There are many reasons I won't sign these.
1. NDAs are poor protection. If a client has one, they breathe a sigh of relief thinking their bases are covered. If they have inordinate confidence in the NDA, they usually fail to monitor the process in ways that matter more, or they don't use standard best practices that would prevent the greatest abuses.

2. Many clients don't understand where their controls lie. It is more common than not that they publicly disclose to the world, information I would consider proprietary. I can't be held responsible for this.

3. No one likes to admit this but many start ups copy existing products. I can't tell you how many times they'll show up with a competitor's product in one hand and an NDA in the other. An NDA in this context is silly. What's the NDA for? So I can't tell on them?

4. Many start ups develop products that are not unique because they haven't researched the market sufficiently. This raises doubts about other facets of their experience and viability. Since there's always room for someone who is good, I don't discourage them but they should know what they're going up against and whether their model is innovative enough to warrant these sorts of transaction costs.

5. Speaking of costs is the matter of spending priorities. Everyone is in love with their idea and want to protect it. The problem is spending their entire budget on legal devices and have nothing left to pay for product development -of which the value may be questionable.

Above all and in consideration of the above, the biggest problem with NDAs is that one runs the potential risk of alienating solid contractors ("manufacturers"). More established firms won't sign them for these reasons and because they don't need to. The only reason they've endured with a solid customer base is because of their integrity; they don't need legalese to be honest in their business dealings. That's a hint btw. You're better off finding a contractor who is not actively soliciting new business than you are in going with a business soliciting you. It's the opposite of what people think. It's not all cases obviously but if you think a business will do better by you because they're hungrier than the one who isn't, think again. And here's another shocker: a contractor who isn't beating the bushes for your business often has lower minimums and costs. Just sayin...

I'm not saying people shouldn't protect their intellectual property. I am saying there's better ways to do it than with NDAs. Think counter intuitively.

You're right to say that a NDA provides far less protection than a patent or other legal protection. However, all NDA's should include a statement that the recipient of the confidential information will not use the information themselves. This at least gives you a claim based on the contract if the recipient then uses your concept without paying for it.

Scott Landsbaum
Licensing Attorney

I think you put it well where you said, "An NDA is not useful as a replacement for other intellectual property protection, such as a patent or a trademark." I think it's important to point out that an NDA is a contractual agreement between an inventor and one other party. The problem arises when a third party not mentioned in the agreement starts using the idea. How do you enforce the contract against this third party? That raises another question, how did the information leak out? That’s a proof problem you don’t have with patent protection.

But if the inventor can overcome the problems you point out; i.e “will a prospective licensee sign such an agreement?,” it could be a modicum of protection at the start of negotiations.

Vincent G. LoTempio
Registerd Patent Attorney