Protect Your Business with Non-Disclosure Agreements
Every business should protect proprietary information when dealing with independent contractors, vendors, and other businesses. The best way to do this is with a non-disclosure agreement, often referred to as an NDA.
What is an NDA?
An NDA is an agreement between two parties to protect confidential information disclosed in a business transaction. Proprietary information can include business methods, finances, client lists, and anything that isn’t readily available in the public arena. If the NDA is breached, the injured party can sue for damages, an injunction against further disclosure, and attorney’s fees.
Directional NDA: In many situations, only one party requires the protection provided by an NDA. If you invent a new product, you are going to need an NDA from manufacturers, distributors, etc., before you discuss the product with them. While this may seem like common sense, most businesses fail to get this important document in place.
For instance, many businesses hire independent contractors, but they rarely have these individuals sign NDAs prior to disclosing important business information to them. Do you use a third party to create or maintain your websites? Did you obtain NDAs from any of them? If not, what’s to keep that party from using your business methods on other sites? A directional NDA can protect you against this.
Mutual NDA: As the name suggests, a mutual NDA protects the confidential information of both parties. A mutual NDA is typically used when two businesses are negotiating a joint venture. Each party must disclose enough information to make negotiations viable, but neither wants that information made public if negotiations fail. If negotiations go well, additional non-disclosure information will be incorporated into the joint venture agreement to protect additional information revealed during the partnership.
Refusal to sign an NDA
Alarms and warning lights should go off if a party refuses to sign your NDA. Unless they can provide a very compelling reason for the refusal, you should walk away from the business relationship.
When an NDA isn’t really an NDA
Just because a document is titled “Non-Disclosure Agreement” doesn’t mean it provides you with protection. You should always carefully read the language of an NDA because the document may establish that you are waiving all confidentiality rights. The best strategy is to have all documents reviewed by your lawyer before signing.
Obtaining non-disclosure agreements should be a standard practice for your business. Don’t expose your proprietary business secrets to others without this protection.
Need more help with non-disclosure agreements? Pamela Finnesand, The Business Maximizer can assist you! Schedule your complimentary Business Breakthrough Strategy Session today.
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