Why an NDA is only one aspect of protecting your IP when pitching your ideas

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Introduction

So, you think you have a brilliant idea that could potentially contribute positively towards society – and contribute towards making some sizable earnings for yourself – great! I’m sure you’ve probably heard from peers and acquaintances how a non-disclosure agreement (“NDA”) is essential for protecting your ideas.

With the internet at your fingertips and access to Google, your most trusted friend, you search and download a free NDA template. Alternatively, speak to your local friendly lawyer to draft a tailor-made NDA that suits your needs.

Now the only thing that remains, is to have potential investors enter into the NDA before pitching your ideas, right? Unfortunately, the reality is, you’ve only just taken one step towards legally protecting your ideas. Here are things you need to take into account to protect your ideas and concepts:

Non-Disclosure Agreements

An NDA is a form of contract between parties that identifies certain information that the parties wish to share with each other without fear that the receiving party will disclose such confidential information.

The intention is to express the agreed purpose for which this disclosure occurs. More importantly, it forbids the disclosure of that information to parties that are not privy to the contract.

As a rule of thumb, any agreement purporting to be an NDA must have the basic components of a legal contract. Therefore, an NDA must meet these essential requirements:

• Consensus: The parties must have an intention to enter into and be legally bound to the terms of the contract. 
• Capacity: The contracting parties must be of legal age and mentally sound to conclude a contract.
• Formalities: The contract should adhere to any statutory requirements. Additionally, the contract should be reduced to writing.
• Possibility: The contract should be capable of being carried out.
• Legality: The terms of the contract may not be impermissible by the law and should not be contrary to public policy.

Should your NDA cover the core components of a contract, it is deemed a legally binding contract. As such, it will afford you a measure of protection in the unfortunate event of a breach.

In summary, NDA’s are relatively easy to source, set up and could cost next to nothing. Therefore, they are a good starting point in creating the first level of protection for your ideas.

Shortcomings of an NDA

It is without a doubt that an NDA is useful in binding contracting parties from disclosing confidential information that they agreed not to share. It restricts the use of disclosed information as outlined in its terms. However, since NDA’s are agreements between contracting parties, anyone outside of the agreement is not bound to it unless they are representatives of the contracting parties and the agreement makes provision for this.

As a result, you will not be afforded protection if a member of the public unknowingly comes up with the same idea that you have and acts on it. Should the above scenario occur, how would that member of the public be in breach of your NDA?

Even if a party to your NDA disclosed your idea to an outside member, are you sure that you would be able to prove that? Thus, NDA’s are not invincible.

Does conceiving an idea in itself provide legal protection?

It is important to mention that an idea in itself cannot receive legal protection. In order to enjoy legal protection, an idea must be reduced to a physical form. Therefore, it is that manifestation that enjoys protection, not the idea. With this in mind, a discussion about intellectual property must be had.

What is Intellectual Property?

Intellectual property is the intangible creations of the human intellect. It is “a term that describes the use of one’s mind to develop something new or original.” (http://www.cipc.co.za/index.php/trade-marks-patents-designs-copyright/what-ip/)

Legal rights to these creations of the mind can be established in a variety of ways, including but not limited to; patents, trademarks, designs and/or copyrights.

Some intellectual property rights, such as designs, trademarks and patents, require registration in order to be enforceable. Others such as literary work, artistic works and musical compositions, enjoy protection immediately upon creation. These works are known as copyright and are governed in South Africa by the Copyright Act.

Enforceability

What makes intellectual property rights so desirable is the associated protections and enforceability that may come with them.

Whilst NDA’s can only be enforced against contracting parties and perhaps their representatives or employees, intellectual property rights reach much further and beyond those confines.

Intellectual property rights could span multiple jurisdictions and enjoy global protections depending on their classifications. It may not be limited to the parameters contained in an NDA when reduced to its physical form or registered with the appropriate bodies depending on its classification. What this means is that, in the event of an infringement, an intellectual property right with global protections may be enforced against just about anyone; anywhere.

The same cannot be truly said about all forms of intellectual property. Some forms of intellectual property may only be enforced in the territory they are registered in.

Conclusion

I know what you’re thinking, that was a lot to take in. So, to avoid experiencing information overload, let’s do a quick recap.

NDA’s are a convenient and cost-effective way to begin the process of protecting your ideas and concepts from being shared to unauthorised parties. Their greatest strength is that they deter contracting parties from disclosing classified information. Therefore, NDA’s are by no means, the be all and end all.

Ideas by themselves do not enjoy legal standing. Instead, it is the physical manifestation thereof that gives rise to intellectual property rights.

To enjoy legal protection, some intellectual property rights require registration, while others enjoy legal standing as soon as they are reduced to their physical form.

Understanding the intellectual property landscape is crucial to protecting your intellectual property rights. Therefore, it is advisable that you do your research and consult intellectual property experts, before pitching your ideas to potential investors.

To hear a summary about intellectual property rights, here’s a short clip of Legalese founder, Eitan Stern. Take a listen.

– Mhlengi Mhlongo

Have any questions? Drop us a message below and we’ll be in touch!

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