As we sometimes say “Keep it on the down low”.  You have a great idea!  It’s going to take a lot of hard work to develop that idea into a product so it would be a shame to have it stolen.  That’s where an NDA or Non Disclosure Agreements come into play.  Notice: we are not lawyers!  We’re not qualified to give legal (or marital) advice.  We just want to share the information below to help get you started with guarding your valuable information.

What is a NDA?

A non-disclosure agreement, or NDA, is a legal document between two parties that protects sensitive information.  Basically, the parties agree to not disclose the information covered by the agreement.  These agreements may be referred to alternatively as confidentiality agreements (CA), confidentiality statements, or confidentiality clauses, within a larger legal document.  An NDA is typically put to use any time that confidential information is disclosed to potential investors, creditors, clients, or suppliers.  There are two primary types of non-disclosure agreements: unilateral and mutual.  A unilateral agreement is a contract that stipulates one party to the agreement agrees not to reveal confidential information he or she learns on the job.  The majority of non-disclosure agreements fall under this category.  A mutual non-disclosure agreement is typically executed between businesses engaged in joint venture that involves sharing proprietary information.

Why should I use one?

As Benjamin Franklin (and my grandmother) said, “An ounce of prevention..etc. etc.”  An NDA is essential for businesses to maintain a competitive advantage.  If you are developing a new product, writing content, or otherwise developing something for sale, you may need to contract out or hire someone to help.  Business owners often need to discuss proprietary or sensitive information with outside individuals.  Having confidentiality in writing and signed by all parties can deter theft of intellectual property.  Without such a signed agreement, any information disclosed in trust can be used for malicious purposes or be made public accidentally.

What should be included in the NDA?

Let’s say you’ve come up with the next best thing since sliced bread. Or maybe a better bread slicer!  While patents and trademarks are important there may be other details that make your idea special and are important not to share with your potential competition like:  secret recipes, proprietary formulas, and manufacturing processes.  The exact nature of the confidential information should be spelled out in the non-disclosure agreement.  Regardless of its function or the information it protects, NDAs should contain a few specific parts: the categories or types of information covered by the agreement; obligations from all involved people or parties; and time periods.

To make the agreement as clear as possible, all of the items that you want to be covered by the agreement should be mentioned.  Remember that the NDA does not protect information or types of information not explicitly outlined in the agreement.  It should also include the specific obligations of the recipient of the confidential information.  These are most often explained as the recipient’s duty to hold and maintain the confidential information.  Time periods are also commonly addressed in NDAs and usually require that the party receiving the information stays doesn’t share or use it for a number of years.  This specific information is usually up for negotiation.  Some NDAs will bind a person to secrecy for an indefinite period of time, so that at no point in time can the signer divulge the confidential information contained in the agreement.  Five years is a typical length of time for US contracts.

I know, you have enough details to worry about and this is just one more thing to add to your long To-Do list.  The good news is that once you have an NDA written, it’s very easy to plugin new names and companies.  You typically only need to get an NDA written once, and use that as a template for future NDAs.  Sign up below to receive one of our Aire Plastics NDA Templates.

Non-disclosure agreements are key for any inventor, product developer or entrepreneur.  Don’t underestimate the value of this important document while getting your project up and running.