Need To Know: Protecting your pitch
You have had a great idea. It’s disruptive, ground-breaking, unique, and you are really, really pleased for having come up with it. Well done you. Time for a pat on the back. Now let’s talk reality.
The fact is, if you want to build your idea into a real business, or you are part way down that road, you just can’t do it alone. You will need to pitch it, talk to people, enlist their help and at some stage raise money.
When you start thinking about the list of people who you are going to need to reveal your secrets to, it’s mind boggling. It might be a design house, a specialist engineer, a programmer, a commercial laboratory, consultancies, prospective licensees, prospective investors, bankers, accountants, solicitors, patent attorneys and so on and some of their employees may need to have access to your secret information. Some of these people you may never meet face to face. Some could be overseas. Some could be faces in a crowd at a pitch event.
“I overheard someone say the other day that you can’t protect a pitch as confidential information. This was poor and defeatist advice”
So, how are you going to do this, without giving away your Crown Jewels? What can you do if someone steals your ideas?
I overheard someone say the other day that you can’t protect a pitch as confidential information. This was poor and defeatist advice. Successful businesses take their IP protection seriously and so should you.
No one worth dealing with in business ever took offence from someone legitimately putting in place reasonable steps to protect their valuable secrets, be that through a confidentiality agreement or other means. If they take offence and/or refuse to sign up to reasonable safeguards, walk away.
It’s important to know your audience too. Your solicitor or patent attorney is not in the business of stealing your ideas, likewise institutional and specialist investors, they would be out of business pretty quickly if they did. With solicitors and patent attorneys in the UK the law implies a duty of confidentiality here anyway.
From an investor perspective, look at the investor concerned, look at their market reputation and try to see it also from their perspective. If you are receiving twenty investment proposals a week you could end up signing a thousand NDAs in the year and life being what it is some proposals will be for similar ideas or in the same technical or commercial space. It would not take long for the investor to become “boxed in” unable to move for fear of litigation for breach of NDA.
Rest assured in the end the investor will want to be sure that you protect your IP, so in the first instance marking all written material strictly confidential and getting a simple agreement verbal or written that the material is sent to them and will be treated as confidential to you is a good basic start.
It’s all in the timing
Get your timing right. Insisting on a full blooded NDA at the outset could be a complete turn off. Signing up on a reasonable NDA in due course should not be a problem with a serious investor or business partner as there is enlightened self interest involved. They will normally understand about patents, having a paper trail and the potential to undermine validity if there is unprotected disclosure before patent applications are filed.
So, it is possible to protect yourself and it happens all the time. You need a bit of attention to detail, to know your audience and some plain common sense. I will explain with a few tips:
Tip 1: Know what you are protecting and why (and keep reassessing this)
If you need to seek registered IP protection, or prove in court what confidential information has been stolen, you actually need to be able to identify what it is. You might find that you have to decide under time or commercial pressure from a prospective backer or business partner whether to engage with them so you need to know what it is you really want and what you need to keep secret.
“No court will grant an injunction, restraining the use of your confidential information if you can’t describe to the court what it is you want protected”
No court will grant an injunction, restraining the use of your confidential information if you can’t describe to the court what it is you want protected. No patent office will grant a patent if you can’t describe the invention you have come up with. No one will invest in something they don’t understand because the description of the big secret is just too vague.
Your business and your ideas will develop and be added to. What is valuable at the start may have no value later, so re-assess from time to time. Try writing it down (in a secure place) as to what you think is secret, really valuable and why. It’s quite a cathartic exercise but worth it if you are really honest with yourself.
Tip 2: Some NDAs are rubbish, even more are poorly executed
I have seen a zillion NDAs ranging from templates downloaded from the internet with names (badly) filled in, to all singing, all dancing, sometimes slightly threatening heavy duty contracts. Often you get to see the last one someone used, adapted to try and fit the bill.
They come in lots of different shapes and sizes. There are one way, two way and multi-party versions, letter form and contract form, click wrap etc, etc. The point is that if used wisely they are an essential tool. Used poorly they are about as much use (if tested) as a chocolate tea pot.
So here are some basic rules. Don’t go into battle with a paper hat, when you need a helmet. NDAs should do the basics well and don’t have to be over engineered to be strong. Lightweight and letter agreements can work, but they must not be flimsy or flawed. If they are flawed don’t use them. If you are not sure that they are right get some help from someone who does.
The basic rule is to read them, ask whether they make sense to you, have you got the basic factual detail right (names and company numbers etc), have you dated them correctly?
Concentrate on correctly defining “the Purpose”. Usually NDAs say you can only use the confidential information for the Purpose. If the Purpose is wrong, the NDA may not work.
Watch out for overseas jurisdiction and the forum for disputes clauses. Get help from someone who knows what they are doing when dealing with overseas counterparties or clauses of these kinds. If in doubt, and you can’t get advice in time, default to the NDA being governed by English Law and subject to the non-exclusive jurisdiction of the English Courts.
Don’t attach the confidential information (e.g. details of an unpatented invention) to a draft NDA. By definition, if the NDA has not been signed, you may have made your invention public and may have set up evidence that could later invalidate a patent application. Even if it’s not to do with patents, if the other party walks away without signing, what do you do then… try and imply that it was given in confidence? Good luck with that if you have nothing else to prove there was a confidential relationship.
“If there is no need to disclose beyond the first people you are engaging with, then don’t allow wider disclosure to others at the outset without good reason”
Watch out for the list of people who the recipient can disclose the information to. If there is no need to disclose beyond the first people you are engaging with, then don’t allow wider disclosure to others at the outset without good reason. The phrase “and its Affiliates or Group Companies” is a signal to think about this. You can always widen the group later by agreement. In the end the information should distribute on a need-to-know basis for “the Purpose”.
When actually disclosing the key information tell the recipient that this is confidential and subject to your NDA and mark written material as confidential. This is especially important if you have no NDA in place. Watch out also for NDA’s that make it a requirement that information has to be marked as confidential to be caught by the agreement. As a default position have you got an email footer with a confidentiality warning on it?
Tip 3: When pitching, understand and keep a record of the pitch event and surrounding conditions
If you are showcasing to an audience or at a speed dating event, it’s usually impractical to get NDAs in place when pitching your wares to the crowd and usually too risky for the organisers to take responsibility for establishing confidential conditions. Also you have no idea as to who is in the room and whether they are a saint or sinner or even a competitor. So what do you do?
First off, your elevator pitch needs to strike a balance. This is the hardest point in this note to get right in practice. Your pitch should be a teaser that’s got just enough detail to get folk interested enough to learn more. If the trout rises to the fly and you receive follow up interest then you can put in place an NDA to cover follow up discussions.
“Your elevator pitch needs to strike a balance. Your pitch should be a teaser that’s got just enough detail to get folk interested enough to learn more”
Whatever you do, if you have an unpatented invention do not make an enabling disclosure of your invention as part of your pitch. If you do, you could kill the chance of getting a patent or invalidate one if granted.
Whether an invention is new and patentable depends on the state of the art at the date of your application to register. In the case of an invention this means everything (whether it is a product, a process, information, or anything else) that has at any time before the priority date of the patent, been made available to the public (whether in the UK or elsewhere) by written or oral description, or by use in any other way.
Multi-million pound patent court battles are won and lost on whether prior disclosure and enablement has taken place. So use your common sense: if you think that someone skilled in the technical field of your invention, when combining what you say in public, with his or her knowledge, could perform the invention, then you could have undermined any actual or prospective patent rights. So, if you are pitching, pre-patent application be very, very careful what you say and err on the side of caution.
Also, get yourself in front of an IP specialist to help get a patent application underway. Remember there are huge tax benefits in the UK for patents now under the patent box regime (which is a topic for another day).
Finally, keep good records. Make a note of what you said, what the pitch conditions were, keep a copy and note of any organiser confidentiality warnings to the crowd and all supporting documents. Go prepared with your well drafted NDA’s and store all of this safely. You might need it later.
Tip 4: Check out IP Litigation insurance
IP Litigation can be expensive and unaffordable for many SMEs unless potential litigation costs are budgeted for or built in to the business model. It is possible to obtain before the event specialist insurance products that have options to include the enforcement of contractual conditions (NDAs/Confidentiality/Licence/Distribution agreements and so on) and the defence of challenges to the title/validity or ownership of the IP rights. You need a specialist underwriting agency but they do exist and are more affordable than most people realise.
If you are a property company, you insure your buildings, because that is where the value is. For a tech company your IP is your property. Do you think about and insure your IP in the same way? If not, why not? If the value of your company is tied up in your IP rights, what use are those rights, if you can’t afford to defend or enforce them. As a director do you regularly test the market for this type of product and build the premiums into your budget? Food for thought.
Confidential information cases tend to fall into several categories. Most of them are to do with departing employees and are intermingled with employment law. The leading employment case has stood for thirty odd years (Faccenda Chicken v Fowler), but it’s still useful to know about.
This case was all about the reuse of customer lists and the like. The judge identified three classes of information which an employee may have as he leaves an employment. As a business owner or departing employee it’s important to know where you stand and what you can or can not do.
The first rule is there is no prohibition against use of information which is just trivial, or accessible from public sources whether during or after employment. You don’t need a law degree to figure that one out.
Next there is information which is confidential, either because the employee was expressly told so, or because of its character, but which once learned sticks in the mind and becomes part of the skill and knowledge used in the course of the employer’s business.
You can’t use or disclose this whilst employed without permission. Once the employee leaves he or she can use his full skill and knowledge for his own benefit in competition with his former employer unless the employer takes additional safeguards. So if you need to protect information of this kind, you can do so by an express stipulation restraining the employee from competing with him (within reasonable limits of space and time) after the termination of the employment. This is why you find covenants in written employment contracts to cover this point off.
Last but not least there are trade secrets. Even though they may have been memorised they cannot be used for anyone’s benefit but the employer’s during and after the employment ends. Of course we lawyers have a field day on arguing what is or is not a trade secret so you can help yourself by marking the really confidential stuff as a trade secret and emphasising to your employees its top secret nature.
You may have heard the phrase “there is no copyright in an idea as such”. If you want to think a bit more about this topic take a look at the following Wikipedia page. This describes the history of a dispute over a show reel pitched at an advertising agency for a Guinness ad campaign many years ago.
Don’t get too hung up about the copyright issues, but ask yourself the question “Would life have been any different if the director had put in place an NDA with the Ad Agency and what would that NDA have had to say and achieve to give the Director an alternative cause of action?”
If you are not interested in the legal point, don’t worry, the ad still looks and sounds great. You can find it on YouTube by searching with the word “Anticipation and Guinness” and you will probably find yourself for some unexplained reason in the pub afterwards.
Mark Lomas is Head of IP Law and part of Ashfords Technology Sector Group. Ashfords LLP is a top 100 law firm.
He has 25 years’ experience advising clients from start up to major PLC’s on all aspects of commercial IP and IT Law and is Chairman of the firm. You can email Mark here.