Reaping Innovative Rewards With a Well-Sown NDA
Whether you are a recently forged startup or rapidly growing business venture, you likely have a strategy, technique, procedure, trade secret, or some other confidential information you hold dear to your success. The uniqueness of your innovation certainly is worthy of protecting as you work to cultivate and fertilize it with the expectation of ultimately reaping its rewards at harvest time.
At some point in the lifecycle of virtually any business, however, the time will come when you want or need to share your confidential information with another party. Whether it be a customer, supplier, or consultant, chances are one or more strategic alignments with others will be deemed beneficial in order for your innovation to reach its full potential.
For example, have you ever wondered about how to prevent a departing employee from poaching key design or development ideas, or how to prohibit a third party service provider from sharing your original concepts with a competitor?
Confidentiality Agreements or Non-Disclosure Agreements (collectively, “NDAs”) permit you to exchange confidential information with others underneath the protection of legally binding contractual obligations that have appropriately identified your “secret recipe” and prohibited the receiving party from disclosing that information to anyone other than persons you authorize. NDAs may impose mutual restrictions on you and one or more other parties, or they can unilaterally proscribe one or more parties from disseminating your confidential information in a manner that does not comply with the NDA.
While many NDA forms express similar concepts and attempt to offer the same protections, keep in mind that variations in fact and circumstance should influence how the NDA is tailored to your specific situation. Fundamentally though, any well-drafted NDA should at a minimum seek to address:
- The business purpose of the agreement
- The definition of the confidential information being shared
- The exclusions from this definition of confidential information
- The nondisclosure obligations of the receiving party
- The use and access restrictions of the receiving party
- The remedies of the disclosing party in the event of a breach
- The return or destruction of confidential information
- The non-solicitation of employees of one or both parties
One startup-specific qualification should be noted here. If you are looking for potential investors in your business, careful thought should be given as to whether it makes sense to require them to sign NDAs before pitching your business. While a certain amount of due diligence is no doubt appropriate to vet investors and ensure your ideas are not stolen, practically, many investors will simply be unwilling to sign such a document. And, it would be a shame for you to expend significant time and resources to produce an NDA that is unusable.
Every business has tangible and intangible assets to protect, and a well-drafted NDA may just be the crucial legal document your business needs to solidify the safety of what’s yours.