Protecting Your Business Concept: Pac-Man & Great Divide Style

Many people approach me with their new business concept and want to prevent others from copying their model. While non-disclosure agreements and trade secret laws provide some degree of protection, at least early on, it is practically impossible to prevent competition.

I came across an article in the Westword from last March that perfectly illustrates the difficulty in preventing copycats (See, here). The article reports on the opening of The 1UP  in Denver’s LoDo neighborhood. The 1Up is a part of a new(ish) trend in bars that provide craft beer and 1980’s era video games. The video games, which include Galaga, Ms. Pac-Man, Punch-Out and Donkey Kong, are priced, 1980’s style at $.25 a play. The concept is perfect – great beer and nostalgic, two-button video games. However, as 1UP points out, they were not the first to bring the concept to life. For example, they credit Ground Kontrol in Portland, Oregon and Barcade in Brooklyn and Philadelphia (in Fishtown) as their predecessors. The Westword story also cites to Barcadia, with locations in Dallas, Houston and New Orleans. My guess is that Ground Kontrol likely does not receive any royalty or licensing revenue from Barcade, nor does Barcade receive any income from The 1Up. The concept might lend itself to a national franchise model, but it has instead grown through regional copycats.

And, as an aside, Barcadia filed a declaratory judgment action against Barcade in the Northern District of Texas in July 2009. Shortly after filing this lawsuit, Barcadia filed a notice of abandonment for its trademark application with the USPTO.

The lesson from this story is no different from what we have seen with Groupon. If you have a profitable business concept that is easily replicable, competitors will follow. As you are developing your business concept, it is good practice limit disclosures and to use non-disclosure agreements. However, as your business moves from concept to reality, those aspects of your business that are secret begin to decline.