As a startup owner with a profitable business idea, you must know how to utilise a confidentiality agreement. During the early stages of your startup, there is a range of things to consider, including protecting any intellectual property or whether or not a contractor is a right fit to assist you in growing your business. This article will explain why a confidentiality agreement may be useful for you, as a startup owner, and how to enforce it.
What is a Confidentiality Agreement?
A confidentiality agreement or a non-disclosure agreement (NDA) is a contract between two parties to facilitate and protect the exchange of confidential information. They are typically only used for the protection of confidential information.
Why is it Important to Me?
A confidentiality agreement can be useful, especially in the following circumstances:
- you have a product and want to negotiate a deal with another business;
- you want to beta test your mobile application and gather feedback from individuals to improve the application; and
- you are looking to bring another co-founder on board and want to ensure you choose the right person.
A confidentiality agreement enables you to share information, such as your business plans, models and ideas with others while protecting such information.
Continue reading this article below the formEnforcing a Confidentiality Agreement?
General
To enforce a confidentiality agreement, you must establish that the other party is breaching the contract. You will need to prove either an actual or anticipatory breach. Generally, it is prudent to first attempt to resolve a breach of a confidentiality agreement informally, outside of the Court. This is both cost effective and time efficient for the parties. To initiate this process, you will need to write a formal letter to the other side highlighting the alleged breach, what you intend to do and the damages you seek.
If you do not feel comfortable handling the discussions, you may also consider mediation. An experienced mediator can facilitate discussions for both parties and aid in resolving the issues.
While a dispute resolution process, such as mediation, is recommended in your confidentiality agreement, it is also important to ensure you still have a right to seek an injunction or specific performance from the Courts. This is especially important when the other side publishes confidential information online. Here, an injunction will allow you to remove confidential information from the public domain as soon as possible.
Overseas
For example, if your business operations are in New South Wales, you may wish for the governing law and jurisdiction to be set to New South Wales as you will have greater familiarity with the laws and regulations you must comply with.
However, it is not unusual to set the governing law or jurisdiction for handling disputes in a different location. For example, suppose you are in discussions with a supplier in the United Kingdom. You may agree that Australian law will apply, but a court in the United Kingdom will rule the matter. If you are a startup owner with an online business, it is important to consider the governing law of your contracts as a whole, apart from the confidentiality agreement.
Additionally, you should have an arbitration process in your confidentiality agreement where you are engaging an overseas party. This means that the parties must pursue arbitration before seeking judgement in a court. You should consider where you want the arbitration to take place, and what rules will apply to the arbitration. The parties may agree on a neutral country to carry out arbitration and work towards resolving the dispute that way.
The LegalVision Startup Manual provides guidance on a number of common challenges faced by startup founders including structuring, raising capital, building a team, dealing with customers and suppliers, and protecting intellectual property.
The guide includes 10 case studies featuring Australia’s top VC fund partners and leading Australian startups.
Key Takeaways
Having a confidentiality agreement as a startup owner is important as it allows you to protect your business’s confidential information. This is especially useful in the early stages as you consider working with third parties. If the other party breaches your confidentiality agreement, you may seek mediation or a remedy through the courts. You may also seek arbitration, especially where the other party is located overseas.
If you need help with non-disclosure agreements, our experienced startup lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A confidentiality agreement, otherwise known as a non-disclosure agreement (NDA), is a contract between parties to facilitate the sole exchange and protection of confidential information.
You can resolve this outside the courts by writing a formal letter to the other party. If you are unsuccessful, you can seek mediation or commence court proceedings. If the other party is located overseas, you may consider arbitration.
We appreciate your feedback – your submission has been successfully received.
