NDAs: the Good, the Bad, and the Ugly

not use an NDA. Why? Because there are a million and one great ideas out there, and believe me, the idea is only the beginning. To raise money, attract strategic partners, find a market, and sell to something takes way, way more than just an great idea. It takes stellar execution of that idea. When you are disclosing confidential trade information such as a patentable idea, client identities or client lists, vendor information, upcoming strategic alliance information, or proprietary methodologies, however, an NDA likely would be appropriate.  I say, “likely,” because the question can be pretty fact specific and there may be exceptions in the instance you are addressing. Probably time to ask your attorney to take a look at the situation with you. * N.B., you need never use an NDA with advisors you hire which have a legal or ethical obligation to keep your information confidential, such as attorneys or CPAs.  There are statutory remedies you can use should they disclose your information.  Be sure to ask. As a practical matter, then, if the person you are speaking to is that dangerous type with ability to execute yours or anyone else’s unique concept, more than likely s/he is probably busy successfully working on a few of his/her own.  They will have little inclination to sign an NDA, when they have nothing to gain from the relationship, but you may wish to speak to them for advice or even to explore possible partnership or investment.  Any other type of person probably isn’t interested in starting a new business and/or doesn’t have the ability to do so. The last thing I explain to my business clients about NDAs is that they are only as helpful as you are well-funded enough to sue the information recipient in the event of a breach.  Your NDA should have some language agreeing in advance that the court may issue an injunction barring the recipient’s further disclosure.  And as with any contract dispute, however, the recipient’s lack of money with which to pay damages may diminish the effectiveness of the NDA in protecting your information.  So try to deal with solvent people.

For information on when a patentable idea must be protected (and not disclosed) prior to filing, please consult with an intellectual property attorney or patent attorney.  This site may also be helpful: USPTO.gov, General Information About Patents.  ]]>

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