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NDA vs Patent Application
February 4, 2015
(reprinted from BML January Newsletter)
Protecting your rights while promoting your invention
I recently attended a talk given by a serial entrepreneur with a great track record of success. In the discussion surrounding the talk the issue of NDA's came up. The speaker opined that NDA's were a thing of the past. That many large companies today refuse to sign them. That they are difficult to enforce and getting them wastes time better spent elsewhere.
The entrepreneur suggested that inventors forget about getting NDA's and concentrate on building up their business so that they could dominate the market and demonstrate the value of their invention with sales statistics.
I believe there is a lot of truth in what the speaker said but what he said is also limited because it omits a good deal of important information and also ignores other options open to the inventor.
Since I have been in business I have signed dozens of Non-Disclosure agreements. Most of them are pretty standard. The only major differences I have found between them are in the term of the agreement. I did find one client who wanted the term to be "in perpetuity". I refused to sign that one. But otherwise getting an NDA signed with small companies and individuals has been easy.
Getting a large company to sign an NDA is another matter. For whatever reason staff attorneys are advising big companies not to sign NDA's. I have also heard it said that VC's and Angels won’t sign them either. My guess is that they want to avoid potential lawsuits around breach of these NDA's.
Sometimes a big company will want you to sign their NDA which may have some unacceptable content. And some attorneys will combine NDA's with non-compete agreements, arguing an NDA only protects you from the other party disclosing your information but not from them using it.
So how does an inventor protect themselves when they want to talk to a big firm about licensing their invention or an Angel or VC about funding their idea?
The simple answer is to file a patent application. A provisional patent application can be quite inexpensive if you do the work yourself and cost about half the price of a full application if you have a professional write it
You can inform the party you are talking with that you have filed a provisional application on the material you are disclosing to them. If you later file a non-provisional application (which you must do in one year) you can enforce your patent, should the company use your IP without permission, as soon as the patent application publishes.
This method is not as quick as an NDA but it is probably more effective and will allow you to talk with those large companies and investors who refuse to sign NDA's while still protecting your intellectual property
If you need more help or advice on this topic, contact us. Just send us an email to firstname.lastname@example.org or give us a call at (585) 520-3539
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