Ethical NDAs

Non Disclosure Agreements are used to protect intellectual property. You have your manufacturing partner sign one because you want them to respect the secrecy of your new products before you bring them to market. You have your business consultant sign one because they will know some of your most sensitive business information. But is an NDA all there is?

Non Disclosure Agreements Are Missing Something

Most NDAs are missing a big component: a Collaboration Provision.

Every time you enter into a business arrangement, from interviewing a job candidate to negotiating a supplier agreement, you have the opportunity to collaborate with that business partner.  Sometimes, like if you hire a transportation company to take your team to an event, you don’t expect to collaborate with them in any meaningful way.  But with any arrangement where you might have an NDA in place, you probably want a collaboration provision.

Wouldn’t you always want to take advantage of the opportunity to collaborate?  Don’t you always want the benefit of someone else’s insight and help?

This is why you want a collaboration provision.

What is a Collaboration Provision in an NDA?

A collaboration provision takes care of any new idea that comes from interacting with someone.  It answers the questions: Who owns the idea?  Who can use the idea?

Most NDAs have very terse terms that prohibit someone from doing anything with information that they hear from another party.  However, very few NDAs even contemplate that the parties may collaborate and share ideas.

An important point: without a Collaboration Provision, all ideas that are created by someone are owned by that person.  Period.  This is how the law treats new ideas: they are owned by the person who creates them – absent an agreement to the contrary.

Take an example of a friend of mine (who was NOT my client).  He has a patent on a product line, and he went to a local manufacturer to have them made.  After beginning the manufacturing process, one of the manufacturing engineers suggested some improvements to the product that would be easier to manufacture and would make the product better.  Elated, the inventor thanked the supplier profusely and was very pleased with their suggestion.  He went on to get a patent on the improvements.  When I met him, he told me this story, but was horrified to find out that he should have included the manufacturing engineer as a co-inventor of the improved product.

But the biggest problem he had was this: the contract manufacturer OWNED the improvement.

You see, he did not have any type of collaboration provision in his NDA.  Nobody ever thought to put one in.

A Collaboration Provision would have allowed the inventor to have access to or possibly own the improvement that the contract manufacturer suggested.  Instead, he got a great suggestion – a patentable improvement – and wound up with mixed ownership, improper inventorship, and ultimately, an invalid patent.

The Ethical NDAs

The Ethical NDAs all have some level of Collaboration Provision.  The specific Ethical NDA that is proper for you will vary from one situation to another.