Invention ideas – when NOT to use NDAs


When should inventors use NDAs? Basically, only when they’re absolutely necessary, otherwise they can hinder rather than help the development of invention ideas or projects. We cover NDAs in A Better Mousetrap, but happily draw your attention to this horse’s mouth blog from early-stage investment adviser Aristos Peters. It’s called ‘Why I don’t sign NDAs (usually)’ and we wouldn’t argue with any of it. It isn’t specifically about inventors and inventions but that doesn’t matter – the advice applies to anyone wanting someone else’s help with a business idea. And that’s what inventors are, even though they may not appreciate it. A serious invention project is a business opportunity, so business criteria apply to the presentation of information about it.

In a business context, too many inventors overuse NDAs. In A Better Mousetrap we give the example of a major company that won’t sign NDAs at a first meeting. Their argument is that they take NDAs seriously, so don’t want to sign one just to find out 30 seconds later that they have no interest in the invention idea that is then unveiled. If they are interested an NDA may be justified – but at a later stage, when both parties to the developing relationship need protecting.

Aristos Peters expands considerably on this theme. His blog speaks for itself, but a few of his main points are worth summarising:

  Investors who receive many submissions simply don’t have the time to wade through every clause of every NDA.

  Don’t NDA someone who is trying to raise money for you and your invention – it can hamper their efforts on your behalf.

  If your business idea has what Peters calls ‘secret sauce’ – and if it’s an invention project, it will – then avoid the need for an NDA by simply removing from your business plan or presentation all significant detail about that ‘secret sauce’. As long as the recipient understands the investment proposition, sensitive detail can be left out until such time as an NDA is genuinely justified.

  No self-respecting investor or company will sign an NDA just to read a business plan.

  Inventors who insist on an NDA to disclose anything at all about their invention project risk looking amateurish or arrogant.

Peters’ sign-off sums it all up for inventors:

‘NDAs do have a use in the investment landscape and I have signed a few in my time, but knowing when and how to submit them is the trick.’

So if you’re an inventor with an investment-ready invention project and are raring to go, let’s sum up the golden rules: first, avoid the need for NDAs by describing your invention idea only in general terms; and second, an NDA is a valuable tool for invention development and intellectual property protection, but use it only when both parties accept that it is necessary.

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