Nailing the NDA – Writing a Non-Disclosure Agreement
Today’s business world is a global marketplace, fueled by networking and the cross-fertilization of ideas. As an entrepreneur, you want to join forces with talented professionals who can help expand your business and make your big ideas into reality. The internet makes finding such collaborators easier than ever. However, before you start sharing your ideas all over the world, you need to take steps to protect your intellectual property. That’s where the non-disclosure agreement (NDA), also known as a confidentiality agreement, comes in.
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What’s that?
A non-disclosure agreement is a document that protects confidential information. Anybody privy to valuable intellectual property, whether they are an employee, a partner, a client, a consultant, a vendor or an investor, should be asked to sign one.
Do I need to use this non-disclosure agreement for everything?
No, and you don’t want to overuse it. People dislike hassle, and a powerful party like a potential investor will often walk away from the prospect of signing an NDA, in favor of a project that doesn’t require one.
Here are two examples of situations involving intellectual property. One is NDA-appropriate and one is not.
Not NDA-Appropriate : An idea for an oxygen-run robot that churns out macaroni and cheese.
NDA-Appropriate : An idea – including blueprints, calculations and a list of potential materials – for an oxygen-fueled macaroni and cheese robot.
See the difference? The first idea is just that – an idea. It may seem original, but technically someone else could have thought of it. The second idea warrants a non-disclosure agreement because it includes data – specific plans, blueprints, etc. – that can be used to bring the idea to fruition. In other words, it contains intellectual property that someone else couldn’t just think of, and is therefore in need of official legal protection.
So, what goes into a confidentiality agreement?
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A typical non-disclosure agreement should contain the following:
- Names of all involved parties
- Governing jurisdiction – The state or municipality under whose law the NDA is enforced. In some circumstances, Federal Law might govern the agreement, if the intellectual property is registered with the United States Patent and Trademark Office.
- Definition of confidential information – List all items of information covered by the agreement, such as vendor lists, financial data, blueprints, etc.
- Terms – There should be two terms defined in your confidentiality agreement – the time period during which the information must be kept confidential and the time period during which the NDA is binding.
- Permissible forms of use – Define the way in which signers must treat confidential information, ie: to only discuss it to authorized persons when necessary, to only use it for official purposes, etc.
- Exclusions – Clarify what types of information are not confidential. These generally include information that is already known to the public, known prior to the NDA, or disclosed to the signer by another source.
- Permissible disclosure – List instances, such as court orders or subpoenas, in which signers may disclose protected information.
These are just the basics. Some states may have additional provisions for non-disclosure agreements. When drawing up your NDA, be sure to check your state’s official website for any requirements.
