SHARING YOUR IP: THE SIMPLICITY AND BEAUTY OF THE NONDISCLOSURE AGREEMENT.

            One of the most exciting things about developing a new idea or business model is sharing your inspiration with others.  Sharing your idea and the way it is implemented, will probably be necessary to turn your idea into a profitable business.  After all, you will have to contract with employees, contractors, and vendors to develop and produce your idea; and, you will have to market your idea to consumers in order to get paid!  While these disclosures can feel like a moment of triumph, particularly when others validate the importance and uniqueness of your ingenuity, but it is fraught with same danger and fear felt by every entrepreneur:  How do I prevent the party with whom I share my idea from stealing it!?

            This is a real and serious concern.  Unfortunately, the risk of someone stealing your idea cannot be completely eliminated.  What you can do, however, is take steps to impose legal penalties for those who steal your ideas, and to preserve your ability to file a patent application or claim trade secret protection.  All of these goals can be accomplished in large part thanks to the nondisclosure agreement.  A nondisclosure agreement is intended to contractually bind the recipient of your information to keep such information secret.  If the recipient feels plucky enough to steal your secrets anyway, you have legal remedies available to you because of the agreement.  You can sue the purloiner for liquidated damages (a pre-agreed amount of money) or possibly enjoin him or her from disclosing the idea further.

            The other function a nondisclosure agreement performs is that it preserves your intellectual property rights.  For instance, if you wish to apply for patent, one of the elements you must show is that the invention is “new.”  If you disclosed the invention more than a year prior to filing the application and did not protect that disclosure with a nondisclosure agreement, you are in danger of losing your ability to patent the invention.  The reason is because your year-old disclosure has made the invention not “new”.  If you used a nondisclosure agreement, however, you should be able to preserve the newness element.  Similarly, for trade secrets, the nondisclosure agreement preserves your ability to enforce trade secret rights.  The law will not assist you to protect your trade secret if you do not care enough to keep it secret yourself. 

            The nondisclosure agreement does come with some limitations, however.  It cannot protect you if your idea is already something that is commonly known and/or available to the public.  It also may not protect you against the unscrupulous person who believes in the “efficient breach” theory.  In other words, if the recipient of your information decides that the amount they will profit from stealing your idea will outweigh all the costs of breaching the agreement, you have yourself a very serious problem.  The best advice I can give is that while you should always use a nondisclosure agreement in these situations, you should do your best to share your profitable information with people you trust.  If you have any more questions, please contact the Law Offices of Aaron Stewart in Chico, California.