As a budding entrepreneur, with tons of ideas oozing from your brain (or wherever good ideas come from) and not much capital to back them up, you have no doubt either entered or considered entering your ideas into at least one of these challenges. But the message I bring you is that you should beware of some of these start-up or innovation challenges.
A few weeks ago, we received an invitation to enter our company into the Telkom Innovation Challenge at the South African Innovation Summit. By entering a business idea or proposal, we would stand a chance of bagging R120 000 if our idea/proposal won the competition. This is all fair and fine until you take a closer look at the Terms and Conditions of this challenge, something that sadly many people don’t bother scrutinizing. If they do scrutinize the Ts & Cs, not many of them understand the legal jargon.
Anyway, back to Telkom’s Ts & Cs. There is a clause in the Ts &Cs (Appendix 2) that specifies that just by the mere act of entering your idea or proposal into this challenge, you automatically cede all Intellectual Property rights of your idea/proposal to Telkom. What this means is that whether you win, or not, you no longer have the right to use that idea, build it or sell it in the future. If you’re like me, you’re probably thinking that this is an utterly ridiculous proposition. Well, yes it is; how can someone claim full rights to your idea just because you entered some competition!! The sad reality though, is that this happens a lot around us.
If you have entered your idea into one of these challenges, how many times have you completely read and understood what you were getting into before hastily entering the competition? How many times have you thoroughly read the Ts & Cs of anything you enter into or use? Come to think of it, not many of us do. We have this inherent belief that the organizers of these challenges, or providers of the tools we use have our best interests at heart. Unfortunately for the consumer, most times, their priority is to protect themselves and make money. So, the responsibility should be on you to look out for yourself.
Arthur Attwell in his blog post about this particular Telkom issue refers to this practice of setting up start-up challenges as a way of freely harvesting concepts and ideas as an IP land grab. Big corporations sometimes sponsor these innovation competitions as a way to get good ideas free of charge, and unfortunately there is not much legislation to protect the innovator in instances like these. I strongly believe this is not ethical business practice.
An alternative and ethical way would be for these big corporations to offer funding to entrepreneurs with an equity interest rather than outright stripping the entrepreneur of the idea because of a competition. Alternatively, they could agree with the entrepreneur beforehand to both have rights to use the idea or something along those lines. As long as it does not leave the innovator worse off than he/she started.
Many unsuspecting entrepreneurs have been drawn into signing away the rights to their ideas under the guise of participating in these start-up challenges. As innovators, we should be extra vigilant when it comes to free-entry innovation challenges offered by companies whose competitive advantage is that particular category the entries are being called for. There’s usually something sneaky going on behind the scenes or in the fine print.
As a parting thought, I wonder if these challenges support innovation among entrepreneurs, or instead they stifle it by dis-empowering the innovators.