When Do I Need a Non Disclosure Agreement?

By:Christina Morales

trade-secret“No man is an island.” “It takes a village to raise a child.” “Behind every great man is an even greater woman.” Yep, there are a ton of different clichés on the benefits of teamwork. While they may not all pertain to entrepreneurs or inventors, the fact still remains that any business needs a partnership of advisors with various expert knowledge to truly thrive. However, the question remains, “How do I protect my intellectual property during the process of launching my idea while I enlist the help of other professionals?”

Let’s say that you have created a new sauce for your restaurant. You call your friends over to try it to get their opinions. They ask, “What’s in this? It’s awesome!” Next you contact a food vendor to order the ingredients to your new sauce and then call a packaging company to create little pouches for your condiment. You make an appointment with your business advisor to discuss your finances and determine how much you should invest in marketing this new product. After that you train your employees to make your addictive topping and the customers come pouring in. But oh no! Your competitor somehow launched a new marketing campaign featuring their new sauce that is suspiciously similar to yours. Who shared your secret?

So should this restaurant owner have had an NDA created and who should have signed it? The basic purpose of a non-disclosure agreement is for keeping information protected and should be implemented anytime confidentiality is crucial. These agreements are most appropriate for instances when information sharing between two parties is necessary but it needs to be kept confidential from the general public. This information could include competitive advantages, potential business opportunities or intellectual property for which you are planning to file a patent application. You don’t want a competitor to steal your idea or for a current employee to resign and get hired on by the opposition.

In general, an NDA should include an description of the information that is to be kept confidential, under which circumstances the signing party may use the confidential information, and the terms of the agreement. Unfortunately, no business or NDA is exactly alike, so enlist the help of your contract attorney to write up an agreement that specifically suits your situation. Any discrepancies or loopholes could hurt you in the end.

On the downside, it isn’t always easy to get outside parties to sign your NDA’s, particularly venture capitalists and other financers since they tend to come across so many inventions. However, as in the restaurant example, you should certainly have your employees who come in contact with the specifics of your IP sign an NDA and non-compete agreement. What about the others in the testing and manufacturing phases? I would first consider if the information I am sharing could hurt my business; if you are ordering mayo, mustard, and ketchup from a general vendor, then you should be safe, but when in doubt, call your lawyer!#NonDisclosureAgreement


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