How to Use a Nondisclosure Agreement to Protect Business Secrets?

A nondisclosure agreement also otherwise known as NDA or confidentiality agreement is a kind of legal contract. Such contracts are signed between at least 2 parties who have confidential material, data or knowledge to share with one another. The access of such information to the party is restricted. The word non-disclosure itself says- not to disclose any information. Such agreements are mainly signed by business companies to understand each other’s potentials to create a business relationship.

Types of NDA

There are two main types: one-way and mutual. One way NDA is used when one party is obliged not to disclose the confidential information. While mutual one refers to both parties.

Key elements

When you file nondisclosure agreement, no matter the type, it should be short and just to the point. It should include the identification of the parties, the definition of what to treat as confidential, the scope of obligations of the receiving party, the term of agreement etc.

Trade secrets

You as an owner of a business may have such secrets as your sales plan, the list of customers, formula for a product etc. These are treated as confidential and valuable information of your business. Of course, even if these data is secret, nevertheless there are employees who may get the information during the work and after apply for their work in a competitor company. To prevent this leakage of information, you as an employer has a right to file NDA contract with your employee.

Use Nondisclosure Agreement

Nondisclosure agreement is mainly used in IT: particularly for the Internet and computer companies. It may be applied in a meeting with a potential suitor of the company. Before starting discussions, you can force participants of the meeting to sign NDA referring to any information which could be disclosed during the meeting. This will make you feel more confident to speak freely without restrictions.

To sound more precise, NDA can be used when:

  • You present an invention or business plan to your potential partner
  • You share marketing, financial, or any other crucial info with a future buyer.
  • When you show your new products to a prospective buyer.
  • You give your employee an access to confidential information while working with you.

Does NDA protect all kind of information?

No! The scope of nondisclosure information is limited. Not all data can be considered as a matter of NDA. Let’s bring some examples which can’t be included in NDA:

  • Anything which is part of public record
  • Information known to one of the parties beforehand from another source.
  • When the information is common knowledge to all professionals of the given field.

Of course, there may be other points as well, which you can fill with your attorney.

Violated NDA

You got to know that your business secret was revealed or misappropriated, i.e. your trade secrets were disclosed through theft, bribery or fraud? So, you have right to sue the party who committed it. As a party of NDA, you may be protected by trade secret laws based on Uniform Trade Secret Acts.

There are several steps that you can take in the case of violation of NDA. First, contact your attorney. He /she will find realistic ways to protect your trade secret rights and provide realistic perspectives for you to win the dispute.

Second, you should gather evidence. This may be easily performed with the help of an investigator. Obtaining evidence is very crucial because without evidence your claim will not be grounded and you will have to pay other side’s attorney fees and other damages caused to the other side’s reputation.

Third, you should determine the nature of the claim. One of your legal claims to make is to state that the suspect has breached the contract. Of course, this may be one of the claims and you together with your attorney may decide what other claims to submit.

And the last but not least step is to determine the amount of loss you have undergone and what you want instead. The loss depends on the nature of your business and the disclosed information. For example, if you wanted to get a patent, the disclosure of some confidential info may decrease your chances.

Summing up!

In fact, NDA is a very important legal tool for many business types but not all of them. Even if we mentioned that this may protect your confidential information and ban the other side to disclose it, nevertheless there are some risks to have a disclosed data. Only having NDA is not enough to save the business secrets. You, as a business owner, should take other steps as well to preserve the confidentiality of nondisclosure information.





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