These days, information is can be the most valuable asset a business can own – so how do you protect it when entering into a new business partnership? Confidentiality or Non-Disclosure Agreements (NDA) are used in a wide variety of business relationships, where protection of one or both sides’ confidential information is essential, whether it’s customer and contact lists, design concepts or logo material, employee data or the protection of non-patented inventions being presented to a manufacturer or new investor.
Here are four quick tips to keep in mind when crafting an NDA for your business.
1. Define the confidential information appropriately
Your first question should be what information needs to be protected? The key to a successful and enforceable NDA is an accurate and comprehensive definition of what information is confidential and covered by the agreement. If you are intending to “open your books” then it should be an exhaustive definition that covers all business information disclosed in the course of negotiations, the relationship or for the purpose of the collaboration. Without a definition, you may have difficulty enforcing the parameters of the NDA in a later dispute.
2. Permitted purpose
You should specify the purpose for which the confidential information is being disclosed and can be used. This will limit the recipient’s use of the confidential information to that prescribed purpose. Any other use for any ulterior purpose will be a breach of the agreement, with liability consequences.
3. Disclosure to employees
If you are disclosing information to a company or entity, then the information will often need to be shared with the directors and/or employees of that entity. An NDA can ensure that the original recipient is held responsible for the actions of their employees and others in possession of the confidential information and place limits on who can receive the information, minimising the potential distribution of your confidential information.
4. End of the agreement
Consider the “end-game” – NDAs should make clear what happens to the information at the end of the business relationship, whether this occurs upon the expiry of a fixed term on a certain date, or when certain conditions are met. Details to cover here include the return or destruction of any confidential information still in the possession of the recipient and a continuing obligation to not disclose.
The above tips are designed to minimise the risk of your confidential information being released to the general public and to give certainty to the contracting parties. If you are considering a business collaboration or commercial joint venture, we recommend that you seek professional advice on whether an NDA is an appropriate mechanism to protect your information.