Patents
10. Confidentiality Prior to Issuance
Until a patent issues in either of Canada or the United States the owner cannot commence a patent infringement lawsuit against infringers, even against putative licensees who have broken-off licensing negotiations with the patent owner. Moreover, in the U.S.A., the patent owner can only claim damages for infringements occurring after his U.S. patent issues. Canadian patent applications are laid-open to public inspection not less than 18 months from their priority date (unless earlier laying-open has been requested by the applicant). Those who infringe a published Canadian application will be held liable to the patent owner for any such infringements occurring after the laying-open of the application if the patent issues with claims that cover the infringing activity. Nonetheless, the Canadian infringement suit cannot be launched until after the Canadian patent issues. Accordingly, the patent application owner is very vulnerable to infringers during the pendency of his application, as there is a window of opportunity for infringers to practice the invention prior to issuance of the original inventor's patents in either the United States or Canada, with little or no risk of ultimately paying damages for what would be seen as actionable infringement after the respective patent issues. Accordingly, it is wise for details of the invention to be kept as confidential as possible until all the patents for the invention have issued (or have at least been allowed) in major market countries such as the United States and Canada. Ideally, details of a patentable invention should only be made available to those who have a definite need to know in order to further the commercialization of the invention. Moreover, wherever possible, a valid Confidentiality Agreement should be signed by the recipients of such details in all instances prior to their receiving same.
A Confidentiality Agreement is a simple contract between the party imparting the confidential information (the "discloser") and the party receiving the confidential information (the "disclosee"), wherein, in consideration for the disclosure of the confidential information which is the subject of the Agreement, the disclosee agrees to retain in confidence the information disclosed. The consideration flowing to the disclosee for his promise of confidentiality is the opportunity to receive information which is not otherwise available, typically for the purpose of assessing the merits of same, with a view towards entering into a further agreement (such as, for example, a licence agreement) relating to the commercial exploitation of the confidential information for the mutual benefit of both parties. Thus, the purpose of the Confidentiality Agreement is to give the discloser (typically the inventor or patent owner) a remedy for breach of contract against those with whom he is most vulnerable until such time as his patents issue or another more detailed contract (e.g., a licence agreement) is substituted for the Confidentiality Agreement. Remember, however, that the Confidentiality Agreement binds only those who are party to the Agreement.
A suitable form of Confidentiality Agreement should be available from your patent agent or patent lawyer for a modest charge. There is no "standard form" for such Agreements which can be as short as one page, or as long as 8-10 pages. Frequently one finds that, the longer the Confidentiality Agreement, the less willing recipients will be to sign it, particularly without first receiving independent legal advice. If an intended recipient is a larger company, its representatives will typically refuse to sign all but the company's standard Confidentiality Agreement. Most of such standard agreements typically deny that confidence exists in relation to the material being disclosed to the company, and have the discloser expressly acknowledge that his legal rights will be determined by the patent, trade-mark or copyright laws of the company's country of residence, and that he should first file for any patent or other legal protection that might be otherwise available to protect his rights in the information he is about to disclose. As such, standard company agreements of this nature are more accurately referred to as "Non-Confidentiality Agreements" and should only be signed in instances where the disclosing party has already filed his initial patent application (as discussed in the section on Preparation of the First Patent Application) and has filed applications for any other types of legal protection that might be available to protect his "invention", such as trade-marks, copyright, or industrial design (design patent) applications and the discloser feels confident that the company he is dealing with is reputable and will treat him fairly. There is always a leap of faith in making this latter assessment.
The bottom line in deciding whether or not to make a disclosure to a company having a policy of only signing its own Confidentiality Agreement is: 1) File at least the first patent application and/or other application(s) for legal protection as advised by your patent agent or lawyer prior to making any disclosures (including sales or public uses) of the invention to anyone; 2) Get a tightly drafted Confidentiality Agreement (preferably drafted by your own patent agent or lawyer) signed prior to each and every disclosure of the invention to other parties (including potential investors, partners, prototype makers, and to potential licensees), particularly in the earlier stages of the commercialization of the invention, where the window of opportunistic infringement discussed above is the largest; 3) Deal only with reputable parties whom you trust and with whom you feel comfortable; 4) Limit the number of disclosures of details of the invention to only those who need to know; 5) Ensure that all follow-up patent applications for the invention are filed within the Paris Convention Priority Period (i.e. within one year from the initial filing date) claiming priority from the first filed application; 6) Pursue the prosecution of your patent applications, so as to have them ideally allowed or issued contemporaneously with commercialization of the patentable invention.
If you closely follow the steps outlined above, you will greatly reduce the risk of having your invention misappropriated by unscrupulous individuals or companies.