstract ideas. You don’t need a feedback license, and in fact, they don’t even make sense. In the United States (and most other countries), abstract ideas belong to everyone—at least to everyone who hears them legally.
The confusion stems from a misunderstanding of intellectual property: from the belief that IP covers every product of the human brain. IP actually covers a very narrow set of brain products. To be considered intellectual property, an asset has to fit into one of the following four categories.
- Copyrights protect written expression. If your contractor or partner writes down an idea, he may have a copyright in the writing. In other words, he may have the right to keep you from copying his words. But he can’t keep you from reading those words and using the idea they describe. You can even write up the idea in your own words (provided your words are truly original).
- Trademarks protect brand names, slogans, logos, and other words and symbols that distinguish commercial offerings. Trademark rights belong to the person or company that uses the mark in commerce (among other requirements), not to the person who developed the idea for the mark.
- Trade secrets law actually can protect ideas, but only “stolen” ideas. The law forbids use of a business secret by someone who got the information without authorization or through a confidential relationship. If a contractor or partner tells you her idea, without an NDA, it’s obviously not a trade secret.
- Patents protect products and processes, not ideas. To get a patent, the would-be patent-holder has to invent a product or develop a process (and that’s only the first step). A mere idea for improving your product or service doesn’t qualify.
Of course, it’s always possible someone will invent a real product or process that improves your offering, then file a patent application, struggle through the Patent and Trademark Office, get a patent, and block you from using the invention. But that’s a risk you can’t avoid. And your partners and contractors aren’t any more likely to file that patent than anyone else — unless they have the advantage of secret information about your offering. In that case, you should consider a nondisclosure agreement, not a feedback license. An NDA will forbid filing a patent application based on your secrets.
In any case, a patent won’t (or shouldn’t) issue for an obvious improvement to your product or service: for something you could easily have thought up yourself. You don’t have to worry about your contractor saying, “Hey, why don’t you add a flange here?” and then running off to the PTO. That’s probably not patentable.
So you don’t need a feedback license. Nor should you rely on a feedback license to protect you. It’s hard to guess whether or how a court will enforce a broad, general license to abstract ideas: to something the law doesn’t recognize as property. An NDA will protect you much better where you’ve got confidential information at stake. And if your deal really is about IP — your contractor’s doing R&D, for instance — you need something more extensive and more enforceable than a feedback license. For an R&D relationship, you should put together a development agreement with a detailed license or assignment clause, transferring IP rights.
[Since writing this post, I’ve posted an additional suggestion regarding feedback clauses.]
Can you lose your right to an idea? Yes, but only by signing an NDA or some other type of contract that says you won’t use it. If you don’t sign away your rights to an idea, it’s yours — and everyone else’s.
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Notes:
- The Tech Contracts Handbook addresses feedback licenses in footnote 1 of Appendix 2, and IP in general in Appendix 2.
© 2011 by David W. Tollen. All rights reserved.
Tech Contracts 
David, can you suggest a more proactive way to fend off the goofy idea submission cases, especially after Larry Montz v. Pilgrim Film and Television, 08-56954 (9th Cir. May 4, 2011)? Eric.
Good question! For anyone who doesn’t know, Eric is asking about claims based on contract, where an idea gets submitted to a company under an implied contract providing that the company won’t use it without paying the originator. The best example involves movie scripts submitted to producers. By accepting the script, the producer (according to the case law) agrees not to use the underlying ideas without paying the screenwriter. The same thing could arguably apply to VC’s receiving tech company ideas, for instance. It’s like an unwritten NDA.
I’ll give a semi-educated guess in answer to the question. I think the only way to prevent this is to make sure there’s no fair implication of such a contract. Folks who actually solicit scripts or other idea submissions could require signature on a doc saying no contract is formed, and “we don’t promise not to use your idea.” Sign it, or we won’t look at your script, proposal, etc. Companies that aren’t in the business of receiving submissions, however, probably don’t have to worry. If you hire a contractor to do tech support and he/she randomly suggests an improvement to a product, you almost certainly haven’t created an implied contract re use of the idea. I doubt this comes up for any company that doesn’t solicit ideas.
Eric, do you–or does anyone–know what producers are actually doing about this?
Eric’s question actually suggests another alternative to a feedback license, if you’re really worried about feedback rights (despite my assurances). Add a clause to your contract saying there is no agreement re use of ideas submitted. It’s not a license; it’s just a disclaimer of an NDA or other obligation not to use the other party’s ideas.
David, I wish the idea submission cases were limited to implied-in-fact (or express) contracts, but not all such cases are so limited–or courts have been willing to imply the contract from facts that we wouldn’t have thought could support such an implication. As a result, I think it’s not ridiculous for companies to expressly address the legal disposition of unsolicited feedback. As you point out, there are many times such efforts would be overkill; but where feedback is regularly rolling into a company, every provider of feedback is a potential plaintiff. Eric.
Eric, I still think the idea of a feedback license is wrong-headed. Among other issues, it creates a mess for the feedback “licensor.” What are you licensing? What are the limits of the rights you’ve granted? (How do you explain it to VC’s when they want to know what you’ve given away, or to auditors?) There’s simply no way to tell with a feedback license. I think the better solution is the one I raised in my second comment (above): a disclaimer of any kind of NDA or other obligation not to use feedback or other ideas: “Company has not agreed and does not agree to treat as confidential any suggestion, feedback, or other information provided by Contractor, and Company has no obligation not to use or exploit any such suggestion, feedback, or other information.” That way you avoid the issues surrounding a “license” grant. You deny the existence of a contract you don’t want; you don’t create one that doesn’t make sense.
I agree with your starting point, and I’m OK with your solution. There are a lot of exemplars of idea submission “disclaimers” that folks can consult. See, e.g., http://www.google.com/search?gcx=c&sourceid=chrome&ie=UTF-8&q=idea+submission+policy
Grudging but appreciated!
In case anyone doesn’t know (and in case anyone’s read this far down), Eric is a well-known expert on IT law and a law professor at Santa Clara. He also has a couple great blogs, which I read frequently: http://www.ericgoldman.org/index.html.
This issue of feedback may call for a second post…
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