Make Non-Disclosure Agreements Work For You

It’s common for inventors or designers to ask job shops to sign non-disclosure agreements. These agreements are designed to protect the intellectual property of the inventor and to prevent unauthorized use or disclosure of information needed to ready a device for production.

These non-disclosure agreements, generally drafted by the inventor’s attorney, are usually concerned with protecting the inventor’s rights. However, with a little attention, the recipients can use these agreements to protect themselves as well.

• "Form" Agreements Are Not Carved In Stone. Most attorneys begin with a general outline of a non-disclosure agreement and then modify it to fit the needs of the client. Shops may ask for modifications.
• Who Will Sign The Non-Disclosure Agreement? While most non-disclosure agreements only ask that the business entity receiving confidential information sign, savvy shop owners will consider requiring the shops’ employees who work with confidential information to also sign. While the shop remains liable, studies show that employees who sign non-disclosure agreements tend to take them more seriously.
• Consider A Bilateral Agreement. Bilateral agreements, where the shop and inventor envision a mutual exchange of confidential information, can better serve both parties. You may need to share a manufacturing trade secret to help craft reasonable production specs, but the typical inventor’s agreement may not prevent "shopping" your knowledge to another shop.
• Account For The "Prior Knowledge" Problem. Avoid misunderstandings as to who knew what prior to the agreement by including a "prior knowledge" clause that protects you against charges of illicit disclosure. Couple it with a "duty to disclose" clause, wherein the shop immediately reports any disclosure that shouldn’t be covered.
• Consider Naming A "Designated Discloser." Shops with multiple employees dealing with multiple employees of a client face a special problem: Who is allowed to disclose confidential information, and how? Name specific persons to make and receive disclosures, and specify that confidential disclosures must be made in writing.

Most importantly, shops should remember that non-disclosure agreements don’t have to be a one-way street.

Michael J. Gallagher is an intellectual property attorney practicing in Columbus, Ohio. He welcomes your comments at (614) 397-8909 or mgallagher@invention-protection.com. The above is intended for general information only and does not constitute specific legal advice.