All businesses have secrets. Non-disclosure agreements (NDAs) or confidentiality agreements are commonly used by businesses to ensure proprietary information is protected and will not become public. However, perceptions around NDAs is that often, wanting another party to sign an NDA be overprotective while not having an NDA signed may appear reckless. Below, we set out what to consider when deciding whether or not you should give an NDA and the valid way to make one.

Non Disclosure Agreement Samples

NDAs are good to use when erring on the side of caution, however, there are some particular circumstances where it is particularly beneficial to have an NDA ready.

  • New businesses – particularly about both employees and in negotiating new business propositions, sensitive information, is inevitably disclosed. Make sure your business and its ideas are protected before it gets off the ground.
  • Consultants – if you have been given access to confidential information, it is often a good idea to clarify the terms under which the information is shared and what your obligations are.
  • Contractors – often work is outsourced and an NDA is important to protect your business. Moreover, work may be sub-contracted to freelancers, in which case it is necessary to let the freelancers know their obligations and rights regarding any proprietary information.

Non-Disclosure Agreements

One of the main advantages of an NDA is that it is more adaptable to the needs of your business and is able to protect information much more specifically. An NDA allows you to define what ‘confidential information’ is, which may cover virtually anything. Your NDA should be as accurate as possible about what proprietary information cannot be disclosed to give you the best protection for your business. Additionally, you should set out time limits and consequences in the event of a breach of a provision of the NDA, e.g. seeking an injunction to prevent further disclosure.

Often, individuals may like to share proprietary information with other like-minded people. A trade secret may stop others from claiming your idea as theirs since it will protect valuable business inventions and information. However, the party should be able to prove they have made ‘reasonable efforts’ to protect the secret to make a compelling case. One of the easiest ways to show that reasonable effort has been made is to present NDAs signed by employees and business partners. Courts are unlikely to protect trade secrets if the party can’t show they have signed NDAs.

Caution for Startups

If your business is a startup and is looking for investment, be cautious of using an NDA. Some first-time startups that are too quick to pull out an NDA may turn away potential investors, particularly those that sit on several boards and can’t afford to be bound to broad NDAs. Additionally, since investors meet and hear hundreds of pitches, many of which many have similar themes and concepts as yours, they may be unable to completely protect your information and will be even more unlikely to sign an NDA.

Drafting your own NDA

It is possible to create your own NDA and have it signed; this will be a valid contract. However, it is better to find a lawyer to ensure that you have drafted the NDA correctly, to fill in the correct details and to make sure that you and your business are fully protected under the law. A contracts lawyer will also be able to fix any drafting issues. For example, if you have neglected to have an NDA signed before confidential information was disclosed, an appropriately drafted NDA may still protect information that was disclosed previously.

Anthony Lieu

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