The Basics of a
Non-Disclosure Agreement

What Is a Non-Disclosure Agreement?

A non-disclosure agreement is used when you have an otherwise unprotected idea that you want to show to a third party and you want the information you share with them to remain undisclosed to other parties. You ask the other party to agree that they will not disclose any information about your idea, except as permitted in the contract, and that they will not compete with you by producing or selling your idea.

Why Use a Non-Disclosure Agreement?

Once you have told anyone in public about your idea, the clock on your right to patent that idea begins to run. You have a year to file for a patent. After that time runs out, you lose the right to ever file for a patent on the disclosed idea. An NDA prevents the clock from starting because you will not have told the public about the idea since the parties signing the NDA are legally prevented from telling "the public" about it.

How Good IS a Non-Disclosure Agreement

A non-disclosure agreement is as good as the word of the person with whom you share the information. Although you do have the legal right to enforce your NDA, legal fights can be costly and take a long time to resolve. If you are proposing to talk with a person or company that you don't know very well, ask to talk to other people they've worked with in confidential situations before you tell them about your idea.

NDAs do NOT apply in all states. If it's important to you to have an NDA, it's worth spending some time with a lawyer to make sure that it will apply to your situation.

What If The Company I Want To Talk To Doesn't Sign NDAs?

Many companies and investors refuse to sign NDAs as a matter of policy. Many new ideas are similar to concepts they have already seen and companies may already have something in development that's close to your idea. Many investors and possible partners won't even look at an idea from outside of their circle of influence. What should you do when a company won't sign an NDA? Look at them carefully - could they have something similar? Could one of the companies they've invested in be developing your competition?

How Do You Protect Your Idea?

Get at least a provisional patent application for your idea before you show it to anyone who could hurt you as well as help you.

What's a Provisional Patent?

A provisional patent describes the idea, product or process under development but contains no specific claims about it. It should describe all possible inventions that flow from the central idea. It acts as a placeholder and provides the inventor with a year from the date it is filed to file for a full patent. The official utility patent application can use the date of priority of the provisional patent application as long as it is fully supported by provisional patent application.

A provisional patent is easier to file and doesn't require the same formality as a regular utility patent. This makes it less expensive to file. The party applying for the provisional patent can then make the claim on the product that it is "patent pending."