3 Things You Should Know About Secrecy Agreement
Note: This is the third in a series on IP for Startups. To view previous articles please click here.
What is it? Also known as a Non-Disclosure Agreement (NDA), a secrecy agreement is an agreement that is signed by someone who is interested in receiving confidential information, e.g. an entrepreneur.
Why is it important? Any time that you want to disclose secret information to someone else, for example a supplier, designer or potential partner, their signature on a secrecy agreement obliges them to keep your information secret, and your disclosure to them is not considered to be a public disclosure of that information. Theoretically, this provides you with limited protection even before you have filed a first patent application. Because of its importance, and the fact that every case is specific, it should be drafted by a lawyer who has experience in IP matters. It is not advisable to use a boilerplate NDA downloaded from the Internet.
When should I use a Secrecy Agreement? It should be used prior to any disclosure of confidential information to a third party who is not otherwise required to keep your information confidential.
HOWEVER, in practice, it is not advisable to rely on an NDA prior to filing a first patent application. If the person receiving the information breaches the NDA that he has signed, the owner of the secret knowledge merely has the right to sue him for damages. However, in most circumstances even public disclosure which is in breach of an NDA will still make it impossible to obtain a patent if an application was not filed before disclosing the secret information.
JMB’s extra Q&A:
Q: Sometimes you feel like you have no choice. You can’t file a patent application, yet you can’t rely on an NDA. So what can you do?
A: Not having a choice’ normally means one of a several situations: (i) there’s no money to pay for a patent application to be fully drafted, and you need to disclose the invention to a potential investor; (ii) you have the money, but don’t want to spend it until you have received feedback from others in the market that your idea is a good one; (iii) you don’t know how to build your invention, and you need the input of a professional so as to help you.
If the only thing you can do before you’re able or willing to file a patent application is to rely on an NDA, try to ensure that the person to whom you’re about to tell your secrets is someone that you would trust even if they just gave you their word (they should still sign though). If there’s no one like that that available, try to get a recommendation from someone that you trust as to the reliability and trustworthiness of the potential inventor, engineer or design company that you plan to speak to.
Do you have questions about the above information? Are there subjects that you would like to hear about? Let me know!