Non-Disclosure Agreements

Menu 

Why Would I Need a Non-Disclosure Agreement?

One of the biggest mistakes a company can make (especially new ones) is to forget to issue Non-Disclosure Agreements (NDAs).  NDAs are used to keep the party you are contracting with from revealing any confidential information you share with them.  It is important to recognize when to use an NDA and to have an attorney draft one for you.

There are many times when it is appropriate to draft NDAs.  Large companies will have potential vendors and potential employees sign agreements before they are hired.  Investors are also usually asked to sign an NDA, particularly when trade secrets are involved.  Companies can have a multitude of reasons to produce NDAs and many types of information they want to protect.

NDAs can protect many different types of confidential information.  Good examples are unpatented inventions, financial data, customer lists, company strategy, and clinical trial data.  Your contract should define exactly what you believe should or should not be included as confidential.  There are many templates available online but the most effective NDA will be tailored to your specific situation.

You can change other aspects of your NDA as well.  Unilateral NDAs bind only the party that signs it and only protects the party that drafted the contract.  Bilateral NDAs will protect the confidential information of both parties.  You can also choose to adjust the term of the NDA and what legal jurisdiction will govern the two parties.  A lawyer is extremely helpful in this regard as they will know what language will be most effective.

If a party violates the terms of an NDA the other party can sue them.  However this does not guarantee an instant win in court.   In order to prevail the party suing most prove that any information released was in fact confidential, which is usually not simple.  It is also important to follow every detail in an NDA.  In Convolve, Inc. v. Compaq Computer, the NDA required information to be marked as confidential.  Comcast disclosed information but since Convolve never marked it as confidential they could not win in court.

Before deciding to use an NDA, evaluate your situation.  While a NDA could be helpful to protect yourself in court it does come with some negatives.  Producing an NDA can scare away a potential investor, vendor, or employee.  On the other hand an NDA can make an entrepreneur look more legitimate.  There is not set framework of when to use or not use an NDA.

If you need a business attorney to draft an NDA or any other contract you can contact Stone Law at 732-444-6303 or send us a message.