Author: Dr. Sandjar Muminov, the President of SANDJAR GROUP, Head of IP & Investment Team, Founder of INTEROCO Copyright Group.
Imagine that you are an entrepreneur with a startup company or an ambitious team of enthusiasts willing to create a great product. You show your project to an investor. The investor looks and says: “Okay, that is a great idea, we’ll get in touch with you.”
After the presentation, the investor talks to his (her) development team, shows them the materials: “Guys, take a look. Can we do it?” And then asks his (her) team if they can implement your concept on their own. Quite a predictable situation, right?
You, as a project author, will show slides, roadmaps, alpha/beta-version builds, and various prototypes while presenting the idea. And indeed, anyone can steal your creation if there is no source code security (for software, that’s called obfuscation of programming code) & prior legal protection of the product.
It’s not a secret that to find a person who will do all the dirty work, grabbing the code and rebuilding your application will cost an unfair investor up to USD 250K. And eventually, when the product is officially released and monetizing starts, the investor can register the ownership to a third party. After the release, they can send copyright claims to App Store, Google, state authorities, etc. And here you are – from the legal point of view, you are not the original creator anymore – the investor is the legal owner of the product. You can call it wrong, cruel, unfair, but that’s business, and we’ve seen those stories many times in our practice. It’s all about business, so moral, ethical, and other aspects don’t matter here.
So, how the yet-to-be-released product author can escape all these troubles & secure his (her) creation? The answer is simple enough – stick to the Principle of Limitations.
The main idea behind the Principle of Limitations is about three key aspects. It means that a startup or a business project can attract investments only if it:
- Cannot be taken over. It’s impossible to take it over from the owner through the prevention of the ability to register the original intellectual property.
- Cannot be copied. There’s no legal way to copy, reproduce the product, following the same pattern with slight changes.
- Cannot be headhunted. It’s impossible to lure away its creators/ developers, make sure the employees are not eligible to share confidential data about the project.
Limitation One vs. "Let's Take the Project Idea"
Large corporations often take over the control of the new products – people come to pitch a project idea and get nothing in the end. Then they try to claim their rights, try to do something, go to court – but no luck, of course. There are hundreds of such cases, but we hear nothing about it because those who bring new ideas have no legal power to fight against large companies. What we hear about is Windows or Facebook acquiring new projects or entire teams. Why does it happen? Because the corporation didn’t manage to copy a product or could not hire the original developers.
There’s one real case in the UAE we want to share with you, it’s very complicated, and the details of it can blow the mind. An independent development team in Dubai showed their works to one of the world’s biggest IT-сorporations, leading photo and video app service with a recently opened Dubai office.
They showed the IT giants new features that can be implemented in the Social Media service, like finding people around you on the map and some new visuals for the App. This corporation gave the project developers good feedback and appreciated all the concepts that were shown. And then just copied them with compensation to the creators. The battle is still ongoing, but how a world-famous brand with over 50 patents, many copyright registrations, made such dishonest actions versus independent developers seems unbelievable.
Limitation Two vs. "Let's Try to Copy It With Our Tools"
The second big reason to be afraid of corporations if you haven’t legally protected your product is their internal resource, i.e., they have tools to get your product to release without you and become the copyright holder. This is where the second limitation comes in – the lack of legal ability to copy.
Remember, any new project you want to monetize must be protected as intellectual property. For example, protect your product as a work of science, an author’s business project, or an invention. Registering it as an invention won’t help you long-term: just change some parameters a bit, and you already have a different invention and a patent on it. Copyright protection in the form of a work of science is more effective for long-term IP protection.
Limitation Three vs. "Let's Hire Their People"
The third aspect is about human resources. When straightforward taking or copying is not an option, headhunting is the last option left, i.e., trying to steal the developers with all the know-how and works in progress. Nothing illegal or unethical here, if an investor or a larger company offers better salary and benefits when making a job offer. And the developers join their team. But that’s when trade secrets protection and non-disclosure agreements can help. So even if the employees leave your company, they cannot share anything due to imposed confidentiality restrictions.
The Principle of Limitations is one of the most important things to be considered at the product development stage and is one of the essential startup growth principles. When all these three limitations work, nobody can “eat” your startup or a business project up and, instead, will want to bring you money for your project.
Consider and discuss all these aspects from the get-go before the project has already been stolen, copied, or the staff has been lured away.
Stay tuned and don’t hesitate to ask questions the author of the blog via email firstname.lastname@example.org.