Handling Privacy Through Non-Disclosure Agreements

by Craig Anthony

3 min read

Often when a small business is starting out and trying to obtain resources, such as key employees, strategic partners, or venture capital, the owner tries to protect his idea as best as possible. Usually, this protection is done by creating a non-disclosure agreement, or NDA. So, if you’re in a business situation that requires some privacy and confidentiality, learning about NDAs may be beneficial.

Main Reasons for Creating an NDA

An NDA is a confidentiality agreement. Its main purpose is to protect confidential, sensitive, or proprietary information that’s shared between two or more people. NDAs are usually drafted by business owners who need to have conversations with outsiders of the company or even with employees inside the company who have access to the sensitive information. NDAs are drafted and signed by all people involved to prevent any proprietary technologies or processes from leaking to potential competitors. Basically, an NDA protects all you’ve worked for and built within your company from anyone stealing the idea and using it. A breach of an NDA can easily lead to legal action.

What to Do if Approached by Someone With an NDA?

Typically, if all the people involved don’t sign the NDA presented, there are no more discussions. It’s extremely important to remember that an NDA is a serious matter and a legally binding contract. So, care must be taken to understand all of the content of the NDA before signing it, no matter whether it’s coming from a business vendor, client, strategic partners, or even your own business partner. You should take your time to read every part of the document thoroughly, even the fine print, and be certain that you understand all of its clauses. Otherwise, you might find yourself in big trouble down the road if something you say or do violates the NDA (even if you didn’t realize it violates the NDA). After reading through the document, it’s a great idea to have an attorney review the document with you. NDAs are very popular, and most attorneys have experience with them. Simply put, don’t sign anything until you and your attorney can interpret and understand every single sentence in the NDA.

Common Elements of an NDA

Every NDA is different and tailored to the specific situation and business at hand; however, in general, there are five common elements that go into every NDA drafted. Whether you are creating an NDA yourself or hiring an attorney to write one up for you, make sure that the following sections are included as a bare minimum. First, have a section that clearly states who’s involved in the agreement, who’s disclosing information, and who’s receiving that information. Next, include a section that details how the person receiving the sensitive information can use it. Details on how the information can be copied, shared, and stored should be included here, too. You also need to include details about the timeframe involved with the agreement. Specifics on when the agreement goes into effect and for how long need to be written out. Lastly, you need to include information about what types of information are protected by the agreement and what happens if any of the people involved breach the contract. Payments due, rights forfeited, who pays legal fees, and so forth should all be detailed. Since businesses are based on secrets and protecting assets, an NDA can be a valuable tool for any business owner seeking to grow the company by exposing other parties to its valuable information. It’s not difficult to have a simple agreement drafted and reviewed by an attorney, and it may be something you want to have on file in case a you need one in a pinch.

References & Resources

Related Articles

Non-Compete Agreements and Their Enforcement: An Independent Contractor's Guide

A non-compete agreement is a contract or clause within an employment contract…

Read more

Protecting Your Small Business Software Idea

You’ve come up with a great idea for a software application and…

Read more

Social Networking and Privacy in the Workplace

Social media sites make it easier than ever for people to stay…

Read more