Confidentiality Agreements For Inventors Without A Patent

The first thing to decide is whether you actually need to have a confidentiality agreement signed. In some instances you may not need to initially have the confidentiality agreement signed. For example, you may share information about your invention project -- including the attributes, benefits, features and advantages of your invention -- without necessarily disclosing any trade secrets or confidential information about your invention. Although most inventors don’t realize this, this can be achieved with the majority of invention projects.

As long as you’re careful about what you disclose, it’s possible to make a preliminary presentation to a company to decide whether they are a match for your invention, or to receive a critique to see to what degree the attributes of your invention are desired in the marketplace without ever needing a Confidential Disclosure Agreement or "CDA".

Important: If you are going to consider sharing information without a CDA, we highly advise you to consult with a patent attorney and share the information you intend to present to a company to be sure that you are not prematurely revealing information that will adversely affect your potential patent rights, both in the United States and abroad.

In many cases, though, you may need to disclose certain patentable aspects about your invention or trade secrets to a third-party company in order to receive an appropriate review. In this case you may seek a confidentiality agreement from that company, especially if you’re considering filing for foreign patent rights.

However, if you are definitely not considering filing for foreign patent rights, and if your patent attorney believes that you’re appropriately covered under your current proprietary rights position, then there may be little risk in submitting your invention to a third-party company for them to decide whether they’re interested in purchasing or licensing your technology, and potentially offer you advice or a critique.

In this case, if the third party company is not willing to sign a confidentiality agreement, it may be better to bite the bullet and sign their non-confidential agreement, if they insist. However, make sure they agree that the invention that you submit will remain your property and that the company will not exploit your invention without your express written permission.

Receiving such commitment from them may be an advantage over any confidential agreement. Plus, it tends to be easier to get your disclosure agreement signed when it does not have a confidential clause. Again, seek legal advise before implementing such a strategy.

Most Fortune 500 companies want to go one step further. In addition to forcing you to sign their non-confidential disclosure agreement, they also suggest that you must only rely on your patent rights in order to receive any potential reimbursement from them.

There are compelling reasons to be willing to sign such a seemingly limiting agreement. First, if your only strategic commercialization choice is to license your invention to another company, in the event that particular company commands the vast majority of the market share, then you may have more to gain than lose by submitting to them. If you do this, however, be sure to learn ahead of time if the company does indeed have a positive track record of paying outside inventors a royalty for use of their invention.

In general, I find that it is important to learn what the ongoing practices and procedure of the company in regard to inventors. What is their track record for paying outside inventors, irrespective of the type of disclosure agreement that they ask you to sign? Often times there’s a disconnect between the severity of the disclosure agreement that the company asks you to sign and their actual policies and track record of paying outside inventors.

On the flip side, it is not uncommon for a company with a horrible track record for paying outside inventors to be willing to sign a confidentiality agreement very favorable to the inventor. This seemingly cooperative and inventor-friendly company may have a history of taking the inventors’ invention, and going to market with it after changing it enough to keep them away from serious legal trouble.

This is yet another compelling reason for doing your due diligence to learn about a company’s practices before submitting your invention to them strictly based on their willingness to sign a confidential disclosure agreement with you.

Ron Docie, Sr.
President, Docie Development LLC
Guest Blogger

Ron Docie, Sr. is President of Docie Marketing and Docie Development. He is the author of The Inventor's Bible, How to Market and License Your Brilliant Ideas, and has successfully commercialized new products and technology for himself and his inventor clients for over three decades.