Protect Your Invention When Presenting to Investors, Licensees, or Buyers

When you’re sharing your innovative idea with someone, there are two types of protection you can consider: contract protection and patent protection. Each one has its strengths and limitations, which we’ll discuss in detail. By understanding these factors, you’ll be better equipped to decide which type of protection is right for you. Keep in mind that you have the option to use both or either methods to safeguard your invention.

Pitching Your Idea with Contractual Protection

One way to present your invention to an investor, potential licensee, or buyer is by using a confidentiality agreement. This agreement would restrict the other party from using your technology for any purpose other than evaluating whether they want to invest in your company, take a license, or buy the rights to your invention.

The confidentiality agreement offers you a contractual right against the investor, licensee, or buyer if they were to steal your invention or disclose it to a third party without authorization. If they use your idea in their own product or go beyond merely evaluating it, you have grounds to sue them for breach of contract.

Pitch idea with contract or patent protection

Strengths of Confidentiality Agreements: Cost-Effective and Efficient

One of the major advantages of using a confidentiality agreement is its low cost and speed compared to obtaining a patent. If you need to pitch your idea to an investor within a short timeframe, you can quickly have a confidentiality agreement prepared at a reasonable cost. This way, you won’t miss out on any pitching opportunities.

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Preparing a confidentiality agreement typically costs a few hundred dollars, whereas a patent application can range from a couple of thousand dollars to over $10,000. Additionally, while a well-prepared patent application takes weeks to finalize, you can have a confidentiality agreement drafted in just a day or two. You can even find reference confidentiality agreements online, although it’s essential to consult with an attorney before using them to ensure it suits your specific situation.

Confidentiality Agreement Overview

Limitations of Confidentiality Agreements: Implementation and Ownership Concerns

Not all investors, licensees, or buyers will be willing to sign a confidentiality agreement. They may hesitate because such an agreement could limit their ability to develop their own technology. What if they had already conceived your idea before signing the confidentiality agreement? This could prevent them from incorporating their invention or idea into their product lines. Therefore, not everyone will agree to sign these agreements.

In fact, the California Trade Secret Practice, published by the California State Bar, suggests using a non-confidentiality agreement, which instructs inventors not to keep their information confidential. Instead, it advises them to pursue patent pending status for their idea. If someone refuses to sign a confidentiality agreement, you cannot disclose your idea to them. Otherwise, there’s a risk that they might file their own patent application and secure the patent ahead of you. Remember, under the first-to-file regime in the US, the first to file is awarded the patent.

Another limitation of using confidentiality agreements is the possibility of inadvertent co-inventorship and ownership confusion. This can especially occur when pitching your idea to an engineer-type person. For example, if the other party signs a confidentiality agreement and you discuss your idea with them, they might suggest an additional feature beneficial for your product. In such a scenario, that person would own the rights to that specific aspect they conceived. This creates an undesirable co-inventorship situation.

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If you claim that you had already conceived of the idea before they mentioned it, a dispute arises regarding ownership. As a result, the investor, licensee, or buyer might accuse you of stealing their idea.

Pitching Your Idea with Patent Protection

Another approach to safeguarding your idea is to pitch it to investors, licensees, or buyers after securing patent protection, specifically patent pending status. Obtaining a well-prepared patent application can provide you with the highest level of protection. It ensures a clear delineation of your idea before you present it, eliminating any possibility of inadvertent co-inventorship or ownership disputes.

Definition of Patent Protection

In this context, patent protection refers to patent pendency-type protection. Patent attorneys commonly use the phrase “patent protection” without clarification, which can cause confusion. Patent protection can either refer to an issued patent, which grants you the ability to prevent others from competing against you, or to patent pendency, the basic form of protection needed to guard against entities that may attempt to steal your invention.

When you file a patent application with the US Patent and Trademark Office (USPTO), you gain patent pendency for any information expressed in the text and drawings that describe your invention. However, if you fail to adequately describe an aspect of your invention, you won’t have patent pendency for that specific aspect. To rely on your patent pendency for protection against investors, licensees, or buyers who may copy your invention without authorization, ensure your application provides a comprehensive and thorough disclosure.

Caution: Many inventors believe they can prepare a comprehensive description of their invention on their own since they know it best. However, the majority of invention disclosures prepared by inventors fail to accurately identify the point of novelty or describe the invention comprehensively enough. It’s highly recommended to engage a patent attorney to prepare your application instead.

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Strengths of the Patent System: Clearly Identifying Your Invention

By preparing a comprehensive description of your invention, you clearly establish what you conceived independently, without any input from the investor, licensee, or buyer. When you present your idea to someone, you can confidently assert that you had already considered that idea or aspect of the invention.

Bear in mind that not every aspect of your invention needs to be included in your patent application; it would be cost-prohibitive. However, if the focus of your application centers on the point of novelty, the critical aspects of your invention should be captured. Double-check the work done by your patent attorney since, ultimately, you know your invention best.

Limitations of the Patent System: High Cost and No Guarantee of Obtaining a Patent

The cost of preparing, prosecuting, and obtaining a patent is substantial. If you’re only planning to pitch your idea without any further plans to develop it, the expense of preparing a patent application might not be worthwhile. After all, if the parties you’re presenting to don’t invest, license, or purchase your idea, the patent application becomes worthless. However, if you have intentions beyond pitching, such as bringing your idea to fruition, then it may be worth the high cost of obtaining a patent.

Remember, protecting your invention is crucial when communicating your ideas to potential investors, licensees, or buyers. By understanding the differences between contract protection and patent protection, you can make an informed decision that suits your specific needs. Make sure you engage the appropriate legal professionals to assist you along the way.

For more information on protecting your invention, visit the Garrity Traina website.