Start-ups: NDA for your meeting?

Do you really need an NDA?

  • You have worked hard on your new product or service.
  • You are eager to show the marketplace the benefits of your product or service.
  • Your start-up finally secured that all important “meeting” with an established market leader and you want to show them your innovations to secure funding or form a joint venture.

SORRY, WE DON’T SIGN NON-DISCLOSURE AGREEMENTS (NDAs)! This practice is all too common, and is becoming the norm. Start-ups need to understand that large companies are trained to avoid risk and liabilities. Plainly, they are afraid of the potential liabilities associated with engaging with start-ups that later claim that their inventions were stolen. It is true, many large companies have R&D groups working on many areas of their business, which include future ventures that are not even public. For this reason, corporate lawyers are quick to reduce the risk and instruct business people to not sign NDAs or simply not take meetings with eager start-ups.

As the start-up, we recommend that you understand the position of the large company. Instead of cursing or bad mouthing the inflexibility of large companies, start-ups need to have basic IP tools. These tools come in the form of patent protection. Sure, securing a patent can be expensive. However, there are ways of reducing the time and expense when filing your initial patent application.

Every situation is different, but for start-ups that have innovation that requires world-wide protection, we recommend a two-step process:

  1. Prepare a technical write-up of your innovation. The write-up need not be in legal form, but it must teach how make and/or use the invention. If the innovation is software, describe how it functions, how it solves existing technical problems, and include diagrams. As a patent attorney that has assisted hundreds of start-ups, I understand that code is no longer written in flow-chart friendly formats. Nevertheless, force yourself to spell out specific routines or flows that are important to the innovation. I especially recommend to focus first on an overall basic description, followed by more specific descriptions of how things work and why. In addition to flow-charts, you should consider drawing block diagrams, multiple views if the innovation is mechanical, and describe alternatives to solve the same problem.
  2. File a provisional patent application using your write-up. Again, it does not need to look like a patent application, it just needs to have all the technical content. And, you don’t need an attorney. The USPTO.gov website has lots of information and forms to assist you. Of course, having a patent attorney review the write-up will always be helpful and may reduce unneeded headaches down the road. The important thing here is to understand that you have options.

Now that you have a provisional patent application on file, the time starts to tick. The provisional patent application is your “local priority application.” In the US, you have 1 year within which to file a non-provisional application. Additionally, if you need protection outside of the US, you can also file a PCT patent application (see diagram above). You may also file a PCT patent application and not file the US non-provisional application until the 30 month date. This may reduce cash flow burn, as that cost can be delayed.

If steps 1 and 2 are done ahead of time, your start-up should feel safer having that all important meeting without an NDA. Of course, you should understand that nothing is risk free, but at least you can feel confident knowing that you have proof of your invention on file.

The lesson here is to understand why large companies don’t sign NDAs, and protect your IP ahead of time with a US provisional patent application and consider PCT filings for international protection. As in anything worthwhile, there is more to know about the mechanics associated with filing patents and PCT filings, but this should give you a general idea of the questions to ask and/or consider when speaking to your patent attorney.

by, Albert S. Penilla 

This information is for general information purposes only to permit you to learn more about patents, and is not legal advice and does not create or constitute an attorney-client relationship. Further, this information is not intended as a solicitation, and is not a substitute for securing legal advice from an attorney.