NDAs: Trick or Treat - Do They Help, and Should You Want One?

By: Michael J Foycik Jr. 
June 21, 2013
The author is a patent attorney with over 28 years experience in patents and trademarks. For further information, please email at IP1lwyr@gmail.com, or call at 877-654-3336.

If you're an inventor, you've probably seen an NDA (Non-Disclosure Agreement).  Do NDAs really help?  And, can NDAs be enforced?  Is there anything tricky there?  Good questions, and you might be surprised by the answers!

It would help to know that an NDA covers trade secrets.  Yes, you want to show your invention to someone, and that invention is covered by a patent application.  But, that means your invention is a trade secret (assuming you haven't already published it already).  So, your invention can also be your trade secret.

If your invention is stolen (misappropriated), you would probably prefer tort damages, instead of contract damages or patent damages.  Here's why: tort damages can be punitive in nature and can therefore be big even when the infraction is small.  Contract damages tend to be limited to the provable amount of money lost (there are exceptions).  Patent damages cover actual infringement situations, provide a percentage of the lost profits (as one example, and there are exceptions), and require an issued patent.  Every case is different, and the above is just a rough guide – you'll need to talk with a lawyer for specific advice.  Note that an NDA is a contract and often specifies the damages and the law to be applied.

Here's the tricky surprise for the unwary:  An NDA on its face seems to be a way to switch from trade secret damages to contract damages.  The inventor, i.e. the trade secret owner, may very well not be too happy about that.  Companies that want to look at inventors' trade secrets probably should like NDAs, and that's just what we often see.

Does an NDA really take away trade secret rights?  That's hard to tell exactly, as it may well depend on the specifics of the situation.  One may well expect an uphill fight to get trade secret damages if an NDA is involved.

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