At its simplest, a non disclosure agreement (often abbreviated to an NDA) is a contract
in which the parties agree to keep shared information private.
Why is it useful for inventors?
A non disclosure agreement allows inventors to talk about their invention to selected
parties (such as investors, prototype makers, invention marketing consultant advisors
and potential licensees) while addressing these two issues:
1. Losing patent rights through premature public disclosure
Public discloser of an invention before obtaining a patent application filing date,
can lead to a loss of patent rights. While it is fine to let people know for example
that you have invented “a new type of screwdriver”, it’s not fine to let people know
just how you designed and developed it.
Although there are a few exceptions to this
rule [notably the US and Canada permit a 12 month “patent grace period” between public
disclosure and patentability] ... it is still an issue that all inventors in whatever
country need to most carefully think-through and address.
And using a nondisclosure
agreement is often the best way forward here. Because information shared within
the confines of an NDA is considered “private disclosure” (rather than public disclosure),
your potential future patent rights are left intact.
2. The danger of having your invention (idea) stolen
The other concern inventors may have re. talking about their invention before having
the protection of patent application filing dates - is the risk of the other party
“stealing” the invention idea.
If properly worded however, nondisclosure agreements
(in principle, but not always in practice as we will see below) allow inventors to
disclose details of their invention to a third party without the risk of them stealing
it or commercially capitalise on it without permission.
The two main types of non disclosure agreements
Before we go on to look at the good and not so good points of using a non disclosure
agreement, there are two types of NDA that you need to understand:
ONE-WAY Non Disclosure Agreements
This type of agreement is suitable when one party (the inventor) is disclosing confidential
information to another party. The disclosing is one-way: From the inventor known
as the discloserto the the receiving party, known as the disclosee.
This is the type
of non disclosure agreement for example that I sign for my private invention marketing
telephone coaching clients, because the inventor is the discloser and I am the disclosee.
This type of non disclosure agreement is used when both parties may want to disclose
confidential information to each other. A typical example would be when an inventor
and a potential licensee want to seriously discuss and negotiate a patent licensing
In this case, not only will the licensee want to know all about the invention,
but the inventor may need to obtain commercially sensitive information from the licensee. This
is especially important if the inventor is considering an exclusivepatent licensing
In this case, the inventor will need to know from the licensee how his or her
invention fits the company’s competitive positioning and overall business strategy,
the nature, schedule and budget of the invention’s marketing plans as well as realistic
gives limited protection - notably only from the party who signs.
can be relatively easy to get around. For example, the other party can say that
they already came up with your idea themselves or go on to use it but as part of
some other product
The ugly points about a non disclosure agreement
breach of contract can be very difficult to legally prove
and in any event, it can be prohibitively expensive in terms of money, time, emotional
capital and financial risk to legally pursue
Not withstanding the above however, it is much more likely that your invention will
be ripped-off/copied once it is actually on the market rather than before. Conclusions BOTTOM
LINE: Using a non disclosure agreement does give a measure of protection..
importantly - it enables you to discuss your invention with investors, prototype
makers, invention marketing consultants, business advisors and potential licensees
with a degree of protection ... without jeopardising your future patent rights.