Legal Question in Business Law in California

Pirating a business idea

Dir Sir/Madam:

I was verbally asked to develop an e-commerce website for a small company back in 2001. At the delivery time, it turned out that the owner has no money to pay for my work. We had no written contract or non-disclosure agreement.

I want to continue to finish the work and launch that website myself this year. It seems to be a profitable idea.

I am violating the law? What are my consequences or liabilities I will incur?

Thanks in advance.


Asked on 3/10/04, 11:29 am

1 Answer from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Pirating a business idea

There is a fine and sometimes fuzzy line between trade secrets, which enjoy legal protection, and business ideas, which have little if any protection. It's impossible to say for sure from a brief on-line description of what was revealed to you by your "customer" whether it falls into a protected category or not; if forced to guess, I would say more likely an unprotected idea than otherwise, but even if the customer will eventually lose a lawsuit, he can still file and cause you a lot of time and expense defending.

If this were a multi-million dollar breach of contract, I would say file suit against the customer for non-payment, and when he settles out of court or you get a judgment, take the right to exploit the idea as part of your settlement or damages.

If, as is likely, much less money is involved, you could try to negotiate the same outcome -- get a written agreement that in exchange for not taking him to small claims court, he will not challenge your use of the business idea.

If you neither settle nor get a judgment and use the idea anyway, you run a small-to-medium risk of being sued and a small-to-meduim risk of losing. A full discussion with an intellectual property lawyer, disclosing all the facts, would be needed to define what "small-to-medium" really is, i.e. .001% or 40%.

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Answered on 3/10/04, 12:09 pm

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