NDA and should I use one?

TOP TIPS –

DO I NEED TO USE A NON-DISCLOSURE/CONFIDENTIALITY AGREEMENT?

Your business or “trade” secrets are one of the most valuable parts of your business and must be protected and in order to do this you will need to show that you have taken “reasonable” steps to actually keep them secret. One of the simplest ways of doing this is entering into an agreement with the other person or organisation (party) that they will keep any secrets you disclose as secret.

A confidentiality agreement usually referred to as a non-disclosure or NDA agreement is a formal written agreement which means that is whoever you have disclosed your business secrets to agrees to use them only in certain ways; otherwise they will face penalties/litigation. This type of agreement can work with everyone from employees, third parties who provide services/supplies to you, potential investors and any third party you are considering working with for any reason. NDAs should be signed before you discuss confidential aspects about your business and can be

– one way (e.g. the employee keeps your secret) or

– two way (e.g. for investment or business ventures where you may both be disclosing confidential aspects of your respective businesses)

Your business will need a properly drafted NDA (which you can probably use many times) but you may still be asking at this stage,

• is it worth it?
• am I just paying money for nothing?
• will it just be ignored anyway?

so  have listed my 6 tips to help you work out if it really is worth using an NDA

(1) What do I need to disclose?

Before you begin, be clear about what you want/have to disclose and

• only disclose to people when it is necessary – do I have to tell them?
• Disclose only what you have to – do they need to know this?
• Does the party you are disclosing to have the ability and motivation to protect your secrets? For example, can you clarify how aligning your interest with theirs will mean that it is to both your benefit to keep things secret. For example, with a licensee perhaps you can offer a royalty discount?

(2) Is what I want to protect a secret?

This may sound basic but, for example, there would be no point asking someone to keep a registered trademark secret because a registered trademark is already public and there are ways to search for them.

(3) Is the “secret” valuable?  

So, for example,

– your business’ strategic plans (that you may share with an investor) or

– technical information (how you make your product) would be valuable

– third party information which you are under a duty to protect anyway (such as card/payment information)

(4) Can I take “reasonable” steps to protect my secrets without an NDA?

This will very much depend on the secret and how you disclose. However, clarification of any obligations is always best in written agreement (it saves confusion and misunderstanding and is protective to both parties) so perhaps you need to think of a reason why you should not have an NDA? I can’t really think of any.

(5) What do I want an NDA to achieve?

Having an NDA in place means that if the other party breaches their obligations you can look at legal remedies which can include:-

• making them stop – obtaining a court order (an injunction) to make someone stop disclosing/using the information
• making them return the information
• obtaining compensation for losses that the disclosure/use has caused you (called damages)
• payment of your legal expenses in dealing with this

(6) Is my NDA going to be effective?

Disclosing your trade secrets is always going to mean a balancing act between

• the advantages of working with the third party to whom you need to disclose your secrets and
• the risk of disclosure of your secrets

So whilst it makes sense that your NDA needs to be clear it also means that in practical day to day terms you make it count. For example

• when disclosing written information, mark it “Confidential information subject to our NDA agreement of the 10^th June 2014”
• before a meeting announce, that “what is discussed during this meeting is subject to our NDA agreement of the 10^th June 2014”
• put a copyright mark © on your relevant documents

An NDA is an important way of protecting your secrets and whilst no agreement can offer you absolute protection an NDA coupled with your practical activities will be the best protection