How effective is an NDA in protecting small enterprises?

Question

Hi. Generally speaking, how effective are NDA agreements in protecting ‘David’ against ‘Goliath’ where a small enterprise is presenting an original product to a large company? Do well-known companies generally respect these types of agreements? Thanks in advance for your input.

Answers: 2 public & 0 private

25da12c4d3
Patent Attorney

If properly drafted and supported by adequate consideration, an NDA generally enables the disclosing party to sue, under contract, the receiving party for equitable and other relief in the event the recipient discloses or otherwise improperly uses "confidential" or other information subject to contractual restrictions. To the extent a receiving party is willing to execute one, having it do so is usually a good idea. Of course, a "Goliath" receiving party will be less inclined to sign an NDA in the first place, for good reason: it is provided many solicitations and having many potentially-conflicting contractual obligations is unworkable.
An NDA is not a substitute for filing patent application, however, despite the former being arguably more protective. Filing a provisional application not only gets you a priority date for a subsequent, timely-filed non-provisional application through which you might acquire patent, but it can work to preempt a recipient’s own efforts to protect under patent that which you are disclosing. Provisional patent applications are cheap to file ($65 for a micro entity) and generally cheap(er) to prepare than non-provisional applications.
Prior to disclosing any information proprietary to your venture or its technology, it would be prudent to speak with an IP attorney to discuss your larger IP securitization and product development strategy.

Steven weinrieb
Patent Attorney

In lieu of an NDA, you are probably better off filing a provisional patent application - whatever you intend to present to the large company you can insert into a provisional patent application - in this manner, your product is evidenced by means of official documents from the USPTO and you have officially established your "invention" or "priority" date. Therefore, if the large company thereafter tries to patent your product, your patent application will serve as prior art to their application.
Note that a provisional patent application can never lead to a patent by itself - you need to effectively perfect your provisional patent application by filing a non-provisional patent application within one year from the filing of the provisional patent application, but the non-provisional application will receive the "invention" or "priority" date of your provisional application and therefore, as noted, will pre-date any patent application filed after your provisional patent application - the non-provisional application will then be examined and hopefully will lead to your patent.

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