A common question inventors ask is, “Will a Non-Discloure Agreement (NDA) protect my product or idea ?” The answer is yes and no. Understanding the benefits and limitations of an NDA can help you use it effectively.
Here’s how an NDA can protect you: An NDA is a legal contract that prohibits the people who sign it from sharing the confidential information with others. This protects your right to apply for a patent because you are sharing information in confidence, in other words, not making a public disclosure. Once you publicly disclose your invention you have 12 months in the US to file for patent protection, and you loose your right to file for a patent in many other countries. This is the biggest benefit of an NDA. In some cases you may able to get a verbal agreement not to disclose and that may be good enough. Ask your attorney.
Here’s how an NDA can not protect you.: An NDA does NOT provide the same protection as a a patent, trademark, or copyright. If won’t stop someone else from producing and distributing the same product or from using the same clever product name. An NDA is also not a non-compete agreement. While the parties who sign it have agreed not to share the confidential information you exchanged with other people, the NDA does not restrict them for producing or selling the same or similar products. And even if you try to include a non-compete clause as part of the agreement, most people won’t sign the NDA. The reason is that many people come up with similar ideas at the same time. A manufacturer may be approached by several people with the same or very similar ideas, or they may even already be working on a similar idea themselves. Or the worst possible case is that they are unethical and actually steal your idea. Stealing ideas is not a common occurance for unproven products, but the point is to be clear on what protection an NDA provides.
One additional thought to consider when using an NDA for protection. Just like any contract, if someone breaches the contract you will have to sue them. Hopefully, you have gotten agreement that any lawsuit will be brought in your home state. Lawsuits, still can be very expensive and a drawn out process where you will have to prove that the other party breached the contract. There are no NDA-police, just like their are not patent or trademark police.
Our advice is to use an NDA to protect your invention’s patentability, but don’t expect it to be more than it is.
