- The best way for an inventor to protect themselves in the early stages of seeking investors is to file a patent application before disclosing the invention.
- Patent law allows you to publish your invention or offer it for sale prior to filing a patent application, provided that you file your patent application within one year of the publication or offer for sale.
- If an inventor opts to wait to file for patent protection, or if the invention does not qualify for patent protection, then a NDA is probably the best option.
- If you have an invention that you believe is worth something, then the first step should be to file for a patent or other intellectual property protection. That will provide the most protection to your innovation.
Here is the scenario: An inventor comes up with an idea for a new product and is ready to pitch the idea to a potential investor or partner. The question that lawyers often hear at this point is “Am I safe to disclose my invention with only a Non-Disclosure Agreement [“NDA”] to protect me?” The answer is that it depends.
The best way for an inventor to protect themselves at this stage is to file a patent application before disclosing the invention.* A patent provides more protection than solely a NDA. If you have a patent and find out that someone is producing your product, then you can bring an action in federal court for patent infringement and seek damages. For some inventors, however, filing a patent application at this stage of the game is not an option, either because they cannot afford to file for patent protection or because they do not wish to move forward until they test the viability of the invention.
If an inventor opts to wait to file for patent protection, or if the invention does not qualify for patent protection, then a NDA is probably the best option.*** This is a contract between two parties. Should you find out that the person that signed the NDA breached the agreement by disclosing the information then you could sue them for breach of contract.
There are some limitations to NDAs however. For example, what happens if a third party has created the same product and put it into the marketplace? Since the NDA was not entered into with the third party, then you would most likely be unable to recover damages against them. Alternatively, if you possessed a patent, then you could still sue the third party under patent law.
NDAs are far from ironclad and not necessarily simple to enforce. We recommend that if you have an invention that you believe is worth something, then the first step should be to file for a patent or other intellectual property protection. That will provide the most protection to your innovation. You may then use a NDA as well when disclosing to other parties.
Goodrich Firm, LLC
* US Patent law is moving from a first to invent system to a modified first to file system (where a first filing based on information derived from an earlier inventor can be challenged and defeated). (Kevin E. Flynn, Flynn IP Law)
** There is a twist in that even an enabling disclosure under a NDA does not count to ruin absolute novelty as under those systems it is only a public disclosure (or actual commercial delivery of product) that ruins absolute novelty (there are many nuances to all of this and there are differences between countries). (Kevin E. Flynn, Flynn IP Law)
*** There is also the option to file a trade secret under a U.S. patent app with a non-publication request as a backstop. If it becomes necessary to use the patent system, you get the patent, if the trade secret option seems better than a patent a few years into the process, you can abandon the patent app and it remains a secret. (Kevin E. Flynn, Flynn IP Law)