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Should I Use a Non-Disclosure Agreement (NDA) or File a Provisional Patent Application to Protect My Invention from Others?
Disclosing your idea can jeopardize your ability to obtain a patent later. 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. While a sale may constitute public disclosure, a private communication that has since become public can also present an obstacle to your patent, whether or not you intended it to be public.
Despite the desirability of filing as soon as possible, it may not always be possible to immediately prepare and file a full, formal patent application. You may need to finalize certain details surrounding the manufacture and use of the invention, or the cost of proceeding with a full patent application at the outset may be an impediment. Moreover, if you are not sure about the marketability of a product, you may wish to initially make a smaller investment of your time and money 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 that 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 relied on in the context of a priority claim in a regular patent application. Securing a filing date puts you in a position where disclosure of the contents of your application may be made without loss of patent rights.
How does a non-disclosure agreement work?
A non-disclosure agreement (often referred to as a 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 more importantly, from using the confidential information themselves for a purpose other than the purpose for which you agreed to provide the confidential information to them. 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 information being protected by the agreement must be clearly stated – this isn’t to say that the confidential information need necessarily be written out as part of the agreement, but the agreement should make it possible to determine whether a given piece of information belongs to the confidential information contemplated by the agreement. As a best practice, it is also advisable, where possible, to mark any information shared subsequent to executing an NDA as confidential, so as to make it clear the information falls within the scope of the agreement. The agreement should also set out the purpose for which the confidential information is being shared.
When considering disclosing information pertaining to your invention, it is important to think about whether you want to disclose all relevant information about your invention to the other party, or only disclose details that are necessary to the transaction at hand. Often the best way to avoid misuse of confidential information is not to 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. 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.
A properly drafted NDA, if breached, provides the non-breaching party with grounds to bring a lawsuit against the party in breach and potentially be awarded an injunction (a court order that the party stop disclosing the confidential information) and/or a monetary award. However, suing the party in breach does not retract the disclosure. If public disclosure has occurred, it may be an obstacle to your patent protection. Further, the process of going to court is both costly and time-consuming. For these reasons, an NDA should not be viewed as a foolproof method of protecting your intellectual property rights.
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. A provisional patent application has a pendency period of 12 months from the filing date of the provisional application. That means a corresponding nonprovisional application must be filed within that 12 months to obtain the benefit of the earlier filing date of the provisional application. Note that the 12-month pendency period is non-extendable. Should the non-provisional application be filed more than 12 months after the filing of the provisional application, the applicant may still claim the earlier filing date benefit provided (i) the non provisional application was filed within 14 months after the filing of the provisional application and (ii) a grantable petition is filed and the requisite petition fee is paid. Securing a filing date as soon as possible is important because Canadian and US patent law both operate on a first-to-file basis. This means, the person entitled to a patent for a particular invention will be the first person to have filed for the patent. Once you file a provisional patent application, you may disclose your invention, as described in the application, 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 or non-provisional patent application. That is, if you never file a regular patent application, or you file without claiming priority from the provisional application, your provisional application will never be published.
In the regular patent application, the description of how to make and use the invention may be expanded and modified but should still be supported by the original disclosure in the provisional application. New subject matter not supported by the provisional application will not benefit from the earlier filing date. This second patent application may be submitted in formal form as a non-provisional patent application in the United States or as a regular patent application elsewhere, with all the subject matter described in the provisional patent application benefiting from the filing date of that provisional application through a priority claim.
A less attractive approximation of a U.S. provisional patent application is 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 complete or formal patent 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 United States 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, a provisional patent application 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. With the exception of brief information about the inventors, only an intent to obtain a patent and a description of the invention are necessary to file a provisional patent application.
Comparing the approaches
| Non-Disclosure Agreement (NDA) | Provisional Patent/Incomplete Application | |
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Pros |
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Cons |
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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 to use while bringing your invention to market. Since a provisional application is maintained confidentially by the Patent Office after filing, you may wish to use an 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 recipient), 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?
Considering 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. It also cannot convey exclusive rights across an entire country or jurisdiction, which can be obtained by filing a patent application and being issued a patent.
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 as a result of a subsequent public disclosure.
Additionally, the priority filing date will secure your spot in line for a patent ahead of any identical or highly similar inventions filed after this date. 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 investment of time and money 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 losing the ability to obtain patent rights following a public disclosure, it will not confer the protections that accompany a granted patent resulting from a formal patent application. An issued or granted patent entitles you to legal ownership of certain exclusive rights to your invention, including the exclusive rights to make, use, sell and offer the invention for sale, and to licence those rights to others to do so. It will also give you the ability to sell the exclusive rights granted by the patent to another entirely.
Ideally, you should file a non-provisional patent application 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 the invention; unlike a provisional patent application or incomplete patent application, a full patent application cannot be supplemented with additional information describing the invention after filing although in 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 enough detail, it is best to apply for a full patent application as early as possible.
If you would like our help to figure out which option is best for you, contact us now for a confidential and complimentary initial telephone appointment with a member of our team.
