In this ‘IP Tool Box Series,’ I’ll be discussing the ever useful, Non-Disclosure Agreement. I’ll explain what it is, why it is an important tool, and why it should be considered more than just a clerical form.
What a Non-Disclosure Agreement is:
A Non-Disclosure Agreement (NDA), or Confidentiality Agreement (CA), as the names imply, are contracts, with agreed upon terms, that legally bind the signees from disclosing confidential, non-public information. The non-public information protected under an NDA or CA can range from a client list, to a production process, to a secret recipe or any other non-public information. In other words, the NDA generally protects a company’s trade secret(s) or proprietary information. A trade secret is a company’s unique assets, as it is usually that which sets a company apart from its competitors (e.g. the Google(R) search algorithm).
The NDA is a flexible document and can be altered to fit specific needs. In a unilateral agreement, it is important for a “disclosing party” to layout what is considered to be confidential info and it is equally as important for the ‘receiving party’ to understand their obligations to protect it. In the case of a joint venture or merger, there is also the option to use a Mutual (Bilateral or Multilateral) NDA, which would cover both or all parties receiving and disclosing confidential information. For any type of NDA, it is imperative that the document lays out requirements, so that all parties understand their duties and their rights.
Why the Non-Disclosure Agreement is Important:
In the ominous words of Benjamin Franklin, “Three may keep a secret, if two of them are dead.” Luckily for us in the modern age, when duels are illegal, we have a civil way to ensure secrets are kept…the paper form. These days, a paper form can carry as much weight as a bullet would have in Mr. Franklin’s time. This is important progress, because honest business can’t take place in a world of mistrust. Without an NDA it is difficult to openly discuss business proposals with Third Party vendors, consultants, contractors, investors, partners, buyers, or licensees. People must collaborate with others in order to grow, so trust must be able to be formed, and an NDA allows that to happen.
A commonplace example of the NDA’s abilities, is when an employee, like those in the Intellectual Property field, must sign an NDA as the first building block of trust with a new company. Many of those in the manufacturing field are also required to sign Non-Soliciting and Non-Compete Agreements. These agreements regularly accompany an NDA or the protective language is part and parcel of the NDA itself. Like the NDA, the Non-Compete and Non-Soliciting Agreements are usually straightforward documents, but their importance should not be underestimated.
Why the Non-Disclosure Agreement is more than just a form:
One can find and download a typical form and complete it with limited guidance, but an experienced attorney could prove invaluable. This is because the worth of any document is in how well it is written. An attorney must strike a balance between writing a document so broad that its intentions are not clear and writing language so narrow that loopholes are present.
An NDA can become intricate, the more parties that are involved, but even a simple NDA may not be what it seems. An experienced attorney can easily review another company’s NDA to recommend adjustments. More importantly, a simple review can even save a company from signing away its rights, if an agreement waiving your rights is misrepresented as an NDA. Legal jargon can easily make an agreement appear to be innocent to the untrained eye. Don’t let yourself or your company be fooled.
Willing help in the form of an experienced legal team is here and is just a call away. Please contact us if you have been presented with an NDA or need one to protect your proprietary information.