Key Takeaways

  • A non disclosure agreement for product development protects sensitive design information during invention or product creation.
  • NDAs can be unilateral or mutual, depending on whether one or both parties share confidential information.
  • Common elements in an NDA include definitions of confidential information, obligations, exclusions, and remedies.
  • NDAs should be signed early in discussions to avoid conflicts or loss of intellectual property.
  • A patent attorney can assist in drafting effective NDAs and securing broader protection through patents or trademarks.

A nondisclosure agreement for product design, also commonly referred to as an NDA, is an enforceable contract that involves at least two parties. The agreement outlines confidential material and knowledge that the two parties want to disclose to one another but want to withhold access to by third parties. The NDA is also known as or referred to as a confidential agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), and a secrecy agreement (SA).

When Are NDA Agreements Used?

Doctor-patient confidentiality, attorney privilege, and bank-client confidentiality are common forms of entities that use NDA agreements. Confidentiality agreements are designed to protect sensitive information and to define what is private and what is unconcealed. NDAs basically shield private business information but can include concepts and ideas in the issue of patents, as well as client lists and passwords in various settings.

During product development, to prevent an invention, idea, or design from being shared with another person or company, an NDA will protect a designer's rights. NDA agreements are all unique, but there are two standard types of nondisclosure agreements. They are referred to as unilateral NDA and mutual NDA. The unilateral agreement obligates the recipient, also referred to as releaser, to keep any information disclosed during product development as confidential information. A breach of this agreement can be the difference between a product's development being successful or a failure. Another type of NDA is referred to as a mutual nondisclosure agreement. Both parties agree to not share the other's information.

Common Situations Requiring NDAs in Product Development

NDAs are essential when businesses or inventors disclose sensitive information to potential partners, investors, manufacturers, suppliers, or even employees. Some common situations include:

  • Pitching to investors: Protecting new ideas before funding is secured.
  • Collaborating with manufacturers: Securing production processes and prototype details.
  • Working with freelancers or contractors: Ensuring external parties maintain confidentiality.
  • Partnering with research firms: Guarding early-stage research and testing results. In each case, a properly drafted NDA ensures that the recipient cannot use or share confidential information without permission.

What Is the Purpose of an NDA?

An NDA ensures the recipient is free to disclose details and how the product's development is progressing with the patenting or licensing divisions while still protecting the disclosing party's confidential information.

The timeframe of an NDA will be effective as outlined in the agreement, which is commonly the date it is signed. There are different options regarding how long an NDA will remain in effect. The agreement may specify a length of time, such as six years from the effective date. An agreement can be designed to expire at the end of the project's completion, or you may choose to hold the recipient to secrecy indefinitely.

Key Components of a Non Disclosure Agreement for Product Development

A strong non disclosure agreement for product development typically includes the following elements:

  • Definition of Confidential Information: Clearly outlines what constitutes protected information, such as drawings, formulas, software, prototypes, customer lists, and business strategies.
  • Obligations of the Receiving Party: Specifies how the recipient must handle confidential data, including restrictions on sharing, copying, or using the information.
  • Exclusions: Lists information not protected by the NDA, such as data already publicly available or independently developed without reference to the disclosed information.
  • Term of Agreement: Defines how long confidentiality obligations will last, whether for a specific term (e.g., five years) or indefinitely.
  • Remedies for Breach: Details the actions the disclosing party can take if a breach occurs, including seeking monetary damages, injunctive relief, or specific performance.

What Steps Are Taken to Create an NDA?

Creating a new product development, also known as an NPD, can involve a great deal of time. There are multiple steps required and the entire process demands confidentiality. Even after the product is commercially available, the designer can still be in the process of NPD. Idea generation, concept testing, screening, marketability, metric monitoring, commercialization, and post commercialization are all part of the NPD steps to be taken. While NDAs are necessary at various times, each step does not require an NDA.

When deciding if an NDA is needed, there are two basic questions to ask yourself:

  • Can the concept be thoroughly explained and described without revealing specifics?
  • Are you starting off on the wrong foot?

If you feel like you can provide necessary information safely, you may opt to wait until product execution begins before requesting an NDA. To ensure an NDA request will not be taken as a trust issue, consider appropriate timing in the product development process.

As a good-faith gesture, it is not uncommon for professionals to propose an NDA to be executed or sampled to demonstrate the company's value and dedication to confidentially. Companies will often refuse to enter an NDA with a prospective client due to potential conflicts of interest with current clientele.

Best Practices for Drafting an NDA for Product Development

When drafting an NDA for a new product, consider these best practices:

  • Use precise language: Avoid vague descriptions; be specific about what is confidential.
  • Tailor the agreement: Customize the NDA for each situation, rather than using a generic template.
  • Consider mutual NDAs: When both parties are sharing sensitive information, a mutual agreement may build trust.
  • Include governing law: Specify the state or jurisdiction whose laws will apply to interpreting the NDA.
  • Limit disclosure access: Restrict access to only those employees, contractors, or advisors who need to know the information.
  • Prepare for negotiations: Some parties may request modifications to the NDA terms; having flexible but protective clauses is important.

It’s advisable to present an NDA early in the relationship, before detailed disclosures are made. If a party refuses to sign, it may signal caution.

The Importance of a Patent Attorney When Creating an NDA

Due to uncertainty in knowing the risk involved and several complex details, a patent attorney can often be very resourceful in new product development attempts. Patent attorneys specialize in obtaining patents and work to ensure your invention is protected. In addition to protecting inventors' rights, the attorney will provide advice on design and trademarks, as well as handle third-party objections.

When choosing a patent attorney, do your homework and search for someone who has a broad knowledge and understanding of patents. Not only will a patent attorney work to obtain a patent for you, but they will also act to enforce the rights of your invention when and if they are violated.

How NDAs Support Patent Applications

NDAs play a crucial role in protecting patent rights during product development. Public disclosure of an invention without proper confidentiality can jeopardize the ability to file a patent later. By having an NDA in place:

  • Patent rights remain preserved: Prevents unintentional public disclosure that could start the patent filing deadline clock.
  • Strengthens evidence of ownership: If a dispute arises, an NDA can help prove that the disclosing party maintained control over the information.
  • Facilitates smoother licensing negotiations: Potential licensees will be more comfortable discussing terms when protected by clear confidentiality obligations. For this reason, inventors often work closely with a patent attorney to coordinate both NDA protections and timely patent filings.

Frequently Asked Questions

  1. What is a non disclosure agreement for product development?

    A non disclosure agreement for product development is a legal contract that protects confidential information such as designs, prototypes, and inventions during the creation process.

  2. When should I use an NDA during product development?

    You should use an NDA before sharing any proprietary information with investors, manufacturers, partners, contractors, or employees involved in the development process.

  3. What happens if someone breaches a product development NDA?

    If a breach occurs, the injured party can pursue remedies such as monetary damages, injunctions to prevent further disclosure, or legal actions to enforce the agreement.

  4. How long should an NDA for product development last?

    The duration depends on the nature of the information but typically ranges from a few years after disclosure to indefinite protection for trade secrets.

  5. Do I need a lawyer to create a product development NDA?

    While you can draft basic NDAs yourself, working with an experienced patent or intellectual property attorney ensures that the NDA offers the strongest possible protection.

If you need help with creating a nondisclosure agreement for product design, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.