General Practice, Solo & Small Firm Division

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American Bar Association - Defending Liberty, Pursuing Justice

SUMMER 2010

Vol. 6, No. 4

BUSINESS LAW

 

Advising the Small Business

By Jean L. Batman

Should Your Client Be Using a Nondisclosure Agreement?
When a client is embarking on a new venture, a good nondisclosure agreement, or NDA, can be indispensable. It will help the client protect the idea, business plan, marketing plan, and other proprietary information it may need to disclose during the course of identifying and engaging suppliers, distributors, employees, and other key relationships for a successful launch.

A good NDA will prohibit both disclosure and use of the proprietary information and will provide for equitable relief in the form of an injunction, preferably without the necessity of a bond, in the event of a breach. Nondisclosure agreements may be called NDAs, nondisclosure agreements, nondisclosure and non-circumvention agreements, confidentiality agreements, proprietary information agreements, and so forth, and they may be either one-way or mutual.

Does Your Client Have an Idea That May Be Patentable?
Actually, an “idea” is not patentable. To be patentable, an invention must be useful, new, and nonobvious to a person having ordinary skill in the area of technology related to the invention; and a complete description of the working invention must be provided. 1

A patent is the grant of a property right to the inventor of a patentable invention, issued by the U.S. Patent and Trademark Office (USPTO) in the United States, or comparable authority in another country or region. The term of a new U.S. patent is 20 years from the date an application for the patent is filed with the USPTO; or in certain cases, from the date an earlier related application was filed, subject to the payment of maintenance fees. U.S. patents are effective only within the United States, U.S. territories, and U.S. possessions. Under certain circumstances, patent term extensions or adjustments may be available.

A patent confers the right to the patent holder to exclude others from making, using, offering for sale, or selling any product that embodies the patented invention in the United States or importing such products into the United States. The USPTO does not assist patent holders with the enforcement of patent rights.

As described by the USPTO, there are three types of patents: 2

1. Utility patents may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof;
2. Design patents may be granted to anyone who invents a new, original, and ornamental design for an article of manufacture; and
3. Plant patents may be granted to anyone who invents or discovers and asexually reproduces any distinct and new variety of plant.

Inventors may prepare and file their own patent applications in the USPTO and represent themselves in the proceedings. However, unless a client is already experienced in patent prosecution, it would be well advised to seek an experienced patent lawyer or agent, since even if the client were able to obtain a patent without adequate representation, the patent obtained may not adequately protect its invention. Only lawyers and agents registered to practice before the USPTO are permitted to represent inventors before the USPTO. 3

If your client potentially has a patentable invention, it should consult a qualified patent lawyer or agent while the invention is still “new,” or it will lose the right to protect the invention. Under U.S. patent law, an invention cannot be patented if, among other things, the invention was in public use or for sale in the United States for more than one year before the patent application was filed. For this reason, and because resources are often quite limited in a small business, it may be a good idea for an inventor to file a provisional patent application before testing the market for an invention that may be patentable.

Endnotes
1. See the U.S. Patent and Trademark Office website guide to patents at http://www.uspto.gov/web/offices/pac/doc/general/index.html.
2. Id.
3. Id.

Jean L. Batman founded Legal Venture Counsel, Inc. in 2004 to provide outside general counsel services to investors, entrepreneurs, and small businesses. Prior to forming Legal Venture Counsel, Ms. Batman was a Partner in the San Francisco offices of Duane Morris LLP, one of the country’s 100 largest law firms. Ms. Batman Chaired the ABA Business Law Section’s Small Business Committee from 2001 to 2005, served as a Board Member of the ABA Business Law Section’s Publications Board from 2001 to 2005, cofounded and Co-Chaired the ABA’s Private Placement Broker-Dealer Task Force in 1999, and is a member of The State Bar of California and the National Association of Development Companies.

Do you want to learn more on this subject or need forms to help your clients ? If so, click here to purchase the author’s book.

This article is an excerpt from Advising the Small Business, by Jean L. Batman, pp. 13–14. Copyright 2007 © by the American Bar Association. Reprinted with permission. This information or any or portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

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