What if someone I am trying to sell my invention to refuses to sign my non-disclosure agreement?
When sharing your invention with others, there are times when the receiving party, that is, the person with whom you are sharing your invention, will refuse to sign a non-disclosure agreement if asked to do so. It is not always essential to have someone sign a non-disclosure agreement when you are sharing your invention with them. For example, if you have a published patent application covering your invention, then there is no point in having a non-disclosure agreement because the public already knows about your invention anyway. Also, it may well be that your invention is very close to being made available to the public through a product or in some other way. In this case, a non-disclosure agreement is merely superfluous and of little value. However, when you have initially completed your invention – perhaps you have just filed a provisional patent application or have yet to do so – you may want to share your invention with another party, for example when raising money – to productize your invention. In these early venture circumstances, a non-disclosure agreement is advisable.
When you ask a receiving party to sign a non-disclosure agreement, it is not unusual for them to refuse or to beg off in some way. The reason this often occurs is that the person who is receiving the information may lack the authority to sign the non-disclosure agreement, or is too busy to read and review a non-disclosure agreement, or is too egotistical or too scared to execute the agreement with you.
There are also circumstances for pragmatic business reasons that having a non-disclosure agreement executed does not make sense. For example, you may meet someone incidentally and wish to discuss the invention with them at a time when signing the non-disclosure agreement may not be immediately available or practical.
There are other times when execution of a non-disclosure agreement would create an unnecessary chill in the discussion and not be a practical reality.
In all these cases, I suggest executing a technique I call the post facto NDA. The post facto NDA is like the morning-after pill for invention disclosure. The way it works is that if you are refused a signature on your NDA form, or for whatever reason you decide that asking for an NDA signature is not appropriate at the time, explain to the receiving party that you want to share your invention with them and ask very politely if the invention could be shared with them in confidence. Almost always, someone who is asked whether you can share your secret with them in confidence will answer affirmatively. There is something about human nature that if someone is asked whether they can keep a secret, it is almost impossible for them to say no. If, in fact, you ask the question, “Can I share my invention with you in confidence?” and they answer, “No,” you should seriously consider whether they really have no interest in hearing about your invention.
Once you get the verbal agreement to share the invention in confidence, go ahead and disclose the invention to them at a level that you feel necessary. The way the post facto NDA works is that the next day, or as soon as is convenient, send them a letter, thanking them for taking the time to listen to your invention disclosure, and especially thank them for agreeing to keep your invention in confidence. Close with some polite exchange, send them the letter, and this letter then creates a record of the verbal agreement to exchange your secret for their promise to keep it. In effect, you have a written record of the oral non-disclosure agreement previously made. Keep a copy of this letter that you have sent, and it can provide powerful evidence in the event that a dispute over the invention disclosure ever arises.
Contact John Ferrell at JFerrell@carrferrell.com if he can further assist you.
About the Author
John Ferrell is a founding partner of Carr & Ferrell LLP, one of Silicon Valley's foremost technology law firms, and specializes in patent and intellectual property law matters. He is the Chair of the firm's Intellectual Property Practice Group.