What is a Non-Disclosure Agreement?
A non-disclosure agreement is a contract in which a person with whom you share confidential information agrees not to divulge that information to others. A non-disclosure agreement may protect things that cannot be protected by a patent, trademark or copyright. For example, if you have an idea for a new process or a new piece of software, but the idea has not been fully developed, you may be eligible for a patent. Nevertheless, you do not want someone else to take your idea and use it. A non-disclosure agreement will allow you to take legal action against someone who takes your non-patented intellectual property.
When Do You Need A Non-Disclosure Agreement?
- For potential investors or business partners: In order to convince a potential investor to take a chance on your idea or product, you need to provide enough information for them to make an informed decision. A non-disclosure agreement will protect you from having those potential partners or investors use your ideas somewhere else. However, as Uber founder Jonathan Long explained in an article for Entrepreneur magazine, you may need to compromise a little when dealing with venture capitalists.
- For employees and contract workers: It is impossible to run your business without disclosing some proprietary information to your employees and contractors. If an employee leaves, you do not want him to start his own business using your customer list, unique processes, or other confidential information. You certainly do not want an employee to use your confidential information to help a competitor if he changes jobs. It is even more important to use NDAs with independent contractors, as there is a chance that the same contractor might be working for you and one of your competitors.
- When you are selling your business: If you are talking to potential buyers, you will need to give them enough information to make an informed decision about its value. However, you have to be careful that a potential buyer doesn't use your trade secrets or customer lists to become one of your competitors.
Drafting a Good Non-Disclosure Agreement
There are forms for NDAs available online, but a one-size-fits-all form may not be sufficient to protect you. A good NDA will cover the specific trade secrets and proprietary information that you are trying to protect. It will also be drafted for the specific category of person you are dealing with. Make sure you consult a qualified business lawyer who knows your business, the types of information you need protected, and the individuals who will be signing the agreement. Call the law firm of Williams and Jordan at (814) 315-9255, or contact us here for more information.