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Should I Use a Non-Disclosure Agreement or File a Provisional Patent Application to Protect My Invention from Others?

It's a dilemma familiar to many inventors: you want to keep your invention secret to make sure you can benefit from it, but you're eager to share the results of your hard work and creativity. This gets even more pressing when you begin assessing the market potential of your invention. In order to receive a valuation of your intangible asset, attract investments, or survey potential buyers, you need to disclose details about your idea.

Disclosing your idea can jeopardize your ability to later obtain a patent. In some jurisdictions, including Europe and China, no disclosure is permitted before the filing of a patent application. In both Canada and the United States, however, the requirement is less stringent, a patent application must be filed within twelve months of any public disclosure.

However, immediately filing a full formal patent application may not always be possible. You may need to finalize certain details about how to make and use the invention or the cost of a proceeding with a full patent application at the start could be an impediment. Moreover, if you are not sure about the marketability of a product, you may wish to make a smaller investment of your time and money initially until such time as you can determine that there is a customer and investor base willing to support the product.

The obvious question becomes: is there a way to navigate communications with potential investors and buyers without jeopardizing patentability and exclusive ownership of the invention down the line?

There are two possible avenues which you can explore if you find yourself in this situation. The first is to ask everyone who comes into contact with confidential information that is crucial to your invention to sign a non-disclosure agreement, which legally prevents them from disclosing or misusing that information. The second is to file a provisional patent application in the United States (in Canada, a similar process which is less frequently used is often referred to as filing an incomplete patent application) to claim a filing date which may be used for a later priority claim included in a regular patent application. Securing a filing date puts you in a position where disclosure of those same details may be made without loss of rights.

How does a non-disclosure agreement work?

A non-disclosure agreement (often referred to as an NDA or confidentiality agreement) is a safeguard mechanism intended to prevent potential partners or investors from disclosing confidential information about your invention to others, and most importantly, from using it for a purpose other than which it was provided by the discloser, such as copying your idea. A properly written confidentiality agreement is legally enforceable under contract law and will typically identify the jurisdiction whose law applies and where the agreement would need to be enforced.

A well-written confidentiality agreement should include several key elements. First, the agreement must clearly specify who the NDA applies to: is it an agreement between two individuals, two companies, or an individual and a company? Second, the details that are protected by the agreement must be clearly stated. It is important to think about whether you want to disclose all relevant information about your invention to another, or only disclose details that are necessary to the transaction at hand. Often the best way to avoid misuse of confidential information is not disclose more than is necessary for a particular discussion or dealing.

On the more technical side of your agreement, it is necessary to specify how long the NDA will be valid for. Generally speaking, if there are trade secrets being disclosed it is in your interest for them to be protected indefinitely unless later publicly disclosed through you.

How does a provisional patent application/incomplete patent application work?

A provisional patent application, in the United States, is a mechanism through which an inventor may file a preliminary, incomplete application with the U.S. Patent and Trademark Office (USPTO) to secure a filing date which may later be relied upon in a priority claim in a regular patent application. Following this, you may disclose your invention to others although the document itself will be maintained confidentially by the Patent Office unless later relied upon in a priority claim in a regular non-provisional patent application.

In this later patent application, the description of how to make and use the invention may be expanded and modified. This second patent application may be submitted in formal form as a non-provisional patent application in the United States or elsewhere, with all the subject matter described in the provisional patent application benefiting from the filing date of that submission through a priority claim.

A less attractive approximation of a U.S. provisional patent application is also available in Canada. Often referred to as an incomplete patent application, it allows inventors to file an initial application with the Canadian Intellectual Property Office (CIPO) detailing their invention. At any time within twelve months of the original filing date, the applicant may file a second, more formal application and claim internal priority to the first application. All content that was specified in the original application will then be granted a claim date of the filing date of the original application for patentability purposes. Unlike in the U.S., where a provisional patent application has a reduced filing fee, a Canadian incomplete application is subject to the same filing fee as a regular Canadian patent application.

A provisional patent application alone cannot issue to a granted patent; that can only be accomplished with a non-provisional or formal patent application that you choose to prosecute. However, this is a good option for those who intend to file a patent but may not have fully determined how to make and use their invention; short of brief personal details, only an intent to obtain a patent and a description of the invention are necessary.

Comparing the approaches

 

Non-Disclosure Agreement (NDA)

Provisional Patent/Incomplete Application

Pros

  • Faster and lower cost option to prepare and execute
  • Easier to complete with minimal legal help
  • A complete and detailed understanding of the specifics of the invention are not required; only what is shared with others needs to be protected
  • Filing date allows subsequent disclosure not to cause loss of rights
  • Base for the filing of a later non-provisional/formal patent application
  • Creates ability to use "patent pending" in marketing the invention
  • Creates a saleable or licensable asset for the business

Cons

  • More difficult to prove breach of agreement and enforce
  • Provides no protection against independent creation by others, or even the disclose organization if they can provide your information was not used
  • Costlier option
  • Takes longer to complete
  • Requires a description of how to make and use the invention to be provided in the provisional patent application; priority date will apply only to what is described in this application

Although a non-disclosure agreement, on the surface, may be a less expensive and quicker method, you may wish to ultimately obtain patent protection for your invention due to the various benefits in doing so. In this case an NDA is not a substitute for a patent application but an optional additional tool for use bringing your invention to market. Since a provisional application is maintained confidentially by the Patent Office after filing, you may wish to use a NDA even after you have filed a provisional patent application to prevent dissemination of the details of your invention more broadly until such time as you commercially release a product to the market.

Further, as indicated in the table above, a non-disclosure agreement does not protect you from instances where someone else independently creates your invention themselves (including the disclose organization), or against anyone who happens to file a patent application for the same or a similar invention before you.

What is the best solution for me?

In light of the comparison above, it is clear that the two methods are effective in different circumstances. A non-disclosure agreement is effective as a temporary measure in specific circumstances; for example, when discussing the invention initially with a potential partner or another entity that will not be deterred by the paperwork and obligations involved and is highly unlikely to attempt to use the information for their own gain.

However, such an agreement is limited in its scope of protection, as it is only enforceable against the other party, and not if they can demonstrate independent creation, and cannot convey exclusive rights across an entire country or jurisdiction which can be obtained by filing a patent application.

A provisional patent application or an incomplete patent application functions as a more effective solution for protecting an invention in the longer term. The filing date that you can obtain as a result of filing a provisional patent application prevents the loss of rights which might otherwise occur from a subsequent public disclosure.

Additionally, the priority filing date will supersede any identical or highly similar inventions that are filed with your patent office after the date your application was filed. Another advantage of filing a provisional patent application or an incomplete patent application is that it will help form the basis of your future non-provisional or formal patent application; unlike a confidentiality agreement, the financial and time investment will serve multiple purposes.

As such, a provisional patent application (or an incomplete patent application) is the more valuable way to protect your invention although a non-disclosure agreement may also be used.

When to submit a non-provisional or formal patent application

Although a provisional patent application will help prevent the loss of the ability to obtain patent rights following a public disclosure, it will not confer the protections that a granted patent resulting from a formal patent application will. An issued or granted patent entitles you to legal ownership of your invention, and allows you to make, use, sell and offer it for sale at your discretion. It will also give you the ability to license the rights to manufacturing your invention, or transfer the patent to another entity entirely.

Ideally, you should apply for a non-provisional patent when you are certain that you have developed your invention adequately enough to fully describe how to make and use the invention. Failing to include something in the non-provisional or formal patent application means that it cannot be claimed as invention; unlike a provisional patent application or incomplete patent application, a full patent application cannot be supplemented with additional information after filing although it some cases a new patent application incorporating these additional details may be filed.

Obtaining a patent in Canada or the United States typically takes a few years because of the administrative and examination wait times involved. Although a provisional patent application (or an incomplete patent application) can establish a filing date in the beginning stages, including it prior to filing a regular or non-provisional patent application does extend the overall time to obtaining a patent. Assuming access to sufficient funds, confidence in the marketability, commercial viability, and patentability of the invention, and knowledge of how to describe how to make and use the invention in sufficient detail, it is best to apply for a full patent application as early as possible.