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May 30, 2023
John Rizvi, Esq.

Confidentiality / Non-Disclosure Agreement: What You Need to Know

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How do inventor confidentiality agreements work? Well, suppose inventor John Doe comes up with a new way of making bagels. He wants to sell his idea to Joe's bagel factory. Now John Doe can ask Joe's bagel factory to sign an agreement called a confidentiality or non disclosure agreement, often abbreviated as an N D A. This is an agreement where Joe's bagel factory will agree to review John Doe's idea and keep it a secret. Typically, Joe's bagel factory will also promise not to use the idea without first paying John Doe. If Joe's bagel factory is honest, John Doe has nothing to worry about. But what if Joe's bagel factory wants to steal the idea and not pay John Doe? After the lawsuit, John Doe would be entitled to a judgment for money damages to compensate him for Joe's bagel factory breaking the contract. But what if the people at Joe's bagel factory are smart enough not to take the idea themselves? Let's take this scenario from the beginning. Joe's bagel factory signs a contract with John Doe. This is the confidentiality non disclosure agreement. John Doe then explains his idea to Joe's bagel factory. The folks at Joe's bagel factory are smart enough not to steal the idea themselves. So they simply leaked the idea to an affiliated company of theirs. Or perhaps a close friend or even an acquaintance. Let's call them Bob's bagel factory. Now, when John Doe sues Bob's bagel factory for breach of contract, what happens? Bob's bagel bagel factory will have a valid defense. They have no contract with John Doe. In fact, they can legitimately say that they never spoke to John Doe never corresponded with him, never met him and have absolutely no idea who John Doe is. In most cases, it will be virtually impossible for John Doe, to trace and prove that the idea that Bob's bagel factory is using originated with him. So even having a bulletproof confidentiality agreement prepared by a lawyer is only enforceable against parties to the contract. And if your idea is leaked to a third party, or someone that didn't even sign the agreement, you have no recourse. As such, it's best to use a nondisclosure agreement as a second line of defense, and only after a patent application has already been filed. This concludes my review of confidentiality agreements. Until next time, this is John Rizvi, the patent professor, signing off and wishing you the best with your new ideas.

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