How to protect your idea in the Proof of Concept and MVP phase?

Protection od product in phase of Proof of Concept
Business | Design | Development - 13th December 2021
By Pixelfield team

If you are embarking on the development of a new product or MVP, it is essential to protect your idea against potential misuse. We asked the experts from AZ Legal how to approach this issue.

Protection according to the Civil Code

“The protection of a new business idea stems directly from the Civil Code, which protects so-called trade secrets, i.e., in simple terms, competitively significant and normally unavailable facts related to the business.

However, a necessary condition for being a trade secret is the obligation to try to keep certain facts secret in some way. In the event of a breach of a trade secret, the person concerned may be required to compensate for the damage suffered (including any loss of profit for a failed business plan). It should be pointed out that it is always the injured party who must prove the amount of the injury or damage caused, which is usually very difficult or even impossible in practice.”

Protection by NDA

“For this reason, and in order to avoid a conflict as to whether or not the fact in question is a trade secret, it may be advisable to negotiate confidentiality agreements and the associated contractual penalty for breach. These agreements, which may also form part of another contract (for example, a cooperation agreement), may define in more detail what is protected by confidentiality, while the agreed contractual penalty makes the position easier in that it can be enforced directly, only if the breach is proven, and thus it is not necessary to quantify the actual damage. 

On the other hand, in contrast to the general statutory regulation, this procedure places greater demands on the correct definition of what is actually protected by the confidentiality obligation (otherwise, there is a risk that the obligation will not be enforceable due to lack of certainty or other legal deficiency). For this reason, the assistance of a business law attorney can be strongly recommended to help you with the appropriate confidentiality agreement (or clause), including a properly set-up system of sanctions.”

Written by
Pixelfield team
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