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Non-Disclosure Agreements – 3 Choices Only You Can Make

March 17, 2019 By Kelley Keller

Non-Disclosure Agreements – 3 Choices Only You Can Make

You have a great idea for a new business, product, service, or method of doing something.

You’ve developed a way to turn that idea into a tangible item, but you can’t actually make that item until you get some money.

You approach investors with the hope that one of them will understand your vision and give you the cash you need to bring your idea to reality.

But there are problems.

Problem #1: Information

Investors won’t give you any money unless they fully understand what you’re creating, how it will work, what makes it different from competitor items, how large the target market is, and what the expected return on their investment is.

The list of questions they’ll have for you goes on and on, and you need to be ready to answer them or your dreams of a big cash injection won’t happen. This leads to problem #2.

Problem #2: Theft

You don’t want anyone else to steal your idea and enter the marketplace first. You’d lose the coveted position of being first-to-market and all of the publicity and sales that go along with it.

Therefore, you ask investors to sign a non-disclosure agreement (NDA) before you provide any information to them, which leads to problem #3.

Problem #3: Non-Disclosure Agreements

Investors won’t sign your non-disclosure agreement until you give them enough information to make it worth their while to invest time into hearing your pitch.

Remember, investors don’t necessarily need you. They have many investment options and many startups knocking on their doors. Their interests are not the same as yours. You need to give them enough information so they’ll give you the time of day, but you need to do so in a way that protects your interests in the future.

What do you do?

Understand You Cannot Protect an Idea

First, you need to understand that you cannot legally protect an idea, even with non-disclosure agreements. You cannot keep someone else from thinking up the same or similar idea or turning it into a product completely separately from and independent of you.

Simply put, your idea for a new product or a new way to manufacture something is not protectable through intellectual property laws, but the way you plan to execute your idea may be.

The “how’s” of your idea are the proprietary parts and are where you find its true value. These proprietary elements, or those that may be eligible for intellectual property protection, are the only parts that will stop you in your tracks and harm you if they are stolen and are, therefore, the only parts that you should try to protect through a non-disclosure agreement.

A non-disclosure agreement is considered a contract voluntarily entered into by two people. Technically, you can require someone to stay mum on anything you want, including the fact that you even met with them.

For startups, non-disclosure agreements should only be used to protect information that matters.

Identify What is Proprietary

What are the specific parts and pieces that are truly proprietary? Consider how you plan to bring your idea to fruition at a granular level, and identify those truly proprietary elements. These are the important elements that a non-disclosure agreement can protect.

Make Your Choice

You have three choices, and only you can decide which is right for you based on your goals and comfort level:

1. Don’t Use a Non-Disclosure Agreement

Many investors will tell you that a non-disclosure agreement isn’t necessary, but remember, they have competing interests to your own.

That doesn’t mean potential investors want to steal your work. They are unlikely to be a source of threat. Potential competitors and even counterfeiters are the more likely threat source. However, not using a non-disclosure agreement can hurt no one but you.

2. Use a Non-Disclosure Agreement and Discuss Nothing until It is Signed

Many investors won’t consider investing until they hear how your product or service will work and the results they can expect. They won’t sign a non-disclosure until they believe it’s worth it to them to do so and believe it will benefit them.

Requiring a non-disclosure agreement upfront could reduce your chances of attracting investors, but it does ensure your proprietary information is protected (to the extent possible by law and depending on the strength of the language in your agreement).

3. Use a Non-Disclosure Agreement to Protect Truly Proprietary Information

Many investors will gladly sign a non-disclosure agreement once they believe the investment will benefit them.

Balance your need to protect information with the need to give investors enough information to consider investing in you. This would entail having an investor sign a non-disclosure agreement when you get to the point in your discussions that you need to reveal the truly proprietary information, which the agreement can actually protect.

Find the Balance that Works for You

Remember, you can’t protect your idea, without something more. You can only protect how you’re going to execute your ideas. The specific “how’s” are proprietary, and they are what you need to protect from being stolen.

Strike the right balance for you and your goals, and your efforts to attract investors should improve. And bear in the mind that the law imposes a responsibility on you to engage in a certain degree of self-help and to exercise good discretion.

Knowing what to say when and to whom is what really matters. Educate yourself, and keep in mind that the law is not as flexible as many would like it to be. If you cherry-pick who you disclose things to with and without a non-disclosure agreement, you might as well have not used one at all.

If you’re having trouble identifying the truly proprietary elements of your product, service, or process, consult with an intellectual property attorney who fully understands the current laws and can help you determine what information can and should be protected through non-disclosure agreements and intellectual property laws.

About Kelley Keller

Kelley Keller, Esq. is an intellectual property (IP) attorney, speaker, and educator with two decades of experience in the IP field. She works with individuals and businesses in a wide variety of industries helping them transform their ideas, knowledge, and innovation into valuable business assets that drive profits. Kelley offers education to established businesses, startups, entrepreneurs, corporate executives, non-profits, government agencies, legal professionals, and students about starting and growing a business as well as about IP, social media law, and the importance of protecting valuable brand assets and creative work.

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What People are Saying about Kelley Keller

Lisa Frederiksen | Author, Speaker, Trainer, Consultant at BreakingTheCycles.com

Kelley works differently. After an initial phone conversation (I live in CA and she's in PA), she drafted a scope of work for both efforts and set a flat fee which included (and still includes) the back and forth conversations a client needs in order to get the best results. She is extremely knowledgeable and truly able to "hear" what I'm after and create meaningful legal documents and advice that have helped me immeasurably. I highly recommend Kelley Keller.
2016-04-23T10:27:42-05:00
Kelley works differently. After an initial phone conversation (I live in CA and she's in PA), she drafted a scope of work for both efforts and set a flat fee which included (and still includes) the back and forth conversations a client needs in order to get the best results. She is extremely knowledgeable and truly able to "hear" what I'm after and create meaningful legal documents and advice that have helped me immeasurably. I highly recommend Kelley Keller.
http://kelleykeller.com/testimonials/lisa-frederiksen/

Kelly Phillips Erb | Senior Editor at Forbes

Kelley was able to explain complicated legal issues in a manner that was easy to understand without being patronizing. She was also great at talking me down from ledges - it was easy to get worked up when opposing parties weren't being cooperative but Kelley advised me to trust in the process and she was right.

Kelley explained my costs and options, as well as the pros and cons of each. She also kept me informed about my matter, letting me know what I needed to do at the appropriate time. All in all, I felt very involved in the process without being overwhelmed. Kelley made a wildly stressful situation so much better. I would highly recommend her services.
2016-04-23T10:42:43-05:00
Kelley was able to explain complicated legal issues in a manner that was easy to understand without being patronizing. She was also great at talking me down from ledges - it was easy to get worked up when opposing parties weren't being cooperative but Kelley advised me to trust in the process and she was right. Kelley explained my costs and options, as well as the pros and cons of each. She also kept me informed about my matter, letting me know what I needed to do at the appropriate time. All in all, I felt very involved in the process without being overwhelmed. Kelley made a wildly stressful situation so much better. I would highly recommend her services.
http://kelleykeller.com/testimonials/kelly-phillips-erb-senior-editor-forbes/

Charlotte Avery | CEO at Being Charlotte Avery

Words cannot express how much I appreciate Kelley Keller. She has helped me and my business on so many levels. Whenever I have a question I always know that I can call her and she will give me the best advice/counsel. I know that my business is in good hands with Kelley.

Kelley, THANK YOU for EVERYTHING!!!
2016-04-23T10:46:03-05:00
Words cannot express how much I appreciate Kelley Keller. She has helped me and my business on so many levels. Whenever I have a question I always know that I can call her and she will give me the best advice/counsel. I know that my business is in good hands with Kelley. Kelley, THANK YOU for EVERYTHING!!!
http://kelleykeller.com/testimonials/charlotte-avery-ceo-charlotte-avery/

Ruth Koup | Founder of Suits to Careers, Inc., Dress for Success South Central PA & Tied to Success

Kelley Clements Keller, Esq has been a huge support to the launch of our new umbrella organization, Suits to Careers, Inc. and the branding and trademarking of our men's program, Tied to Success. We could not have navigated this transition without her support. Many thanks.
2016-04-23T10:49:27-05:00
Kelley Clements Keller, Esq has been a huge support to the launch of our new umbrella organization, Suits to Careers, Inc. and the branding and trademarking of our men's program, Tied to Success. We could not have navigated this transition without her support. Many thanks.
http://kelleykeller.com/testimonials/ruth-koup/

Matt Bloom | Founder & CEO of CRIMEWATCH Technologies, Inc.

Kelley is an exceptional IP attorney. She understands the legal nuances facing start-ups and is willing to work within those restrictions. Kelley is casual and easy to work with, but when it comes to legal action she is aggressive and takes charge. She has successfully helped us secure coexistence agreements and trademarks for our business. Here expertise has added exponential value to the technology we have built and I would highly recommend her to anyone seeking IP representation.
2016-04-23T10:53:29-05:00
Kelley is an exceptional IP attorney. She understands the legal nuances facing start-ups and is willing to work within those restrictions. Kelley is casual and easy to work with, but when it comes to legal action she is aggressive and takes charge. She has successfully helped us secure coexistence agreements and trademarks for our business. Here expertise has added exponential value to the technology we have built and I would highly recommend her to anyone seeking IP representation.
http://kelleykeller.com/testimonials/matt-bloom-founder-ceo-crimewatch-technologies-inc/

Zachary Ziegler | Brewmaster at Molly Pitcher Brewing Company

Kelley is not only extremely knowledgeable in the realm of intellectual property, but she made the whole process fun! It's not often you hear fun and legal work in the same sentence but Kelley's personality eased my worries while keeping me upbeat the whole time. She explained the entire process in language I could understand and kept me updated continuously. I would not hesitate to work with her again or refer her to my friends and family.
2016-04-23T10:54:48-05:00
Kelley is not only extremely knowledgeable in the realm of intellectual property, but she made the whole process fun! It's not often you hear fun and legal work in the same sentence but Kelley's personality eased my worries while keeping me upbeat the whole time. She explained the entire process in language I could understand and kept me updated continuously. I would not hesitate to work with her again or refer her to my friends and family.
http://kelleykeller.com/testimonials/zachary-ziegler-brewmaster-molly-pitcher-brewing-company/
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