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Real Estate and Business

Will A Non-Disclosure Agreement (NDA) Protect My Idea?

Faced with a decision, issue or situation in which you’d like additional perspective? ‘Ask Baldo’ is a column in which selected letters to Baldo are answered and published in MetroActive Ezine, the MetroActive Website (http://www.metroactive.org) and in this blog. Submit your letter to baldo@metroactive.org for consideration.

Dear Baldo,

I joined MetroActive to help me start my own business.  I have been developing my idea for a new website business that no else is doing.  I am now at the point where I need to bring in others to help and I need money in order to develop the website and programming. But, my fear is that if I approach potential investors they may take my idea and run with it.  How can I protect my idea? Will getting potential investors sign a Non-disclosure agreement help?

John P.

John,

You ask two different questions. The first question being, how can you protect your idea? There are different types of protection, the most common being legal in which case I would defer you to a good lawyer. You might want to take a look at branding your idea and protecting the name, securing your domains, trademarking, perhaps even patenting if possible. All of which cost money. Or you can take a more entrepreneurial approach by establishing and securing the competitive advantages that will make it hard or undesirable for others to compete with you. For example, you can secure an exclusive relationship with joint venture partners, alliances, suppliers, etc.  I don’t know enough about your concept to comment further on this aspect.

In regards to your second question about Non-Disclosure agreements or ‘NDAs’, my answer is ‘it depends’. Let me put it this way, if you have to ask for a NDA chances are that you shouldn’t be talking to that person to begin with, either because that person isn’t trust worthy or you haven’t developed your idea to the point where you have enough of a market advantage.  Most professional investors will not sign an NDA for the very simple reason that what you have is only an idea and chances are that others out there have the same or a very similar idea they’re working on.  So, what happens if they sign your NDA today and don’t like your idea or your ability to implement it, then tomorrow someone else comes along with the same idea but more able to implement it?  By signing the first NDA, they in effect would either be eliminating future prospects and therefore setting themselves up for failure or setting themselves up for litigation. Then there is one more element to consider – even if they sign the NDA, how are you going to monitor their future activity? They could give the idea to their brother-in-law who can run with or, or when out for a few drinks chatting with his partners be overheard by someone who will take the idea. Even if you are able to prove they have intentionally shared your idea, how you going to pursue them? Are you prepared for the legal costs and effort required to put your evidence and case together?

However, there are situations where NDAs are appropriate and that is when you’re working in a partnership or joint venture or even with suppliers. Of course, the same risks as above apply, but there is no reason for these individuals to sign the NDA.  Just make sure that your NDA includes what is called a Non-Compete clause.

The best method I’ve seen entrepreneurs deal with the risk of their idea being stolen is by simply developing their concept and business plan, and then implementing it as quickly as they can.  The quicker you can meet the needs of your customers, the less opportunity there will be for others to try and provide the same service or concept. Then again, even if someone else does try to copy your idea, the market for web-based businesses is so large that there is plenty of room for competition.

Good luck!…Baldo

One Response to Will A Non-Disclosure Agreement (NDA) Protect My Idea?

  1. Dear Baldo,

    me to I joined inventors assistance league international to help me start my own business. I have been developing my idea for a new website business that no else is doing. I am now at the point where I need to bring in others to help and I need money in order to develop the website and programming. But, my fear is that if I approach potential investors they may take my idea and run with it. How can I find investor

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