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IP Expert Advice: How do you protect your idea and still attract investors?
By M. Henry Heines, Townsend and Townsend and Crew LLP -- Electronic Business, 3/12/2007
> Become an expertQuestion: Some time back, while attempting to fund an idea, I ran into a group of VCs who were not willing to sign an NDA, because "it's all been thought of before." I was (and still am) worried about getting ripped off. How do you protect your idea from improper disclosure but still gain an audience with those jaded individuals and institutions holding the purse strings?
Expert response from M. Henry Heines, partner, Townsend and Townsend and Crew LLP
You will not find any VCs, or any corporations for that matter, who will sign an NDA, because they have no guarantee that the information is not also available from other sources or that you are the true originator of the information. If the former were the case and the latter were not, the NDA would place the signing party in a difficult position of having to prove this by documentary evidence to avoid an accusation of breach.
Also, the limited information you would be willing to supply before they sign the NDA is generally not enough for them to evaluate its merits, even if they chose to do so. If your idea is indeed novel and you are serious about developing it, you should invest in a patent application, preferably reinforced by a patentability search and an evaluation by a patent attorney. A pending application can be shown to VCs or potential licensees or developers without loss of patent rights, and they will be considerably more receptive, because they will not be obligated by an NDA and its attendant risks. The patent application will also help you specify exactly what is novel about the invention and how broad its scope is.
