Practical Ecommerce

Legal: Protecting Against Idea Misappropriation Claims

Ideas are cheap. But ideas can also help an ecommerce company improve its products and services. Often a merchant’s customers or partners are in the best position to provide such ideas. Implementing unsolicited ideas, however, can pose legal problems surrounding ownership of the idea. Merchants can protect themselves by taking basic precautions, which I’ll address in this article.

Ideas for Products and Services

Let’s start by first defining the types of ideas that you should be concerned about. An ecommerce merchant may receive ideas from partners or customers about its offers or products. For example, a shopper may have a feature request or suggestion for a software-as-a-service product. Or a supplier may recommend that a merchant run a certain type of email offer. These types of unsolicited ideas can cause problems.

By definition, an idea is not copyrightable or protectable by trademark, and in many cases an idea may not be patentable or subject to trade-secret rights. Even if an idea is not protected by traditional intellectual property law, however, some states have recognized a claim for “idea misappropriation,” which is an implied or quasi-contract claim that finds the existence of a legal relationship between the parties even where it may not be clear that they intended one to exist.

Taco Bell’s Chihuahua

One of the most famous cases of idea misappropriation involved the beloved Taco Bell Chihuahua. In Wrench LLC v. Taco Bell Corp., Wrench alleged that Taco Bell had misappropriated its idea to feature a live Chihuahua with a feisty attitude in Taco Bell commercials. Wrench alleged that the ideas were inspired by its Chihuahua character “Psycho Chihuahua,” that two Taco Bell employees had engaged with Wrench to discuss licensing the character, and that Taco Bell unilaterally began using a similar character without a license.

Taco Bell’s marketing agency, however, claimed that it had independently created the idea when two of its employees, while eating Mexican food, saw a Chihuahua trotting down the street without a master or a leash.

Wrench filed suit.

In examining the claim, the court found that, though there was no written contract between the parties, there was an implied-in-fact contract because Taco Bell, during the negotiations to purchase a license to Psycho Chihuahua from Wrench, promised that it would pay Wrench a license fee. When Taco Bell failed to pay, the court found that an implied contract existed. At trial, Wrench was awarded $30 million, plus $12 million in interest, for a total of $42 million in damages.

While this may be an extreme example, even small businesses can be faced with an idea misappropriation lawsuit. My firm, for example, recently represented an insurance company that faced such a claim when it failed to properly reject an unsolicited idea, albeit an obvious one. When the company moved into the area that was covered by the idea, it was sued by the individual who believed it was his.

A Policy for Unsolicited Ideas

How do you protect against this? Adopt an unsolicited idea submission policy and clearly outline that policy in your terms-of-use agreement on your website. You could then rely upon the contractual power of that agreement as a defense to an idea submission claim.

A good unsolicited idea submission policy will require the submitting party to agree that his or her submitted ideas become the property of the company upon submission, that the ideas can be used in any manner or form, and that the company may use the idea without payment. Through the force of contract, you can ensure that you won’t have to run for the border.

Free legal advice is worth as much as a bad idea. So make sure that you speak with an attorney for your specific situation.

John Di Giacomo

John Di Giacomo

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  1. Carlos Rivera January 19, 2017 Reply

    Excellent advice from the hidden dangers of running a large business! Thank you for your expertise!