How to Make Money From Your Invention (Chapter 6, Part 1) - How to Proceed
1. Protecting Your Invention Before the Patent Application
As mentioned earlier in the discussions, confidentiality or non-disclosure to the general public is critically important for the protection of foreign and U.S. patent rights while proceeding with the filing for a U.S. patent. This is important, also, for a variety of commercial reasons as well. There are clearways in which to provide protection for these disclosures even while you are proceeding with the appropriate patent application and prosecution processes.
The most likely process that one should follow is the preparation of what is known as Non-disclosure Agreements (NDA’s) [sometimes also called Confidential Disclosure Agreements (CDA’s)]. These are agreements between you and the party to whom you wish to have in depth discussions, regarding either a license or other possible commercial venture opportunities.
These are critical prior to the filing of a patent application and also important to prevent premature disclosure should foreign filings be desired as an extension from the original U.S. patent filing. An example of a complete NDA is presented later in this report.
Preliminary discussions can be held without a NDA but no information should be transmitted that is part of the patent application document or in any other aspect is deemed to be confidential. Once an interest by both parties is established, the appropriate legal documents need to be drafted. It can be either a one-way (information flows one way) or two-way agreement, but if one-way, it should be from the patentee to the potential licensee or business partner. A clear definition of the field of discussion as well as disclaimers regarding general public information that is known, needs to be well represented in the document. Legal counsel should be consulted to draft this agreement.
It is worth mentioning further, that all discussions under an in-place NDA should be documented after the meetings, in writing, to protect the information that was transmitted (common practice). A two-way agreement allows for information to flow both ways, but one needs to be cautious should new information be developed as part of those discussions, since the right of ownership may later come into question. This is generally covered within such an agreement and the subject of ownership and also potential dissolution of the discussions needs to be carefully considered, documented and agreed to, by both parties.
1b. Sample Non-Disclosure Agreement (Bilateral)
The following Non-Disclosure Agreement is presented for example purposes and is not intended as legal advice. Every situation is different and you should seek the help of a licensed attorney to craft a Non-Disclosure Agreement that meets your particular requirements.
This non-disclosure agreement (“Agreement”) is between PATENTEE, having its principal place of business at: [Insert address] and [insert company name] (“Company”), a corporation having its principal place of business at: [Insert address]
PATENTEE and Company mutually desire to engage in discussions concerning a possible business relationship where either party (the “Disclosing Party”) may elect to disclose to the other party (the “Recipient”) in the course of such discussions certain confidential and proprietary Information (hereinafter collectively, “Information”) which both parties wish to protect from further disclosure. This exchange includes information pertaining to this Agreement provided in written form (including graphic material), machine readable form, orally by Disclosing Party and/or observed by Recipient.
For purposes of this Agreement, confidential Information shall mean all strategic and development plans, know-how, data, technical and non-technical materials, designs, concepts, processes, product samples and specifications, and other expertise, whether or not patentable, financial condition, business plans, co-developer identities, data, business records, customer lists, project records, market reports, employee lists and business manuals, policies and procedures, information relating to processes, technologies or theory and all other information which may be disclosed by Disclosing Party or others, or to which Recipient may be provided access by Disclosing Party or others, in accordance with this Agreement, or which is generated as a result of or in connection with the discussions mentioned above, and which is not generally available to the public.
PATENTEE and Company agree, as follows:
1. That the disclosure of Information by Disclosing Party is in confidence and thus Recipient agrees to:
a. (1) not disclose the Information to any other person except as specifically authorized by Disclosing Party in accordance with this Non-Disclosure Agreement, and
(2) maintain the confidential nature of the Information with the same degree of care that Recipient would use in maintaining its own confidential information, but in no event less than reasonable care;
b. restrict disclosure of the Information to Recipient’s employees having a need to know such Information in order to accomplish the purpose stated above;
c. require Recipient’s employees or subcontractors who will have access to the confidential Information to have signed a confidentiality statement that is consistent with Recipient’s obligations under this Agreement, before he or she receives access to the Information;
d. return to Disclosing Party all documentation, copies, notes, diagrams, computer memory media and other materials containing any portion of the Information, or confirm to Disclosing Party, in writing, the destruction of such materials within fifteen (15) days following request of Disclosing Party.
LIMITATION OF OBLIGATIONS
2. This Agreement does not impose any obligation on Recipient with respect to any portion of the Information received from Disclosing Party which:
a. was known to Recipient prior to disclosure by Disclosing Party;
b. is lawfully obtained by Recipient from a third party who does not have an obligation of confidentiality;
c. is or becomes generally known or publicly available other than by unauthorized disclosure;
d. is independently developed by Recipient;
e. is disclosed by Recipient to a third party without a duty of confidentiality; or
f. is required to a valid order of a court or other governmental body of the United States of America, or of any state, city, town, municipality, county or any political subdivision thereof; provided, however, that the disclosing party shall first have given notice to the other party and made reasonable effort to obtain a protective order requiring that the Information and/or documents so disclosed be used only for the purposes for which the order was issued;
g. is otherwise required by law or regulation to be disclosed; or
h. necessary to establish rights under this agreement.
3. This Agreement does not impose any obligation on Recipient with respect to any portion of the Information unless such portion is (a) disclosed in a written document or machine readable media marked “CONFIDENTIAL” at the time of disclosure or (b) disclosed in any other manner and
summarized in a memorandum mailed to PATENTEE within thirty (30) days of the disclosure. Information disclosed by Disclosing Party in a written document or machine readable media and marked “CONFIDENTIAL” includes, but is not limited to, the items, if any, set forth in Schedule A attached
hereto. Schedule A is incorporated herein by reference. Recipient hereby acknowledges receipt of the items listed in Schedule A, if any.
4. The Information shall remain the sole property of Disclosing Party.
5. The Information being disclosed to the Recipient pursuant to this Agreement is with the express understanding that each party recognizes that this Agreement does not constitute a contract of engagement and that neither Party will be obligated to enter into any further agreement relating to the
Information, and nothing in this Agreement shall be construed as granting any right, title, grant, option, ownership, interest in or license from one Party to the other relating thereto.
6. The obligations of confidentiality shall terminate three years after date of execution hereof, unless the parties enter into a definitive contract modifying or superseding this Agreement as to the subject matter hereof, in which case the rights and obligations of the parties shall be governed by that contract.
7. In the event of a breach or threatened breach or intended breach of this Agreement by either party, the other party, in addition to any other rights and remedies available to it at law or in equity, shall be entitled to preliminary and final injunctions, enjoining and restraining such breach or threatened breach
or intended breach.
8. The validity, construction, and performance of this Agreement are governed by the laws of the [Insert State], and any proceeding to enforce or resolve disputes arising under or relating to, this agreement shall be brought in a court of competent jurisdiction in the [Insert State] including a Federal District
Court sitting within such state. The parties expressly waive any right to a jury trial and agree that any proceeding shall be tried by a judge without a jury.
9. Any attempt to sell, assign or otherwise transfer the rights and obligations of the parties under this Agreement will be void.
10. If any arbitration, litigation or other legal proceeding relating to this Agreement occurs, the prevailing party shall be entitled to recover from the other party (in addition to any other relief awarded or granted) its reasonable costs and expenses, including attorney’s fees, incurred in the proceeding.
11. This Agreement constitutes the sole understanding of the parties about the subject matter hereof and may not be amended or modified except in writing signed by each of the parties to the Agreement.
This Agreement is effective as of the date of execution and is binding upon Recipient, Disclosing Party and upon the directors, officers, employees, agents and subsidiaries of either. Recipient’s right to use the confidential Information in connection with the purpose stated above shall continue in effect until _________, 20____, or until Disclosing Party provides Recipient with written notice of termination of such right, whichever is earlier. Notwithstanding the foregoing, Recipient’s obligations with respect to the confidential Information shall continue in full force and effect until further notice from Disclosing Party. For purposes of this paragraph, “subsidiaries” shall mean any corporation, company or other entity controlled by or under common control with Recipient. For the purposes of this paragraph, “control” means ownership or control, direct or indirect, now or during the Agreement, of more than ( 50%) of the outstanding shares or interest entitled to vote for the election of directors.
This Agreement constitutes the sole understanding of the parties about this subject matter and may not be amended or modified except in writing signed by each of the parties to the Agreement.
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This information is presented for the general education of independent inventors by the Invention Patenting Group. The Invention Patenting Group makes no warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed herein, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favoring by the Invention Patenting Group.