Founding Partner
What is the purpose of a non-disclosure agreement (NDA)?
Many inventors and investors alike think an NDA exists solely to protect an idea or invention from thievery. Based on that, the investor may balk at signing it. Why would an investor steal your idea when he or she is funding it, after all?
Richard Gearhart, Esq., Founder, Gearhart Law
BUT – Although the NDA does guard against theft of your intellectual property, it has another, and, I would argue, almost more important function in the patent world.
How could that be? First let’s talk about what a public disclosure is and how an NDA prevents this, then we’ll discuss why it means so much for patents. A public disclosure happens when you tell another person about your invention (unless they’re a co-inventor). But, if you have a signed NDA from the person with whom you’re discussing the invention, then it’s not public, so no public disclosure has taken place.
Who cares about a public disclosure? The US patent office does, and foreign patent offices too, but they’re much more strict. In the US, you have one year in which to file a patent after a public disclosure. In legalese it’s called a ‘one year bar’. If you don’t file within that year, you can NEVER get a patent on your invention as disclosed. If you make significant changes to your invention you may be able to patent the modified version, but that’s not even a sure bet.
How can foreign countries be more strict than that? They don’t even give you that year. Once you’ve made a public disclosure of your invention, you can NEVER get a patent in Europe or in a number of other countries either. In legalese that’s called an ‘absolute bar’.
So what is a public disclosure? It’s telling anyone about your idea or invention if they’re not a co-inventor and they haven’t signed an NDA. You may do this, for instance, if you present a detailed description of your invention at a conference, during a pitch presentation, display it at a trade show, or even sell just one item or tell one investor. If you do that, you’d better have a patent on file already or you’ve just lost all of your patent rights in Europe and other countries for that invention.
Please note – you can tell your patent professional about your invention without its being a public disclosure. Most patent professionals (and certainly the team here at Gearhart Law) have a blanket NDA covering everything they discuss with clients. If you’re using a law firm, you also have attorney/client privilege, and your attorney won’t discuss your idea with anyone else without your permission.
So yes, the NDA protects against thievery, and unfortunately thievery does happen. But if you’re working with an investor who doesn’t want to sign an NDA because he or she isn’t a thief and expects you to trust them, please tactfully remind them of the importance of the NDA for preserving your patent rights in Europe and elsewhere.