Whether informally meeting for coffee or having an initial contact with a prospective client, one of the first questions that often comes up is, “Does a confidentiality agreement need to be put in place before discussing the invention?” And why shouldn’t it often come up? Intellectual Property is valuable, and valuable things should be protected.But what is intellectual property (IP)? Why is confidentiality so important? Does a legal contract really need to be signed prior to starting a conversation?These are just a couple of questions addressed in this guidebook on IP for innovators. Whether an inventor, entrepreneur, student, university professor, or otherwise innovative and creative person, this guidebook can be a resource to anyone interested in learning more about IP. For a preview, here’s a few of the topics addressed:
This is the question that I like to start with when discussing intellectual property. When posing this question to an audience of students and entrepreneurs, the most typical response I get is, “to protect my intellectual property.” The laws do indeed protect IP, however, that’s not why the law exists.
The truth of the matter is that governments around the world have established IP laws to “promote sharing.” More specifically, these laws have been established to incentivize innovation. This can be seen in the United States within the Constitution, which grants Congress the power "to promote the progress of science and useful arts.”
The “protection” of IP is the how Congress executes its power, not the why. The quote above goes on to say, “by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."
This is a trade, known as quid pro quo, which translates to “something for something” in Latin. The something traded by the inventor is the disclosure, or publication, aka sharing the “how to” of the intellectual property. The something traded in return by the government is a limited time exclusive right to what was shared.
Sometimes, when we hear the term “Intellectual Property” and “IP” we jump to “Patent” as a first thought. Indeed, there are multiple forms of IP, including patents, trademarks, copyrights, and trade secrets. Let’s look at each, in reverse order, and then we circle back to focus on Patents for the remainder of this post.
That’s right… keeping something a secret is one form of IP. This is a different choice as the one discussed in the opening on why the laws exist. The laws exist to promote sharing, thus qualifying you for a trade of protection. A trade secret is the choice not to share and therefore not receive the same protection. That being said, trade secrets are intellectual property and just like any property you own, if someone steals it, they can be punished. (Note that reverse engineering is not stealing.) Whether reverse engineered or stolen, once the property has been made public, it’s public, and not eligible for patent protection, or frankly, trade secret protection, since it is no longer a secret. That’s the risk you take by not participating in the quid pro quo. The benefit is that your trade secret lasts forever (unless reverse engineered or stolen), while IP protection has limits of time.
Copyrights protect works of authorship including written works, songs, movies, and computer code as some examples.
Trademarks protect branding, such as names and logos.
Patents protect new, useful, and non-obvious things. As a matter of differentiation from a trade secret, the terms on a patent are roughly 20 years from filing an application.
All of these forms of IP: trade secrets, copyrights, trademarks, and patents, are “property.” I particularly like the use of the word “property” in IP. It helps me understand what it is, and what the exclusive rights are actually protecting. Again, the focus from this point forward is patents.
A white board is useful for this part in a classroom, so, imagine that I’m drawing a globe with some rough boundaries indicating some continents and oceans.
Think about being a property owner in a land, like the United States, versus being a land owner of an island in the middle of nowhere. Both are property. Both are your land that you own.
Let’s recall the law: "To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."
I like to think of the land as your exclusive rights. On your land, you can exclude others. But, if your land sits on top of another land (like your land in the US), then, the other land owner can exclude you.
In patent law, this exclusion is realized in something called Freedom to Operate (FTO).
On your sovereign island, you may be free to operate whatever you wish to operate (let your imagination run free). If you try to do the same thing on your property in the USA, you may not have such freedom to operate. The location of your land matters. You may be free to have a brush fire in rural areas, but not free to do so in city limits.
If you invented the light bulb on a metaphorical island representing FTO, like Thomas Edison, then, you are free to make and sell light bulbs all day long. If you are an inventor of an energy efficient light bulb (within 20 years of Edison), you are the owner of the energy efficient light bulb patent, but, you are not free to make and sell it, because you are sitting on Edison’s property (his intellectual property that is).
For something to be patentable, it must:
An invention must fit into the categories of process, machine, manufactured item, composition of matter, or an improvement to any item in the previous four categories. This is important because there are many creative innovations that are not patentable. For example, you can't patent a book or a song, but you can patent the display device upon which you view these items.
It’s patent eligibility that I’d like to particularly dig into. For something to be patentable, it must meet three specific requirements: novel, useful, and non-obvious. Let’s look at each.
I often interchange the word “novel” with “new.” It means it’s never been done before OR has never been publicly disclosed. Something that has been done before, and is publicly disclosed is called “prior art” and thus not eligible for patent protection.
A side bar on public disclosure:
Prior art means that it exists somewhere that the public can find it. A trade secret, for example, is a secret, and not available to the public. So, if you invent something that’s has been done before, but, no one knows about it, you can still get a patent (so long as it’s also useful, non-obvious, and categorically eligible).
This is why non-disclosure agreements (NDAs) and confidentiality agreements are important. They are important to prevent inventions from becoming part of the public domain (and thus becoming prior art). They are less important (in my opinion) to act as anti-theft agreements. Larger corporations with legal resources in place make it common practice to put confidentiality clauses in their agreements primarily as a way to demonstrate that they have a standard business practice that avoids public disclosures.
In contrast to that, institutional investors such as venture capitalists (VCs), typically don’t sign NDAs. Why not? They see so much stuff, they’d be reading agreements all day long and have no time left to review business plans. More seriously though, they tend to invest in similar technologies. After passing on one company and investing in another they like better, had an NDA been in place the passed up company may feel like confidentiality protections were violated. VCs know IP law, and they know not to publicly disclose what they see. If you trust them, you can share your invention with them and it doesn’t count as a public disclosure. There is an expectation of confidentiality.
To me, this all comes down to trust. If you trust the person you are speaking to, and if they understand IP law, then you can have a confidential conversation with them without anyone needing to sign anything.
A company like Trig, and all service-based companies, have a reputation that depends on their clients being successful. Such firms are typically happy to sign an NDA to get the conversation started. That being said, if you trust the firm, you really don’t need it to start the conversation.
The lesson here is this, as an inventor, you may be seeking advice. You may need a lot of advice and a lot of feedback from many trusted mentors in the community. Running around with an NDA for these people to sign is a way of saying, “I don’t trust you.” That’s not a good way to ask for feedback and advice. It’s better to say, in my opinion, “I understand you are a trusted advisor and I’d like to point out that what I’m discussing today is confidential.” A handshake is all you need to keep the invention novel to meet this requirement.
Sure, it needs to benefit society. But, it doesn’t take long doing patent searches to find a bunch of useless patents.
To me, useful means that it’s been reduced to practice.
Here’s the deal, an idea is not an invention, and therefore not patentable. I can have an idea for a perpetual motion machine. But, if I have no idea how to make it, it’s not useful. I have to know how to make it. Reduced to practice means that you know how to make it, but, you don’t necessarily have to have made it.
I had an invention that showed an endothermic chemical reaction of ammonium nitrate could be used to cool saline for therapeutic hypothermia. I didn’t need to produce a commercial device to show its reduction to practice. All that was really needed was a thermodynamics equation on paper and/or a computer aided model with data to support my claims.
Useful is something that can be made, and a proof of concept that demonstrates its feasibility will suffice as a reduction to practice to meet this requirement.
The technical phrasing here is something like, “Non-Obvious to someone of ordinary skill in the art.” Here’s the word “art” again. The art can be anything from electrical engineering for someone inventing light bulbs to snowboarding, for someone inventing a new snowboard.
If you are an ordinary electrical engineer, or an ordinary snowboarder, and you can think up the solution in view of the prior art, then it is obvious. But, if you are extraordinary … well then, you can meet this criterion. Of course, this is all highly subjective.
The reality of this requirement is that typically all patent applications get rejected on obviousness. It is then part of the negotiation process with the patent office to prove that this is not obvious through back-and-forth office actions between the inventor, the inventor’s attorney and the patent office. You might have to demonstrate or teach the patent examiner that there just aren’t typically snowboarders with electrical engineering degrees capable of inventing a light-bright-snowboard.
Who are inventors and who are not?
I’ll start by saying this. Inventorship is not a choice. It’s part of the law. Authorship of an academic paper, for example is very different. The mentor that generously gave you lab space for your research may very well get authorship on your paper, because you want to reward their contribution to your ability to get the research done.
Such rewards should not be given by inventors to other non-inventors. Invalid inventorship impacts issues such as ownership and can leave the door open for an attack by someone looking to invalidate the patent.
So, who are inventors and who are not?
The bottom line is this. Any inventor needs to have participated in all three acts of making the invention novel, useful, and non-obvious.