In a series of upcoming articles, I’d like to recall and share some of my experiences as a dental product developer since 1987 and some basics about how our own product development process works at Practicon, Inc. Disclaimer: Let me say that I am not an attorney, and I do not have a crystal ball or the Midas touch. That much is a proven fact. Free advice is worth the cost, but maybe something herein will help someone who is equally excited about an idea for a better “mouth” trap.

In my last article, we discussed a Non-Disclosure Agreement (NDA) as a tool that allows an inventor to share his/her idea with another party, establishing that the information will be held as confidential and considered proprietary to the inventor. We examined why an NDA is important for both inventor and evaluator (Practicon). This week’s article ventures a bit into the weeds, but I wanted to answer a common question concerning most NDAs, including Practicon’s: Why does an NDA have an expiration date? I have seen this question needlessly derail several development projects before they ever left the station.

Let’s ask a more basic question first: Why not avoid the need for an NDA by simply getting a patent before shopping for a potential development partner? Remember from the last article that NDAs are often beneficial even when an idea is already patented, but the simple answer to the question is that patents are expensive and time consuming. Unless an inventor has tens of thousands of dollars and several years to spend on an idea just to become a member of the “patent club,” it is usually in his/her best interest to explore the manufacturing and marketing feasibility of an idea BEFORE investing time and money in a patent. Even a provisional patent, while a useful priority date marker if properly written, can cost several thousand dollars to prepare professionally (we’ll talk about provisional and non-provisional patents in a future article).

It is worth noting that large corporations with lots at stake usually require a related patent to be granted before evaluating any external ideas. The enormous cost of creating a consumer product, one possibly vulnerable to competition or infringement on an unpublished pending patent, or potentially being sued by a litigious inventor for “stealing” his/her idea, make the risks of unpatented and patent-pending development too great. In those cases, having a strong, non-provisional patent in hand is a prerequisite for idea submissions. Given the relatively small size of the dental industry, and in the best interest of dental inventors, dental patients, and dentistry in general, Practicon is willing to accept and review new product ideas protected only under an NDA, prior to any patent work. We can proceed with proper caution together from there, if we determine we can help.

Now back to the original question: Why do NDA’s have an expiration date? The question is a good one, and being a developer myself, I understand the obvious concern: Can’t the receiving party just hold a disclosed idea until the NDA expires, then crank out the product free of any royalty or legal obligation afterwards? Please allow me to alleviate that concern first, then finish up with a more fundamental reason why NDAs must have a limited timeframe.

First, the number one reason that a hold-until-expiration scenario would never occur at Practicon is that we put inventors’ interests first. As stated in Article 1, that is the only way we can expect to have the opportunity to learn about an inventor’s next idea. Trust is the currency of success. Besides violating our values, such action would disqualify us as a trusted dental product development partner, not to mention destroy our reputation for exceptional customer service.

In addition to our overriding corporate values, here are several more reasons why a hold-until-expiration scenario should not be a concern with Practicon:

1. If we decline the NDA from the start because a similar idea is more than likely already known to us, based on the NDA’s general product description, then any NDA time period is irrelevant. The inventor would receive our declination before ever disclosing his/her idea to Practicon. The NDA expiration period and any corresponding concerns would not be initiated.
2. If the idea is deemed a good match for our resources and worthy of entering our development process, the timeline is critical. Waiting three years to work on an idea would risk losing first-to-market advantages and postpone any profits. We would begin the development process in cooperation with the inventor as soon as our development schedule allows. This leads to a multitude of activities from forecasting to designing to prototyping to engineering to sourcing to manufacturing to marketing, and accordingly, licensing well within the three-year timeframe of NDA expiration (we’ll discuss all these activities down the line).
3. If we find we are not the best partner to help with the idea after NDA acceptance, that is, we discontinue development (called the “kill” decision by some) because it is later determined to be outside our ability to manufacture and market successfully and profitably, it is unlikely that the factors in that determination would change for us over time. We would not revisit the idea, even after any NDA expiration.
4. Again, if we discontinue development of an idea after NDA acceptance for reasons mentioned above, and if the inventor and/or any eventual manufacturing and marketing partner other than Practicon work to patent the product during the NDA period, even before the product is produced and sold, neither Practicon nor any other party can make the product later (at least for the duration of the patent). The product will be protected above and beyond any expired NDA.
5. Lastly, if we discontinue development of an idea after NDA acceptance, and if the inventor and/or any eventual partner other than Practicon work to manufacture the product but WITHOUT a patent due to financial constraints or patentability issues, Practicon would still be better off becoming a non-exclusive retail dealer of the product, if allowed. From a resource management/ROI standpoint, selling an existing product is typically a better decision than starting from scratch to manufacture a competing, second-to-market product.

Finally, a more fundamental reason why NDAs must have a limited timeframe: Practicon’s NDA is a common version expiring three years from the date of acceptance (i.e., execution). Three years is generally ample time for an inventor to act upon an idea by (a) commencing the pursuit of a patent; or (b) producing the product, with or without a patent, whether in partnership with Practicon or different company; or (c) choosing to abandon the idea, leaving it to another future inventor to think of and act upon at that person’s own expense. Having a limited time to make that decision helps to motivate the inventor while also allowing enough time to work towards profiting from the idea. That same time limit protects Practicon, and dentistry in general, from an inventor abandoning and “squatting” on the disclosed idea, enjoying interminable protection with no drive whatsoever to apply the concept.

Stated another way, NDAs are not patents. Utility patents expire 20 years after the filing date; design patents 15 years from date of grant. Inventions then become “public domain,” available for anyone to “practice” for public benefit. That is why patents expire—to allow inventors to capitalize on their ideas, but at the same time to keep innovation moving ahead for the common good, to keep driving inventors to develop something novel, something better. An unlimited NDA would never expire, in a sense locking that idea up forever, in conflict with the spirit of patent law and industrial progress. Furthermore, if a company signs an NDA giving the inventor never-ending timeframe protection, they are granting MORE than patent protection. The company is forfeiting (a) its opportunity to ever develop any product even remotely similar, “similar” being determined by a jury at some point if an inventor does not agree with the company’s claim of dissimilarity and seeks legal remedy; and (b) the right to ever compete with other companies unbound by the same continuous NDA.

I hope this article provides some clarity and reasoning behind a three-year NDA limitation, at least as far as Practicon’s product development process is concerned. We look forward to earning your trust and determining if we are the best company to help with your idea, starting on the right track with an NDA.

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Next up: Practivations Article 4: After the NDA

Practicon was founded in 1982 with a vision of advancing dental health and increasing practice success through improving patient education. Building on a mission to Make Dentistry Better, we have grown to become a trusted developer and marketer of “Practical Innovations” that provide effective solutions for common problems, sold alongside a growing line of brand-name supplies. Customers describe Practicon’s products as creative, unique, and hard-to-find, many inspired or designed by dental professionals looking to improve patient care and productivity. Our product development mission is to develop exciting products that are relevant and useful in everyday practice—or in short, practical innovations.