start on my own or negotiate with the employer?
pedalpete: Seems you have a few competing opinions here, but I think there are a few key themes that you need to consider
1) Ethical
2) Legal
3) Financial
4) Processes
5) I'm sure their are othersFrom the sounds of the sounds of things, your boss is still in development. Has the product you have been working on been released into the wild yet?It is unethical to be working on a competing product while working for your employer. However, remember that Woz approached HP with his idea, and they said no so he went and built Apple.Legal commitments from non-compete are not always binding. You didn't say what country or state you are in, but you can check that out yourself. If you are happy ethically with leaving the company to start a competitor. 
Note that this happens all the time. Lots of ad agencies are started by former ad execs who jump ship and go out on their own, often stealing clients from their former employer.Do you really want to start your own business? if so, is this the business you want to start? or is it just that you like this product? A product does not make a business. So I'd consider that very carefully as well. Is your 'planned' product so much better than what your current employer that you can truly build a business around it?This might be an opportunity for you to learn a TON and get lots of experience and move up in the company you are working for. If the change is significant enough, you may be able to put yourself in a position where you are leading significant parts of the initiative.In the end, I don't think you can get very far without at least discussing some things with your current employer, so if the relationship is solid enough, maybe sit down with them and talk about it. You don't have to give them your entire product ideas, but let them know that you think they are going in the wrong direction and see how they take it.Their reaction could/should be a big eye-opener into what direction you want to take.