Non Disclosure Agreement

I am often asked whether a Non Disclosure Agreement (“NDA”) makes sense for an inventor.  The answer is of course, but there are some important issues to know about.

Drafting, advising and editing an NDA is practicing law.  You can’t ask an attorney not admitted in your state to do this, nor can a patent agent do this.  You need an attorney.  You can do it yourself, but you can also do brain surgery on yourself.  Also, getting a form off the Internet, editing it yourself, and asking a lawyer to “check it over” won’t work.

What Is An NDA?

An NDA is just what its name implies:  an agreement that the recipient of information will not disclose it.  It is not self-enforcing, however, so it is only as reliable as (1) the parties entering into the agreement, (2) the attorney who drafted it, (3) the clarity of what is covered, and (4) the court that will be asked to enforce it.

Are There Common Terms in an NDA?

Read enough NDAs and you will start to see a theme.  The recipient is under an obligation not to disclose certain “trade secrets” but what if the information gets on the Internet through no fault of the recipient?  What if the recipient already knew the information?  For that reason, a well drafted NDA will probably contain “exceptions.”

What Does it Cover?

This is a hard issue.  Sometimes it only covers documents that are marked “Confidential.”  So, a well drafted NDA will anticipate how information will be disclosed, and how closely guarded the information must remain.

Choice of Law

This is an issue that most people miss.  You are in California, but you ask a lawyer in New York to draft the NDA, and she (or he) puts in a clause choosing New York law for the agreement.  Then you have someone in Arizona sign it, and ask a judge in Nevada to enforce it.  What happens?  Anybody’s guess.  Just pick a good lawer to draft it, and listen to the advice you get.

What Could Go Wrong?

You have a startup, and you have a great idea for a product.  But you don’t know how to build it (or code the software) and you decide to hire an engineer to help. Lots of things could go wrong.  What if the engineer has to invent something to get the job done?  Then the engineer might be a co-inventor and needs to be listed as such on the patent application.  So, maybe you need an assignment, and not just an NDA.  Maybe the engineer has already written the code needed.  Do you get a license, and if so is it exclusive or non-exclusive?  Not many engineers want to sell their reusable code.  Do you add a clause assigning future inventions by the engineer?  Is that even enforceable in your state?  These are all legal issues, and you will need a patent attorney to sort it out and help you along the way.

Has the Law Changed? 

Yes.  As of 2013 and the AIA, the US is a first to file jurisdiction  Sort of.  The old “first to invent” inquiry was for the old, or pre-AIA law.  So, your best practice is to get an applicaiotn on file, or at least a provisional application, as soon as possible.  See here for information on provisionals.

`© Robert Rose 2015