Beware: Confidentiality Agreements Are Far from Ironclad
Real protection comes from a patent application
Q: I have an E-commerce concept, and I'm looking for a capital partner. I've approached the 10 most popular portals on the Web. Some want to meet with me, and some want further information. How do I protect my idea?
-- L.A., Jerusalem
A: You can get a measure of protection by having the people to whom you plan to disclose information sign a confidentiality agreement. That legal document obligates the party receiving the information not to use or disclose the information for purposes other than evaluating it.
Standard confidentiality agreements are available from contract attorneys or intellectual-property attorneys, generally for a couple of hundred dollars. For very little money, you can download a boilerplate version of a confidentiality agreement from the Web, from sites such as www.teneron.com and www.nolopress.com.
Make sure the agreement is broad enough to cover all the confidential information you disclose and that you get it signed before you discuss your idea in any specific terms. Be careful with the do-it-yourself method. Some companies, to protect themselves from potential litigation, may want you to sign a nonstandard confidentiality agreement that will transfer the rights to what you disclose to them after a certain period elapses.
But even if you're careful drawing up the agreement, there's a catch, says David Farah, an
attorney specializing in intellectual-property law for the firm of Sheldon & Mak in Pasadena, Calif.: "A signed confidentiality agreement is nothing more than evidence that a confidential relationship existed, if you sue the party for breach of contract. Few, if any, private individuals have the money to sue a company on their own. Further, attorneys will not take such cases on contingency, so as a practical matter, confidentiality agreements are not an effective means for protecting your idea."
So, before you publicly disclose your idea, offer it for sale, or undertake any commercializing activity regarding it, you should file a U.S. patent application (www.uspto.gov) or obtain copyright protection, as appropriate, Farah says. "A pending patent application is like a piece of personal property in the U.S., and you can sell the rights to it before you know whether a patent will ever issue." Another word of caution: If you disclose an idea in an attempt to sell your invention before you've filed for patent protection, many countries won't let you file for it afterwards, Farah says. That reduces the value of the idea considerably.
Farah recommends that you meet with potential buyers or investors face-to-face, rather than negotiating via e-mail or on the phone. As a matter of business style and for leverage in negotiations, there's still no substitute for personal interaction.
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