What Should You Include in Your Non-Disclosure Agreement?
The right business law tools can help you protect your business, yourself, and your customers. Working with an experienced attorney to develop contracts that provide security for your business is an important step whether you’re just launching your company or are working down the line to continue scaling.
Clarity in contract language is critical in any type of agreement. That definitely includes a non-disclosure agreement, or NDA.
When Might You Need an NDA for Your Business
You might want an executed NDA anytime you have confidential business or customer information you want to protect. You might ask employees, business partners, vendors, or clients themselves to enter into NDAs.
Here are a few examples of times when NDAs might be important:
- During hiring processes. If you want to disclose sensitive company information during interview processes so applicants can better understand if they are a good fit for your organization, you may want to have them sign an NDA first.
- For employment. Your employees may have access to sensitive information, including proprietary formulas or designs, financial data, or customer data. A good NDA can help you protect that data.
- When partnering with other businesses. If you’re working closely with a software vendor, lawyer, accountant, or other service provider, they may need confidential information to provide those services. Including NDA provisions in your contract with those entities can help protect your company.
Common Types of NDAs
NDAs can be unilateral, bilateral, or multilateral.
- Unilateral NDAs are one-way contracts. One party promises to hold confidential the information of the other party. This is typically the type of NDA involved in employment contracts or signed by contractors or buyers.
- Bilateral NDAs are two-way contracts. Both parties agree to hold confidential the information of the other party, and both parties disclose some information. These types of NDAs are common in certain types of business partnerships and in mergers and acquisitions.
- Multilateral NDAs involve more than two parties. This type of NDA isn’t as common as the other two, but it may be used in complex negotiation situations.
It’s worth noting that you can’t simply ask anyone and everyone to sign NDAs. Typically, NDAs must include consideration — the party signing the agreement must get something in return. This consideration can be “potential.” For example, a potential vendor might sign the NDA to enter deeper into contract negotiations in the hopes of making a sale.
What to Include in Your NDA
Knowing what to include in your NDA can help you create a stronger document that is more likely to hold up if you must put it to the test in court. Here are some essential elements to include in any NDA:
- A definition of the information considered confidential (and therefore impacted by the agreement). You can’t simply assume that all information shared during the relationship is covered. An NDA that doesn’t define the confidential information is unlikely to hold up later.
- A time period for the NDA. NDAs tend to be stronger when they include a reasonable time period for valid enforcement. For example, you might require employees to hold certain information confidential while they are employed and for five years after termination of employment. In some cases, such as with proprietary product formulas, you may expect employees to hold the information confidential forever.
- The parties involved in the NDA. Ensure the right companies and people are listed and that everything is spelled correctly.
- A clear description of the responsibilities of the parties. Ensure you include provisions that make it clear how the parties will access the information and what their duties are in protecting it. For example, if information is provided digitally, you may want to create provisions that ensure parties to the NDA don’t save the information on their own servers, as this could put the information at risk.
Why Exclusions Are Critical and What You Might Want to Exclude
Another item to include in your NDA is exclusions. If you don’t properly exclude certain information from the NDA, it may be deemed too aggressive and not hold up in court.
Here are some things that you might want to exclude in your NDA:
- Independently developed. If you restrict someone from disclosing information they independently developed, without reference to your confidential information, the individually developed information may not be protected by the agreement.
- Publicly available information. If information is available to people who did not sign the NDA or is readily available via public access, you can’t typically protect it with an NDA.
- Anything that contradicts employee rights or other laws. For example, you probably can’t enforce an NDA against someone if they disclose information as a legitimate federal whistleblower or in seeking legal recourse for harassment or discrimination.
Draft Your NDAs and Other Contracts With Confidence
Working with an experienced legal team to draft your NDAs and other contracts can help you rely on those documents to protect your business. The team at InPrime Legal provides guidance and help in creating contracts and other business documents that best support your goals and business objectives. We can also help you uphold those contracts in the future.
For more information about our various services or to find out how we can help you shore up NDA processes for your business, give InPrime Legal a call today. Reach out to schedule an appointment by calling 770-282-8967.