Business Strategy · NDA

What about all the NDA's that need to be in place on some of these projects?

Christine Danning

April 28th, 2016

Are they already in place prior to individualized discussion? Are patents already filed? As an IP consultant for several years, I'm a little confused with this format and all the information that is shared without benefit of protection when there seems to be a new product or service that needs funding or additional investors.

Rob G

April 28th, 2016

I don't want to put words into Christine's mouth, but i suspect what she is referring to is the tendency in the tech startup world to eschew NDAs.  The party line is that "VCs don't sign NDAs" and "by asking a VC to sign a NDA you look like a rookie".  True, for all intents and purposes, all investors will tell you they don't sign NDAs.  The reality is that the vast majority of the time leverage is in the investor's favor and they don't have to sign NDAs.  Their risks of signing and eventually getting sued are high so they will avoid it if at all possible.  If you are in this situation and you need investor money then "don't ask don't tell" - don't ask the investor to sign a NDA and don't tell them the secret sauce.  Investors do talk and some don't have the moral compass keep your proprietary information confidential so don't tell them what you don't want your competitors to know.  I can tell you that some investors do sign NDAs, it depends on how badly they want into the deal and the wording of the NDA and the stage of discussions.  This 'party line' is often extrapolated and parroted by members of the startup community - it's fashionable to say "i don't sing NDAs".  It's also fashionable to say "ideas are a dime a dozen, it's all about execution".  This is true, mostly, but again it is often taken to the extreme.  The 10 second or 2 minute elevator pitch about your idea isn't worth much and not worth asking for a NDA.  The hour+ meeting where you intend to get into the weeds of how you do what you do, that is, presumably, worth more and potentially worthy of a NDA, it depends.  So the issues is much of the time inexperienced entrepreneurs simply parrot what they hear and don't know when it is and is not appropriate to execute a NDA.  No one wants to sign a legal agreement if they can avoid it.  There is no sense in asking someone you've just met to sign some draconian legal document (which attorneys are fond of producing) before you disclose even the high-level details about some half-baked idea you have.  BUT if your idea is fully baked and you know the individual or company well enough to trust them with your proprietary information and you feel they need to know parts of your secret sauce then asking for and signing a NDA is appropriate.   I have asked virtually hundreds of individuals and companies to sign NDAs and i don't recall 1 refusal.  But the vast majority of the time we don't discuss 'secret sauce'.   If they refuse that's OK too, just don't disclose any parts of your secret sauce.   If you expect to file patents then do so before you disclose your invention to the public and/or get NDAs in place first.... or don't disclose.  As has been noted above, a provisional patent application certainly helps, but be ware of the 12 month clock - within 12 months you will need to file a full patent application with all of the necessary details "for one skilled in the art to practice your invention" - in other words, your secret sauce and, now, non-provisional patent applications are published (they did not used to be) for all your competitors to see if they know to look. 10 years down the line when your acquirer is waving a big check at you and their due diligence team asks about your IP and evidence of what steps you have taken to protect it you will be glad you have signed NDAs in place.  

Rob G

April 28th, 2016

Christine, there are several FD threads on the subject of NDAs already.  I'd suggest reviewing those. 

Adam Pressman

April 28th, 2016

I'm reminded of the great quote, "no one will steal a great idea. If it's truly a great idea, you'll have to shove it down their throats."

I believe many more startups are obstructed from success by excessive concern for protecting an idea (not talking product, process or other execution) than by their ideas being stolen.  

Gray Holland founder / director at UX-FLO

April 28th, 2016

Our venture is dealing with this very simple fact... Its not about stealing, its about loosing the rights to defend your stolen IP in the future. 

If you have a valuable patentable idea, and you share details of "HOW" without an NDA then it is functional in the public domain, and no longer patentable (yes I'm over simplifying but thats the basic issue in play here). 

This should be the prime consideration when deciding what you should and shouldn't disclose. If you never intend to file patents then its not as much of an issue, if you do, you are potentially destroying your opportunity for future filings. 

If your not sure, then file provisionally -- this costs very little and gives you a year to follow up (but only a year, and if you don't then they are gone). This will cover the "maybe" category and will only cost a few hundred for the pease of mind. 

Gray Holland founder / director at UX-FLO

April 28th, 2016

Yes, it is well covered here, I too recommend exploring the existing threads on FD -- but your confusion is understandable because the situation is a paradox. Bottomline investors are not interested in signing NDAs, in spite of the fact it might undermine the IP and patents they want to invest in. Its just the way it is, and you have to figure out how to manage the situation. If you have patentable IP then filing provisionals is a necessity before you share sensitive IP with investors. 

Rob G

April 28th, 2016

@ Gary H, provisional applications are not published (public) but non-provisional applications are public. It used to be that non-provisionals were not published until granted, but that is no longer the case.  and of course often times a patent isn't issued or the one that is has no teeth so now you have your secret sauce published to the world and little if any protection for it.  Of course even without a patent it often doesn't take long for others to reverse engineer your product. 

Gray Holland founder / director at UX-FLO

April 28th, 2016

Provisional patents are closed, of this I'm pretty sure.

And I believe that only when your patents are granted they are "published" -- but not completely sure on that one.

Alan Sack Founding member of SACK IP Law p.c., Intellectual Property Law and related Matters.

April 28th, 2016

Of course that is a major concern.  Never share proprietary information without a specially drafted NDA in place.  Typically, I advise to wait until there is also a Copyright or Patent Application on file, as well.

Alan Sack Founding member of SACK IP Law p.c., Intellectual Property Law and related Matters.

April 28th, 2016

Christine, I am not sure what is the context of the question. Each project is different.  Please let me know additional details regarding your topic.

Ken Anderson Director, Entrepreneurial and Small Business Development, Delaware Economic Development Office

April 28th, 2016

Extremely well covered here. My input in those discussions are that you need to be able to have a detailed discussion in this or any forum, in order to get the type of feedback that is valuable and actionable. Most folks who can give you valuable feedback, won't sign NDA's for a number of reasons. I haven't signed one in eight years and have advised hundreds of start up's. Here's my advice, protect your project or idea to the hilt, as much as you can. Then go have a discussion that includes information that will hopefully result in valuable feedback. Generally, you don't have to worry about someone, who could actually pull it off, stealing and attempting to execute against your project, until it becomes wildly and I mean wildly successful. By then, you are branded in the marketplace, have a headstart, and all the copycats will be just that, copycats.