One of the most common questions I hear from startups is: “Can I disclose this idea to XX, or do we need a confidentiality agreement?”. To answer this question I have gathered some important points that every startup entrepreneur should take into account when faced with this question. In some cases, confidentiality agreements are necessary and crucial, but in other cases, they may even be harmful to your business.
1. Secret ideas have a lower success rate
When I started cooperating with startup communities advising startup entrepreneurs in IPR matters, I thought that one of my most important tasks would be to talk about the importance of confidentiality. However, I soon realised that startups are actually very good at keeping their ideas secret — sometimes even too good. After talking to several investors, I understood why they find confidentiality agreements problematic. For example, if an investor constantly discusses new ideas with different startups and needs to sign an agreement each time, then, managing all of these agreements soon becomes an impossible task. Therefore, they are reluctant to sign agreements just to discuss an idea.
Furthermore, some investors simply do not invest in startups that immediately require a confidentiality agreement. One reason for this is that an entrepreneur, who openly discusses his/her business idea with different people, receives valuable feedback and this eventually turns the idea into a working solution. The refined idea will better fit the demand on the market and has a better chance of success. Therefore, it is worth investing in such companies rather than in companies, where a confidentiality agreement is immediately required.
2. A patentable invention
However, in some cases, confidentiality is very important. One example is when your idea is not simply an idea — it is a patentable invention. In order to meet the requirements of patentability, the invention needs to be new. If the invention is published anywhere before filing a patent application, the publication becomes an obstacle to patentability. This also concerns the situation, where the inventor discloses his/her idea to a person who is not bound by confidentiality.
If you want to know whether your idea is a patentable invention, you should discuss your idea with a patent attorney. It is also good to know that a patent attorney is always automatically bound by confidentiality — no agreements required.
3. Confidentiality agreement
The Confidentiality Agreement or Non-Disclosure Agreement (NDA) allows the parties to agree in writing on confidentiality, for example when discussing potential cooperation. Usually, a certain time limit is set for how long the matter is kept secret as well as a sanction for breaking the contract. It is advisable to draw up a contract with an expert to make sure all aspects concerning your situation are taken into account.
4. Copying an idea is difficult
The conclusion is that you should know the situations where you truly need a confidentiality agreement and avoid unnecessary agreements since they actually can do you more harm than good. It is very difficult to copy a business idea without knowledge of its implementation. Therefore, you can often disclose an idea without risking that someone would or even could steal it immediately.
The best advice I can give is that you should not be afraid to discuss your business idea and receive feedback, but make sure you do not disclose all details regarding its implementation. You should use confidentiality agreements with consideration and only in situations, where you really need them. If you are uncertain, an IPR expert can advise whether an agreement is necessary or not.