Not Establishing Confidentiality Protections- Startups

By Debby Winters

Before publicly disclosing its intellectual property (IP), a startup should balance the risks with the rewards of allowing the confidential and sensitive IP information to get out into the public domain.  Startups often misstep and disclose patentable subject matter at investor meetings, pitch events, or on company websites prior to filing a patent application. Unfortunately, public disclosure of an invention prior to filing a patent application can limit or even destroy patent rights. Such public disclosure can also destroy a company’s trade secrets.

Third-party conversations with those not under legal obligation to maintain confidentiality, such as a public pitch or presentation, a trade show, or publication are common examples of what can be considered a public disclosure to the patent office. If such disclosure is necessary, the startup should file a provisional patent application prior to the disclosure or at the very least have the third parties sign a written Non-Disclosure Agreement (NDA).

One caveat to that rule is that venture capitalists generally avoid signing NDAs because they deal with many startups and believe confidentiality obligations limit their contact and investment opportunities.  Furthermore, while speaking at trade shows or making a pitch, securing an NDA may not be feasible. In such instances, to avoid disclosing confidential information, the revealed information should be limited to generalities.

In the next part of this series we will look at the IP plan.

Confidentiality Agreements for new inventions

By Debby Winters

It is critical to have a confidentiality agreement setup when you are discussing your invention with a stranger or another company prior to a patent filing. Confidentiality agreements (CDAs) and Non-disclosure agreements (NDAs) should be used anytime you are disclosing detailed information about your invention to someone and they are especially important to use if you have not yet filed a patent application

What are Confidentiality Agreements and Non-disclosure Agreements?

A confidentiality agreement (CDA) is a legal agreement between two or more parties that allows for the exchange of secret or confidential information. Usually one party is known as the “discloser” and they are the ones disclosing confidential information to the other party known as the “recipient”. Confidentiality agreements are sometimes called non-disclosure agreements (NDAs). The information being disclosed can be from one party to the other and is then called a one-way NDA. Or both parties can disclose confidential information and create a mutual NDA.

When should I use a CDA or NDA?

You should use a CDA or NDA anytime you want to share secret or confidential information with another party. Ideally you will get one of these agreements in place before you share your information but it is possible, but not preferable, to pre-date your document and get one in place after you share your information.

CDAs and NDAs are important for new inventions

CDAs and NDAs are important for new inventions because they require the other party to keep your information secret. This is important for patent reasons because if you publicly disclose your invention then you could lose patent rights. By having a CDA in place, your disclosure will not count as a “public disclosure” in the eyes of patent law, and thus will not hurt with the USPTO. CDAs and NDAs can also limit what the other party can do with the information you provide them. This is important if you don’t want the other party to steal your ideas and make their own commercial products with your information.  These agreements also give you legal remedies should the party you share this confidential information breaches the agreement.

What should a good CDA or NDA include?

A good CDA should include the follow items:

  • Clearly define what is considered to be “Confidential Information”
  • Clearly define what is not “Confidential Information”
  • State the purpose and what the receiving party can use the information for
  • Define a term (how long does the party have to keep the information confidential)
  • Define what should be done with the confidential information once the term is over.