To maintain a competitive advantage, businesses must keep working projects, innovative ideas, or exciting new products secret lest they fall into the hands of a competitor. If you are running a business, or are about to start one, you know that there are numerous instances where you end up sharing confidential information with another party. And this fear of your data or information being misused sinks in.
There is a solution to brush aside your fears. It’s those three impressive letters: NDA or non-disclosure agreement.
A non-disclosure agreement or NDA is a written contract between two parties (people or organisations) that prohibits the sharing of confidential information shared between both ends.
As Benjamin Franklin said, “An ounce of prevention..etc. etc.” An NDA is essential for businesses to maintain a competitive advantage. If you are developing a new product, writing content, or otherwise developing something for sale, you may need to contract out or hire someone to help.
While patents and trademarks are important there may be other details that make your idea special and are important not to share with your potential competition like secret recipes, proprietary formulas, and manufacturing processes. The exact nature of the confidential information should be spelled out in the non-disclosure agreement.
Not all of a business’s dealings are meant to be kept confidential. Public records such as information filed with the Securities and Exchange Commission or the address of the company headquarters are not covered by an NDA.
Non-disclosure agreements are a key legal framework used to protect sensitive and confidential information from being made available by the recipient of that information. Businesses use these documents to ensure that their ideas or methods won’t be stolen by people they are negotiating with. Anybody in breach of an NDA will be subject to lawsuits and penalties commensurate with the value of lost profits. In certain jurisdictions, a breach is a criminal offense.
NDAs may be unilateral wherein only the recipient of the information is required to keep silent or mutual where both parties agree not to share each others’ sensitive information.
While you create an NDA for your business, we recommend that you take care of the following:
- Ensure that all the information mentioned is precise and the language used is simple and well defined.
- You should make the involved parties review the NDA and orally explain it.
- Do not write unnecessary clauses or use contradictory sentences while conscripting the document.
- Ensure that the document has an expiration date and if need be, renew the same if required.