CONFIDENTIALITY AGREEMENTS

Do you have a great idea but don't know how to get it to market? You are not alone. No business can do everything, and most great ideas involve input from a lot of people from conception to market. You might need to talk to designers, developers, manufacturers, market researchers, investors, etc. How do you talk to these people safely?  The common practice is to use a confidentiality agreement (sometimes called a 'non-disclosure agreement' or 'NDA').

Confidentiality agreements protect sensitive information. They create an obligation to keep your information secret and not misuse it, and they help preserve your ability to register a patent or design. They are particularly useful for working out whether an idea is feasible before investing too much in it. This article will help you avoid some of the pitfalls of using confidentiality agreements.

What does a confidentiality agreement do?

When a proposed recipient of your information signs a confidentiality agreement, they agree to accept that information on certain terms. These usually include keeping the information secret and using it only for certain purposes. It gives you the right to apply to a court for an order to stop them misusing your information, and for damages if they have already done so and you have suffered loss as a result.

Do I really need a written agreement?

Our clients often ask whether it is enough just to tell the recipient that information is confidential. The answer is that it is better than nothing, but far from ideal. In that situation you may not have enough evidence to show a court that there has been an agreement to accept that information in confidence and a breach of confidence. Having a written agreement puts you in a much stronger position.

A written agreement can also increase your options for intellectual property registration. For example, to obtain a patent or registered design, the idea or design must usually be novel (ie: not publicly known or commercially used) when the application is filed. Using a confidentiality agreement prevents your disclosure of your invention or design to the recipient from being a public disclosure.

What should it cover?

While a short confidentiality agreement might be easier to get signed, it might not address some key issues. Here are a few of the things to consider before using an agreement:

•     Does it describe the information I am disclosing without giving away the crux of the new idea?
•     Have I named the correct person as the recipient?
•     Is it clear what the recipient can or cannot to do with the information?
•     If the recipient is overseas, could I enforce the agreement in that country?
•     If we devise an improvement during our discussion, will I own the intellectual property rights in that improvement?
•     How long must the recipient keep my information confidential?

If you're not sure of the answers to these questions, ask your lawyer.

How do I get it signed?

Once you've got your agreement, send it to the recipient and ask that it be signed before your meeting. It is a legal document, and the individual you are meeting with may not have authority to sign it or may need time to have it approved by someone else in the organisation.

Limitations and back-up plans

Finally, it's important to understand the limits of what a confidentiality agreement can achieve. Using an agreement doesn't absolutely guarantee your information will be safe, so disclose only as much information as necessary, and choose the recipients carefully. It's usually safer to stick to businesses which complement, rather than compete with, your own. If your idea is likely to be patentable, considering filing a patent application before you talk.

A patent application can also be useful if the recipient, like many very large companies, has a policy of not signing confidentiality agreements. It's also important to remember that confidentiality agreements do not usually protect information already in the public domain. For example, if you have already sold it, displayed it at a trade show, or talked about it on the internet, it's probably not realistic to expect the recipient to keep it secret.

The same applies if someone else has already beaten you to it and published or sold the same idea. In fact, in that situation your idea might seem like a lemon, but don't despair –  you might still be able to make lemonade. More about that next month.

* The above information is of a general nature and is not intended to be comprehensive or to constitute advice. Readers are advised to seek specific advice before acting on any information provided.