Patent Attorney and Founder
Oh, before I get started, would you mind signing this? It’s a nondisclosure agreement, no big deal, right?
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Hello everyone, my name is J.D. Houvener, a registered USPTO patent attorney, and I’m the managing partner and CEO here at Bold Patents Law Firm. Today, I want to dive in and help you better understand nondisclosure agreements and when inventors should use them.
Before we get started, I want you to know the timestamps are down below in the details; you can jump ahead in the video to the section that you want. There’s even a blog article I wrote on our website.
So, what is a nondisclosure agreement, and what is it used for? Well, a nondisclosure agreement is the same thing as a confidentiality agreement; they mean the same thing. The secret here is that they’re contracts – don’t forget, it’s not just a handshake; this is a legally binding contract. It’s what’s going to help you have a foundation for confidentiality when you’re starting your business or you have an invention. This is the cornerstone of what you set your company on; you’ve got to make sure that you protect it.
Now, I want to take a quick mention of our blog article. Go visit our website at boldip.com/blog. I wrote an in-depth article about what a nondisclosure agreement is and what aspects of the contract itself you need to be concerned about. So, visit the blog if you want more detailed information.
Something else I want to mention too about nondisclosure agreements is, because they’re contracts, they are governed by state-specific law. Every state has its own laws about contracts, and so you must make sure that you’re working with a local attorney licensed in the state that you’re residing in and the other party is residing in if you want it to be binding on all parties. This is a major reason why investors typically won’t sign nondisclosure agreements; they see so many ideas pitched at them, they don’t want to get stuck being liable, having known information and sharing it with others. The other issue is that they likely are very difficult to enforce; you’re again dealing with a contract that’s likely between parties that reside in different states, and also, I’ve seen this quite often – inventors talking with parties over in different countries. Could you imagine trying to go, let’s say, to China to enforce your nondisclosure agreement in a Chinese tribunal? Good luck.
So, when do you use a nondisclosure agreement? This is the heart of what I wanted to get to – inventors oftentimes come to me as a patent attorney, they confide in me in their invention, and it’s wonderful. But even before they talk to me, they’ve usually talked with other people, and you know that happens, right? You’ve got a brother, a relative, a close friend; you want to go bounce the idea off of someone in confidence – this is the tool to use. Even if it’s, like I said, a friend or family member, it may seem awkward to shove a contract in front of them, but it’s a great way to practice because you need to have that level of seriousness with your invention. Now, certainly, you may not need that with family, and I said like I would encourage you to practice it, but you will need it with third parties so that someone is helping you develop the product prototype it or help me be a co-inventor someday. Now, that’s all pre-filing, so we do recommend that you work with an attorney to structure that nondisclosure agreement to get the written language down correctly for the state that you’re in.
Once you file your patent application, there actually are reasons to still use a nondisclosure agreement. A provisional or a non-provisional patent application will actually lock in your invention, but know that it’s only locked in so far as what was disclosed in that provisional. So, as soon as that’s filed, yes, you’re patent pending on that subject matter, but let’s say you see improvements in your invention down the road – those bells and whistles that you add or you get feedback from customers on that needs to be kept confidential because likely you will be able to seek a second patent application or an improvement application on that core invention. So, keep all those extra learnings and improvements confidential, and if you needed to disclose them with a third party, treat them just like a brand new invention.
I want to tell you a quick story about one of our clients that we worked with just last year. They came to us when we first got to meet, and they said, “Oh yeah, JD, I really need help with this new partner of mine. He’s going to be manufacturing this product for us; it’s a quick confidentiality agreement, that’s what I need as well.” Well, you know, has he or she or this company sent you any documents? And he said, “Yeah, here it is, here it is.” And I start to look at the contract that he sent in. Of course, it’s a little bit more murky, and it turns out that this contract was really taking ownership of this inventor’s product. So, they’re not only just manufacturing it, but they wanted the rights to be able to sell it to third parties – yikes, right? So, make sure, of course, you’re looking at your contract but know to ask about confidentiality, and then, third, talk with an attorney because they’re going to be able to spot issues well beyond confidentiality and, in this case, patent ownership.
Alright, so I want to summarize all six areas I just talked about. Again, what a nondisclosure agreement – similar to a confidentiality, just a nomenclature thing. They’re state-specific; don’t try to get investors to sign them. You need to use them pre-filing and post-filing. And don’t forget to work with an attorney to help you spot issues that may not be so apparent. Last but not least, I want to give you a copy of our book, “Bold Ideas: The Inventor’s Guide to Patents.” It’s available right now online at boldip.com/free.
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