Many budding entrepreneurs start businesses – usually with friends, family or colleagues. If you were or are one of these people, you may have had disagreements on the vision of the company or you wanted to keep your family recipe confidential. Problems like these are a dime a dozen when running a business and a typical solution is to have the stakeholders of a company sign a Non-Disclosure Agreement (NDA).
What is an NDA?
An NDA, also referred to as a confidentiality agreement, is simply a legal contract between two or more parties that signifies that a confidential relationship exists between them.
You may think that asking your partners to sign an NDA might be insulting and that it is a sign that there is a lack of trust within the ownership group. In fact, it is the opposite. It is a sign of mutual respect amongst stakeholders of a company to keep the value and methods of that company within its walls and with its stakeholders.
There are a multitude of reasons to sign one. Many business concepts begin with the discussion of a problem that a consumer has and a solution to fix it. Once that discussion moves toward “HOW” that solution will be created and maintained, you might want to think about an NDA.
If you have put a significant amount of work, time or shared information that is helpful to a company’s profitability, you will want to sign an NDA so your work is not exploited or duplicated without compensation. Another reason to sign an NDA is to save yourself and the company from legal fees if there is a breach. A long drawn out battle can be simplified with a contract that specifically states the restrictions on disclosure.
What are some of the key inclusions of an NDA?
- Clearly defined confidential information
- Clearly defined confidentiality obligations and right to take action
- Clearly defined time duration for the validity of the agreement
- Any appropriate clauses includingNon-solicitationuse, Assignment of Intellectual Property Rights, Non solicitation, etc.
- Are there obligations to return information to a specific party and what are the clearly defined steps of returning such information
- Clearly defined and proportional responses to a breach of contract
While there are many reasons to sign, there are also times when signing an NDA can limit your opportunities and stifle innovation. For instance, it is smart to have all employees sign an NDA to prevent your business processes and trade secrets from going directly to a competitor should that employee leave the company. But it wouldn’t be smart to force everyone meet out on the street to sign one. No one will like you and they won’t care about your idea.
Whether you are certain that you need an NDA or aren’t quite sure if it is necessary, never try to write one yourself. Contact an Orlando business law attorney to help you through the process.