by Ronald Docie Sr
If you are seeking to license your invention to a manufacturer, it is best to submit your invention only to companies that have a positive track record of paying outside inventors for their contribution. If a company has been manufacturing goods for fifty years, for example, and they have never paid anything to an outside inventor, why would you want to submit any invention to them, even if they do offer a confidential disclosure agreement?
On the other hand, if a company does not want to sign a disclosure agreement, yet it has an extensive track record of paying for outside inventions, then I believe that this fact alone should weigh foremost in your decision to submit to them. This is because such a company may be an excellent candidate even though they won’t sign an initial disclosure agreement.
I often speak with entrepreneurs new to the industry who don’t have a history of paying outside inventors, however, this is simply because they are start-up companies. It is not uncommon for these entrepreneurs to be more than willing to consider paying for outside inventions because they want to expand their product line, and they see outside contributions as an excellent way to do so. In this case, the company may not have any track record with paying outside inventors, and yet be an excellent candidate for commercializing your invention.
Why are companies reluctant to sign disclosure agreements? There are several good reasons for this. If you are presenting the company with an unpatented idea, the company has no guarantee that the idea you present to them is indeed unique, or for that matter, yours. For all they know, you may have stolen the idea from another individual, and invited potential litigation to the company by no fault of their own. It is unrealistic to expect a company to perform the unfathomable amount of due diligence required to determine the authenticity of whatever idea you submit to them. This is why disclosure agreements offered by companies typically state that you must rely on the rights you receive from the U.S. Patent and Trademark Office. In this way, it takes out the guesswork, along with the associated liability.
As an inventor, you need to be sensitive to this. This is why you simply cannot insist that the company pay outright for any idea that you bring them. Such a notion creates a tremendous liability for the company. On the other hand, I find that companies in general don’t mind paying for truly unique unpatented ideas when it gives them an advantage in the industry, such as the first into the market, etc.
The problem is, prior to the initial submission of your idea to the company, they really don’t know the unique advantages that you are bringing to them. As such, they don’t want to prematurely commit to paying for a bill of goods, when indeed that’s exactly what it may be.
Companies have lost lawsuits or paid inventors out of court for supposed damages when it was no fault of the company. In some cases companies had to do this because the court’s discovery process would have exposed trade secrets to their competitors and created an unreasonable hardship on the company. This is why it is typical for the company’s attorney to advise against the acceptance of unpatented inventions, unless there is no obligation by the company to do so.
