Every entrepreneur wants to protect valuable business information. The development of new inventions often involves collaboration between different parties. Intellectual property rights, such as applying for a patent, can help protect business information.
In addition to securing intellectual property rights, a Non-Disclosure Agreement (NDA) between the parties provides valuable protection during collaboration. An NDA not only protects information in the run-up to a patent application or during the application process. It can also help when another party wrongfully claims patent rights.
One of the requirements for obtaining a patent is novelty. An invention must be new. If information becomes public without an NDA, you may lose the possibility of protecting that invention with a patent later on. The case of Ferm v Avery illustrates this risk.
Ferm v Avery
The 2024 judgement in Ferm v Avery shows that a confidentiality agreement (NDA) can play an important role when one of the parties breaches its obligations and wrongfully claims patent rights. In such situations, the court may order the transfer of those patent rights. Although the judgement mainly concerns trade secrets, the dispute shows clear similarities with a patent case.
The District Court of The Hague examined two related cases concerning the collaboration between the companies Ferm and Avery. The companies ADE and ADC are jointly referred to as Avery. Ferm had started developing a concept to integrate RFID components (chips with an antenna) into car tyres. Ferm then began working with ADE to further develop the concept. As part of this collaboration, the parties concluded a confidentiality agreement. ADE subsequently shared information with the American company ADC, which belongs to the same corporate group as ADE. ADC was aware of the confidentiality agreement between Ferm and ADE. Despite this, ADC filed several patent applications that disclosed Ferm’s confidential information. Some of those patent applications were later granted.
The judgement demonstrates how an NDA can do more than protect trade secrets in cases of breach. It can also lead to the transfer of patent rights that were obtained unlawfully.
Ferm argued that ADE had unlawfully shared information about the concept with the American company ADC and claimed damages. ADC had benefited from this conduct and had therefore also acted unlawfully towards Ferm. The court awarded the damages. Based on the Dutch Trade Secrets Act (Wet bescherming bedrijfsgeheimen, WBB), the court held that ADC had acted unlawfully. By benefiting from ADE’s breach of contract, ADC violated the applicable legal framework.
Ferm also argued that the patent rights granted to ADC should in fact belong to Ferm. After all, the patent applications were based on knowledge that ADC should never have possessed. The court largely granted this claim as well.
One of ADE’s defences was that Ferm had already disclosed the information itself during a presentation to another company. According to ADE, this meant that the information was no longer protected by the confidentiality agreement. However, Ferm demonstrated that it had also concluded a confidentiality agreement with this third party. The court therefore held that Ferm had taken sufficient measures to safeguard the confidential nature of the information. This part of the judgement highlights an important point. Having an NDA with one partner is not enough. An inventor must safeguard confidentiality throughout the entire chain of parties involved in order to protect their rights.
Conclusion
This judgement shows that a confidentiality agreement concluded before collaboration begins is important, including in the context of patents. An NDA not only helps preserve the required novelty for a patent. It also provides legal tools if a partner wrongfully claims your intellectual property. In practice, a well-drafted NDA can therefore play a key role in both obtaining a patent and protecting trade secrets.
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