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Experienced Innovator Guide |
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Overview |
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In this Section
The "Inventor's Tool Kit" is a set of four key documents that, when used properly, provides you with solid protection during the early stages of the invention process. The kit includes:
Let's take a closer look at these documents. The Disclosure Document (DD) establishes ownership because, under U. S. law, patent rights legally belong to the first inventor unless the idea is abandoned. To be effective, however, the DD must clearly teach how to make and use the invention, and it must be signed and witnessed. It should be in a permanently-bound book with numbered pages. And, it must be followed up with provable, diligent reduction to practice. The Confidentiality Agreement (CA) may be the most important document of all. Its use allows you to start the marketability and patentability discovery processes without opening the door to claims of public disclosure, which might bar patentability here or abroad. The CA must be referenced to the DD so that no misunderstanding can arise as to what the pledge of confidence is about. The CA should identify what the intended purpose of the confidential disclosure is, and it should state that the disclosed is released from the agreement in the following circumstances: if the invention comes into the public domain, if the invention is already known by disclosed, if the invention is already known by others, and if the invention has not, or is not, treated by the inventor as confidential material in dealings with others. The Work Agreement (WA) is important when you obtain outside help. Such help might be in reduction to practice, artistic design, improvements in concept or construction, etc. The WA is very important because, by law, ALL true inventors must be specified in your US patent application. If a contractor has contributed to the invention and you elect to legally claim his/her improvements in your patent application, the contractor must be treated as a co-inventor in your application. The WA allows the contractor to legally be bound to transfer his/her rights in the application to the inventor. Contractor compensation may be salary, fixed contract price or a percent of the first profits, but should not be a percent of ownership in the patents, which carry some of the contractor's inventive contribution. The WA legally binds the contractor to transfer his or her rights in any patents for the compensation paid for his or her work, even if the compensation occurs in the future, i.e., option rights, etc. Rights transferred are for US and foreign patents and any continuations, divisions, and reissues. The contractor is also obliged to help perfect your patents. The License Agreement (LA) may be the most complex agreement in law. Please don't try to negotiate such an agreement without professional help. The patent or pending patent should be clearly identified as well as the names, addresses and entity status of each of the parties. The LA gives rights of making, using, and/or selling for products protected under law by the patent grants or potential patent grants. Usually an "upfront" fee is stipulated, but in many agreements the licensee considers his investment of time and money in tooling and initial market rollout to be an adequate initial investment. In this case, the inventor must include controls in the LA that will enable him/her to back out of the agreement if certain actions are not taken on schedule. Considerations of exclusivity, duration, disputes, termination, assignability, sublicensing, patent right defense, improvements to the invention by the inventor or by the licensee, marking of products that are protected under the patents, trademark usage and control, foreign sales and patent protection, are just a few of the important issues to be negotiated. Having experience, so as to be able to assert knowledge of typical agreements in forcing contractual terms to meet your needs, is essential in striking a deal. Some of the more important issues are the royalty rate, minimum royalty amount, when it is to be paid and to whom it will be paid. The latter is important with respect to income tax considerations. The Inventor's Tool Kit provides the basic legal tools necessary to the maintenance of rights in bringing a new product idea to market. Familiarity with these four documents enables anyone to proceed with greater confidence in selecting professionals to help, and in making the important early decisions necessary for business success with inventive ideas. Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Nondisclosure (Confidentiality) Agreement The "Nondisclosure Agreement" sounds confusingly similar to the US Patent & Trademark Office's "Disclosure Document Program." Yet they are completely different and unrelated. A Nondisclosure Agreement (also known as a "Confidentiality Agreement") is used when someone with an UN-patented idea for an innovation shows it to another party and wants that party to maintain as confidential any information he or she learns about the product as a result of the meeting. The inventor draws up the nondisclosure agreement and has the other party sign that he/she will not disclose any of the information to anyone else, and will not market the idea or compete with you. In the very early stages, we advise against indiscriminately signing any Nondisclosure Agreements with any product development companies, service providers, investors, venture capitalists, licensees, etc. Keep the Details of your New Innovation Secret at First During the initial phases of working on your new idea, you will generally not need to reveal it to anyone. There is a way to talk to people about your innovation without telling them what it is or how it works! For example, let's say your idea is "a toothbrush with a long, curved handle which reaches further into the mouth to get at hard-to-reach spots, and extra long bristles made out of natural materials to stimulate the gums." Instead of revealing so much information, you can simply say that you have developed a "new type of toothbrush," or a "new teeth cleaning device" or an "oral hygiene tool." With these brief phrases, you have provided a "general" picture of what your product is, but it is so general and vague that you have not given away any secret details or features about your product or how it works. If someone asks you more in-depth questions after you have provided a short phrase such as the one above, just explain that you are not able to disclose any additional information about the product at this time. TIP: Keep the details of your new product secret until you have at least a patent pending, especially during the period when you are not protected and are shopping for services. USE THE NONDISCLOSURE (CONFIDENTIALITY) AGREEMENT SELECTIVELY WITH ESSENTIAL SERVICE PROVIDERS WITH WHICH YOU HAVE DECIDED TO WORK The Nondisclosure (Confidentiality) Agreement is recommended as a tool for you to use once you have progressed to the point where you have done everything you can do on your own, and absolutely need a professional to assist you with the next phase. For example, you may need to hire a professional prototype maker to help you develop a working model of your product. Yet, while you are in the initial phase of "shopping" for a prototype maker, you do not need to reveal all of the details about how your product works, nor is it necessary to have the prototype maker sign a Nondisclosure Agreement. In the shopping phase, you will want to find out what kind of experience the company has, what successful clients they have had, examples of their work, what their fees are, how they charge, what forms of payment they accept, how long a typical project takes and other questions along those lines. They do not need to know what your product is in order to answer these basic questions for you. Some of these companies may operate like a doctor's office where they initially provide you with a Nondisclosure Agreement to fill out while you wait in the lobby. In this case, fill out the basic contact information and explain to the receptionist that you cannot complete the entire form. In other cases, the company may say that they can't provide you with an accurate quote or estimate without knowing what the product is. This may be true, but you can still get a general idea of the price range for a product similar to yours - without revealing your product. Explain that you understand their concern, but that you are not ready to sign a Nondisclosure Agreement yet, and cannot reveal what your product is because you are in the early stages. In order to get a sample quote; provide them with a similar product that is already out on the market. For example, you can ask them to give you a quote on making a typical toothbrush prototype. This way, when you have quotes from several companies on the same product, you'll have a "general" idea of the costs and can compare their advice and pricing. In this way, if you have spoken with ten prototype companies, you haven't given away the full details of your product to all ten companies - when in fact you'll only be working with one. Once you have shopped and decided which company you are going to work with, naturally you must reveal the details of your idea and how it works in order for the company (for example, a prototype maker) to do its job. At this point, use the Nondisclosure Agreement to protect yourself before any work is started. In this way, you are using the Nondisclosure Agreement "selectively" throughout the period prior to applying for a patent. To recap, the Nondisclosure Agreement should be used after you have made the decision to work with a certain company or individual who absolutely needs to know how your product works in order to perform their special craft. Working this way, you'll narrow down the amount of people that know about your product, and you will greatly reduce the risk of someone stealing your idea. What If a Company Refuses to Sign a Nondisclosure Agreement? If a company you selected refuses to sign a Nondisclosure Agreement, you will have to make a personal decision about whether or not to work with the company. Since you do not have any patent protection yet, you'll need to assess whether you can take a risk to work with this company. If they won't sign a Nondisclosure Agreement, it isn't necessarily a sign that this company intends to steal your idea. There may be valid reasons for not signing Nondisclosure Agreements. For example, if you already have a patent, there's no need for a company to sign a Nondisclosure Agreement and most companies will refuse to sign them, but at this stage where you're patented, it's a valid refusal. The company may have had a previous bad experience where they signed a Nondisclosure Agreement and ended up being unfairly sued, so they developed a policy of not signing them in the future. If the company happens to be the best in the industry, it might be worth the risk to work with them anyway. On the other hand, it might not. Don't jump to conclusions one way or the other. Be sure to do your research and ask them the specific reasons why they won't sign one. So you need to take all the specific circumstances into consideration, and weigh the benefits as well as the risks if a company you selected refuses to sign a Nondisclosure Agreement. Approaching Well-known, Large Companies with Your Idea There are inventors who try to approach well-known, large companies in these early idea stages in the hopes that the company will just "buy out" their idea. However, large companies most often (of course, there are always exceptions to the rule) refuse to sign Nondisclosure Agreements, feeling that they may have something like this already in the works in their research department. Naturally, the company's officers do not want to compromise themselves in any way. And you can't really blame them, since they are employees of the company, and they are only doing their job. They don't want to risk their jobs by creating a possible legal liability for their company by signing your Nondisclosure Agreement. While they may agree to meet with you and review the idea, they will probably not promise that they won't work on something like it without you. In fact, large companies usually have the inventor sign a "release" which relieves the company of any obligation or liability if they market a similar product in the future. Therefore, approaching large companies without adequate protection is basically an invitation for them to develop (not necessarily steal) your idea. Because there is such a high turnover of staff in large companies, a new person may come across your idea later and decide to market it, thinking that the idea was developed in-house. Even in such an innocent scenario, you would have no recourse because you signed their release and didn't get a signed Nondisclosure Agreement. Therefore our recommendation is that you wait to approach any of these types of companies until you at least have a patent pending. Large Invention Development Companies So, on the one hand you have large, well-known companies that refuse to sign any nondisclosure forms in order to protect their company's self interests. On the other hand, you have large invention development companies who routinely mail pre-signed nondisclosure agreements to anyone who happens to respond to their ads on TV, radio and magazines. There are a number of these product development companies, which advertise their services nationally on late-night TV, radio and in the classified sections of major magazines like Popular Science. They offer to mail inventors a "free information kit." This kit happens to include a pre-signed ("Nondisclosure Agreement" or Confidentiality Agreement) in which inventors fully describe their invention, draw a sketch, sign the form and return it by mail. It may seem like these companies are requesting the information in order to determine whether or not your idea is a marketable product. It may also seem like a safe thing to do because the company has signed that they will not discuss your idea with anyone else. But when you stop and think about it, these companies are asking you to mail them a full description of your idea to someone on their staff you have never met, who works at a company you have never heard of or worked with before and which is perhaps in another state! Yet these companies expect you to trust a complete faceless stranger with the full details of your valuable innovation before you have determined if and how they can help you! You're only "shopping" for services! In dealing with any companies, you just need to stay on track and remember what the purpose of your call is. The fact is, you have contacted this company because you saw their ad and wanted to find out what services they can offer you. At this point, you really do not have enough information yet to make a decision about whether you want to work with them or not. You do not need to reveal the specific details of your unprotected idea to any company in order to find out what services they offer and to see if and how they might be able to assist you. Ironically, these types of companies do not generally "steal" the idea and market it themselves as you might suspect. Instead, they are fee-based and charge exorbitant fees, proposing to handle ALL phases of commercializing your idea - doing the evaluation report, doing a patent search, getting the patent, and submitting the product to industry to get it licensed or sold. This is a VERY tempting concept, especially because most people with new ideas already have a full-time job and don't feel they have the time to do it all themselves. But the problem with these companies is that their expertise is only in promoting and selling their services - not in delivering results for inventors. Once they receive the Nondisclosure Agreement with the details of your idea, they act like experts and state that the idea DEFINITELY has potential. In truth, you have only been speaking with a sales representative, who has not done any research. However, people who are not familiar with the process of inventing feel encouraged by the promise of success, and many do end up signing up with these companies. At best, these types of companies do the bare minimum in order to stay within the limits of the law. For example, nobody actually evaluates any inventions. Instead their evaluation reports are pre-written for a variety of industries (called boilerplates) and they just insert the name of each client's invention throughout the report to customize it. The information is extremely general and not of much value or benefit to the inventor, yet these companies charge hundreds of dollars for these reports (an average of $400-500.) In terms of filing a patent, sometimes the patent they file is merely the $10.00 Document Disclosure program. Other times, the patent they file ends up being worthless to the inventor because it was quickly drafted and filed with the Patent Office without regard for the product's special qualities that needed patent protection. Many times, they file a "design" patent, which is easier to file but is considered an inferior type of patent. A "utility" patent is the strongest form of protection available, but takes a lot of time, skill and work. When submitting the product to industry, they may actually do a few mailings, but they are not targeted to the right types of companies or individuals. Often their mailing lists are old and out of date. In the final analysis, these companies end up charging an average of $300-$10,000, or more, for performing no work at all, and usually end up jeopardizing your rights to the idea, depleting your financial resources, and completely discouraging you to the point you have to start over again from scratch. For these important reasons, beware of any organization that offers to "do it all for you." And one major tip-off to these types of companies is that they always send out Nondisclosure Agreements as part of their "free information kits." Therefore, we recommend extreme caution with any company that sends you one of these and expects you to fill it out and mail it back before they will even talk to you about their company's services. If you have previously filled out and mailed out Nondisclosure Agreements or Confidentiality Agreements to any of these companies, your best protection is to immediately begin your logbook, and the other steps outlined on this site in order to protect yourself properly as fast as possible. This, along with selectively using the Nondisclosure Agreement in the future, will help you stay on the correct course. Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Sample Confidentiality And Non-Disclosure Agreement CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT THIS AGREEMENT, made this ____ day of ____________ (month), _____ (year), between _______________________, (hereinafter "Disclosing Party"), and __________________________ (hereinafter "Receiving Party"). BACKGROUND The Disclosing Party and Receiving Party wish to discuss and exchange certain items and information related to business programs, products, applications, systems, components, technologies and business topics (the "Invention") which the parties hereto consider highly confidential and proprietary. NOW THEREFORE, the parties hereto, intending to be legally bound in consideration of the mutual covenants and agreements set forth herein, hereby agree as follows: 1. DEFINITIONS 1.1. "Invention" shall mean all information relating to business programs, products, applications, systems, components, technologies and business topics. 1.2. "Confidential Information" shall mean all information provided by Disclosing Party with respect to the Invention regardless of whether it is written, oral, audio tapes, video tapes, computer discs, machines, prototypes, designs, specifications, articles of manufacture, drawings, human or machine readable documents. Confidential Information shall also include all information related to the Invention provided by Disclosing Party to Receiving Party prior to the signing of this agreement. Confidential Information shall not include any of the following: (a) such information in the public domain at the time of the disclosure, or subsequently comes within the public domain without fault of the Receiving Party; (b) such information which was in the possession of Receiving Party at the time of disclosure that may be demonstrated by business records of Receiving Party and was not acquired, directly or indirectly, from Disclosing Party; or (c) such information which Receiving Party acquired after the time of disclosure from a third party who did not require Receiving Party to hold the same in confidence and who did not acquire such technical information from Disclosing Party. 1.3. "Disclosing Party" shall mean the party disclosing information to the other relating to the Invention. 1.4. "Receiving Party" shall mean the party receiving information from the other relating to the Invention. 2. USE OF CONFIDENTIAL INFORMATION The Receiving Party agrees to: (a) receive and maintain the Confidential Information in confidence; (b) examine the Confidential Information at its own expense; (c) not reproduce the Confidential Information or any part thereof without the express written consent of Disclosing Party; (d) not, directly or indirectly, make known, divulge, publish or communicate the Confidential Information to any person, firm or corporation without the express written consent of Disclosing Party; (e) limit the internal dissemination of the Confidential Information and the internal disclosure of the Confidential Information received from the Disclosing Party to those officers and employees, if any, of the Receiving Party who have a need to know and an obligation to protect it; (f) not use or utilize the Confidential Information without the express written consent of Disclosing Party; (g) not use the Confidential Information or any part thereof as a basis for the design or creation of any method, system, apparatus or device similar to any method, system, apparatus or device embodied in the Confidential Information unless expressly authorized in writing by Disclosing Party; and (h) utilize the best efforts possible to protect and safeguard the Confidential Information from loss, theft, destruction, or the like. 3. RETURN OF CONFIDENTIAL INFORMATION All information provided by the Disclosing Party shall remain the property of the Disclosing Party. Receiving Party agrees to return all Confidential Information to Disclosing Party within 15 days of written demand by Disclosing Party. When the Receiving Party has finished reviewing the information provided by the Disclosing Party and has made a decision as to whether or not to work with the Disclosing Party, Receiving Party shall return all information to the Disclosing Party without retaining any copies. 4. NON-ASSIGNABLE This agreement shall be non-assignable by the Receiving Party unless prior written consent of the Disclosing Party is received. If this Agreement is assigned or otherwise transferred, it shall be binding on all successors and assigns. 5. GOVERNING LAW This Agreement and all questions relating to its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the State of _______________ (State), notwithstanding any conflict-of-laws doctrines of such state or other jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. 6. No License Neither party does, by virtue of disclosure of the Confidential Information, grant, either expressly or by implication, estoppel or otherwise, any right or license to any patent, trade secret, invention, trademark, copyright, or other intellectual property right. 7. Binding Nature of Agreement This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns. 8. Provisions Separable The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. 9. ENTIRE AGREEMENT This Agreement sets forth all of the covenants, promises, agreements, conditions and understandings between the parties and there are no covenants, promises, agreements or conditions, either oral or written, between them other than herein set forth. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon either party unless reduced in writing and signed by them. 10. Arbitration Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be resolved by arbitration conducted by the Commercial Division of the American Arbitration Association and in accordance with the rules thereof, conducted in Fargo, North Dakota, or in any other convenient forum agreed to in writing by the parties. Any arbitration award shall be final and binding, and judgment upon the award rendered pursuant to such arbitration may be entered in any court of proper jurisdiction. Notwithstanding the foregoing, either party may seek and obtain temporary injunctive relief from any court of competent jurisdiction against any improper disclosure of the Confidential Information. IN WITNESS OF THEIR AGREEMENT, the parties have set their hands to it below effective the day and year first written above. Disclosing Party Receiving Party By: _________________________ By: __________________________ Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Inventor Request for USPTO Disclosure Document Program I understand that simply filing the enclosed papers with the DDP is not a patent application and that I can lose valuable patent rights if I make a public disclosure of my invention without a patent application filed first. I understand that the purpose of the DDP is to simply provide evidence of the date of conception of my invention. 1. FILING REQUEST: The undersigned, being the inventor of the disclosed invention entitled ______________________________________________ (invention title), requests that the enclosed papers be accepted under the Disclosure Document Program, and that they be preserved for a period of two years. Please mail all papers to me at the address below. 2. FEE(S) & COPY REQUEST: I have enclosed a check or money order made payable to the "Commissioner of Patents" in the amount of $35 (U.S. Currency) for filing the enclosed documents and providing a copy of the Disclosure Documents as filed with the USPTO. I request a copy of the Disclosure Documents as filed with the USPTO. Note: Please make checks payable to the "Commissioner of Patents". 3. INVENTOR INFORMATION Signature: _______________________ Date Signed: ______________ Printed Name: ____________________________________________ Address: ________________________________________________ City, State, Zip Code: ______________________________________ |
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