What is a Non-disclosure Agreement and when would I need one?

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Non-disclosure Agreements (NDAs), also known as confidentiality agreements, are critical for many startup companies. A non-disclosure agreement is a legally binding contract between parties who agree to keep certain information confidential. “Confidential information” means information that is not readily available in the public domain.  These agreements set forth the confidentiality restrictions for business partners, employees, independent contractors, potential investors and other people that may have access to valuable information about your company provided to them while discussing a potential business transaction. NDAs are a great way to protect a party’s confidential information but they must be carefully drafted with state law taken into consideration to avoid jeopardizing the legal protections afforded.

Examples of information that may be protected include:

• Inventions, plans for an invention, or business idea shared with an employee, partner, potential partner, independent contractor, investor, or buyer

• Business plans, financial, marketing, and other confidential information presented to a partner, potential partner, independent contractor, investor, or buyer

• Ideas for new marketing materials, websites, blogs, etc. shared with employees

• Copyrighted software programs used or partially developed by employees or other technology shared with a potential buyer or licensee

• Confidential and proprietary information that may be accessed by employees or collaborators, including independent contractors hired by the business

• Information, plans, ideas, etc. generated among a working group

• Showing a new product or technology to a prospective buyer or licensee

• Receiving services from a company or individual who may have access to some sensitive information in providing those services

 

The NDA must be signed BEFORE you disclose any confidential information. If one party violates the NDA by not protecting the confidential information, the other party may sue for injunctive relief to stop the release of information and recover damages.