Jon Stride, The Daily Record Newswire
Ideas are the lifeblood of successful businesses. They drive innovation, build brands and create competitive advantages for companies in every sector. From manufacturing processes to marketing slogans to information technology, ideas can add value that leads to break-out performance.
There is never a lack of ideas in the marketplace. Ideally, a company’s workforce includes creative people who are always thinking about ways to improve the company’s products and processes.
But sometimes, company officials may be approached by someone – not on the payroll – who has an idea to share. Company leaders who aren’t careful about how they accept ideas from outsiders may be accused of stealing and using someone’s great idea and find themselves defending a lawsuit claiming that they should pay for that idea.
Beware of “accepting” unsolicited ideas
Unsolicited ideas can come from unsuspecting sources. Some come through the front door in the form of standard mail, email or a hand-delivered proposal. Others may come in more subtle ways — perhaps through a casual conversation at a gym or on an airplane.
The idea does not need to be in the form of a drawing or design (which may be protected by copyright law) or presented to in confidence (which may be protected by trade secret law). It does not even have to be novel.
An owner may create an obligation to pay for the (alleged) use of the idea by implying in a response that the company will pay for the idea if it chooses to use it. The submitter may claim that an owner has agreed to an “implied-in-fact contract” to pay for the fair value of the idea.
An implied-in-fact contract does not need to be in writing or even be definite as to the value of the idea. Consider Desny v. Wilder, a case still used as an example of the dangers of an implied-in-fact contract.
In 1949, screenwriter Victor Desny had an idea for a movie based on a 1925 tragedy in which a Kentucky man named Floyd Collins was trapped and ultimately died in a cave-in. Collins’ two-week ordeal was widely reported in the media. Desny called Billy Wilder’s office at Paramount Studios and described his idea to Wilder’s secretary.
Two years after that call, Paramount released “Ace in the Hole” with Kirk Douglas, a movie about the attempted rescue of a man trapped in a cave-in. Desny sued Wilder for copying his idea and claimed that Wilder’s secretary had implied that he would be paid for his idea if Wilder used it.
Wilder’s attorneys argued that an oral plot summary offered to Wilder’s secretary did not constitute a formal story submission and that the Collins story was not protected by copyright laws. The lower court agreed with Wilder, but Desny appealed and, in 1956, the California Supreme Court ruled that Desny had a claim for payment based on an implied-in-fact contract.
The Wilder case and many that followed are cautionary tales for people who receive unsolicited ideas. It also presents a starting point for understanding how to avoid a claim that an implied promise was made to compensate someone for an idea.
Protect against an idea submission claim
The best defense to a claim that an idea was appropriated without compensation is that no access existed to the idea. Of course, when someone opens the mail or hand-delivered package, or engages in a conversation with an airplane seatmate or gym acquaintance, there’s proof of access.
In a perfect world, an owner would avoid proof of access by never opening envelopes that might contain an unsolicited idea, and by returning those envelopes unopened with a letter stating that the company does not accept unsolicited ideas. The owner also wouldn’t permit anyone to submit an idea in a conversation. The employees would follow a similar policy and ask submitters to keep their ideas to themselves.
In the actual world, these policies are often difficult, if not impossible, to follow. There are steps that can be taken before access exists that may help protect a company from an idea submission claim.
The business should establish policies related to unsolicited idea submissions that:
State that the business does not accept unsolicited outside ideas. Post that policy on the business’ website.
Establish procedures for responding to unsolicited outside submissions. Require that all written submissions be directed to a designated employee for processing and returning to the sender. The designated employee should be an administrator, not one in the development or design groups. Prohibit internal circulation of the submission, especially to departments responsible for development and design. The returned submission should include a statement of the outside submission policy and affirm that the company has not made copies of any of the materials submitted.
Prohibit employees from receiving written or oral outside idea submissions, and provide employees with useful responses if they encounter someone who is attempting to submit an idea to them.
(If the company wishes to accept unsolicited outside ideas,) direct the prospective submitter to complete required voluntary idea submission and nondisclosure forms that limit the company’s exposure for use of any ideas.
A business may thrive on good ideas. But owners want to own and control the ideas that help the business grow. Establishing policies and practices for addressing unsolicited outside submissions will go a long way toward protecting the business.
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Jon Stride is a partner in Tonkon Torp’s litigation group. Contact him at 503-802-2034 or at jon.stride@tonkon.com.
