It’s hard to put a price on intellectual property (IP). However, keeping IP confidential is crucial for a company’s continued success.
That’s why it’s best not to leave anything to chance and ensure your company’s IP is protected. One tool you might use is a non-disclosure agreement (NDA).
What are NDAs?
A non-disclosure agreement is a legally binding contract between two or more parties that safeguards sensitive information. NDAs ensure that the protected information isn’t shared with anyone else without permission. Without an NDA in place, the information could end up in the hands of competitors or unauthorized individuals, thus harming the company’s profit.
NDAs also encourage collaboration. Once an agreement is signed, the invested companies have a safe space for sharing ideas without the fear of misuse. Signing an NDA with an investor allows you to pitch a business idea with the assurance that it won’t be shared with a third party.
There are three different types of NDAs:
- Unilateral: one party shares the confidential information and the other party agrees to protect it, i.e. employer-employee NDA
- Mutual: both parties share sensitive information and agree to keep it confidential.
- Multilateral: three or more parties share and protect confidential information.
All NDAs should include the following information:
- Involved parties
- Type of NDA
- A clear definition of what is considered confidential
- Any exclusions
- How the receiving party will protect the information
- The duration of the NDA
- Penalties for violating the NDA
Considering the importance of an NDA and the proprietary information it protects, it should not be made without assistance. There is the risk that it may be broad or vague, leading to loopholes. It’s also imperative that any NDA complies with state and federal laws and is enforceable in any disputes that may arise. Remember, an NDA alone might not be enough to protect everything, so it is important to understand the full range of options available.