If you're trying to license your invention, you run the risk that someone will rip you off. Here are some ways to avoid trouble.

If you've developed a potentially marketable invention, you are faced with a dilemma. To make money from the invention, you must generally license the rights to it to another business, often a manufacturer or distributor. But in pitching the invention to potential licensees, you run the risk of disclosing so much information that the invention might be stolen or no longer protected by law.

Horror stories abound of unscrupulous businesses who feign disinterest in the hard work of an inventor, only to turn around and use the inventor's description of her work to steal the invention for themselves -- and reap huge profits. Some inventors have fought back in court and won millions -- money that rightfully should have been theirs in the first place. One study determined that trade secret owners prevailed in 75% of the cases -- poor odds for parties planning to steal. But winning these cases isn't easy or cheap.

Filing a Provisional Patent Application

So how can you shop your invention around without jeopardizing your rights? If your invention potentially qualifies for a patent, it may be worth your while to file a provisional patent application ($80 for small companies) and obtain "patent pending" status. Most often, this will deter ripoffs.

Using Nondisclosure Agreements

However, if you determine that the invention is probably not patentable, the best way to protect yourself is to have prospective licensees sign a nondisclosure agreement (sometimes called a disclosure agreement or confidentiality agreement) before you disclose any secrets. If someone signs a nondisclosure agreement and later uses your secret without authorization, you can sue for damages.

Nondisclosure agreements vary in format. Generally, they contain these important elements:

• a definition of what is and what isn't confidential information,
• obligations of the receiving party, and
• time periods.