Non-Disclosure Agreements: make sure you are protected before you disclose your confidential information
Non-disclosure Agreements (NDA) provide protection over information that you provide to another party – they put in place a confidentiality agreement on how information can and cannot be used. While you would usually not share your private business, information, or trade secrets outside of your organisation, there are some circumstances where sharing information may be beneficial to you, for example:
- If you are launching a brand-new service which you do not want your competitors to know about, an NDA would prevent any outsourced contractors from leaking information;
- Your business is being purchased by another company; you do not want any leaks coming from your employees before the deal goes public so you may ask them to sign an NDA; and
- You do not want your intellectual property to be stolen by potential investors who you will have to pitch this information to, so you ask them to sign an NDA.
When should you consider using an NDA?
NDA’s can be used in any situation where information needs to be kept private and where the party providing that information to others wishes to regulate how that information is to be treated. The best time to put an NDA in place is prior to the disclosure of any confidential information.
When should you consider signing an NDA?
NDA’s will usually be biased in favour of the party drafting the document as ultimately it is them who will be disclosing the confidential information. Because of this, if you are the party being asked to sign the NDA you should consider very carefully why certain clauses are included, and what their application could mean. You do not want to be caught out when using the confidential information the other part has provided you.
How effective are non-disclosure agreements?
If your NDA has been executed correctly, then it is legally binding. If the confidential information protected by your NDA is disclosed by the other party without your permission, or used incorrectly, and your business loses out, you can claim against them for losses and/or damages.
An NDA is only effective if drafted correctly. If drafted incorrectly, an NDA could become unenforceable and not worth the paper it is printed on.
The best protection is not to disclose confidential information. However, where disclosure of confidential information is required, you should take all practical measures to ensure that the information disclosed is adequately protected.
If you need any assistance drafting an NDA or you are presented with an NDA that you want reviewed, please do not hesitate to contact us.