Introduction to Non-Disclosure Agreements (NDAs)

While it is often tempting to seize an opportunity to pursue an advantageous business relationship without waiting for paperwork to be produced and signed – whether one is an inventor with a new software application that he/she wants to bring to market or an established business with a potential joint venture in mind – it is essential that both parties agree to a non-disclosure and confidentiality agreement (commonly referred to as an “NDA”) prior to the commencement of such sensitive discussions.

NDAs serve a valuable role in memorializing the understanding that, pursuant to exploratory discussions and subsequent transactions, one party (or both) will be disclosing certain proprietary and/or confidential information that the disclosing party intends to protect from possible unauthorized use, or theft, by the party receiving the confidential information.  Only when such protections are agreed to in writing should both parties feel truly secure in sharing valuable trade secrets and business ideas with the other party.

A Multi-Purpose Agreement

As alluded to above, NDAs are useful in multiple contexts.  By way of example, but by no means an exhaustive list, NDAs can: (1) help inventors, designers and developers safeguard a new idea, software application or invention while pursuing funding or a strategic marketing relationship; (2) allow two established businesses to pursue a joint venture, business combination or other strategic partnership while protecting business strategies, marketing plans and other proprietary business approaches; and (3) enable a business to hire a third party contractor or new employee, while protecting sensitive proprietary information that might be disclosed to that contractor or new hire.

Customization Recommended

The specific provisions contained in an NDA will often vary depending on the purpose of the prospective relationship.  For example, some NDAs will only protect the proprietary information of one party – where only one party is disclosing sensitive information as in an employee/independent contractor relationship – while other NDAs will be mutual, and protect the confidential information of both parties.  The duration of the protection might also vary depending on the nature of the discussions/underlying transactions, as well the burden of proof for proving compliance with the terms of the NDA and dispute resolution provisions.

It is highly recommended that you retain qualified legal counsel to ensure that any NDA that you use, or agree to, provides adequate levels of protection to safeguard your interests, while anticipating potential conflicts and other contingencies.