The importance of a Non-Disclosure agreement (NDA)
Updated: Apr 25, 2021
If you’re beyond ground-zero on product development, there is a good chance that you know what an NDA is. If you don't then please continue reading! In its most basic premise, it provides a contractual agreement between parties that outlines information to be held confidential. It’s essentially the condom of the Intellectual Property world - it offers the best form of protection when you are collaborating with people, but it’s no guarantee.
When to use an NDA
The best practice is to always use one when discussing any sensitive details -
whether it be with manufacturers overseas or your gossiping Aunt. Therefore it can be relevant for collaboration with anyone such as employees, contractors, investors or bank managers etc. They are commonly used throughout business and your recipient will be most likely familiar with it. Some parties may be hesitant to agree to certain terms though, particularly if they are engaged in similar activities.
If any of the following scenarios require you to share confidential stuff, then rubber up with an NDA.
If you are pitching your idea to investors
When you are collaborating with contractors
Getting a manufacturer to produce your widget?
If employees or new hires are exposed to inner workings
Are you discussing financial information with clients?
What it covers
It should specify key details such as:
The key ideas or information to be withheld.
The ownership and/or licensing of information.
The context in which the information can and cannot be used, including exceptions.
The timeframe of confidentiality.
The return of confidential information or material.
Any other company-specific requirements.
What it doesn’t cover There are limitations to what an NDA is legally able to cover. If information is already known to the recipient, or known to the public in general, this does not provide grounds for confidentiality. Similarly, you may already have agreements in place with those parties, so ensure you are not double-wrapping the same clauses.
It also can't be abused by trying to withhold illegalities, mislead people or cover up misconduct. But they weren't your intentions anyway, right?
Creating an NDA The first step will be to assess the information that you consider sensitive or proprietary to you. This can take some consideration to clearly dictate the aspects of the design or process which are to be withheld. Next you will have to define the terms of your contract. The best way to approach this is by using an NDA template for reference. You can find many online, which are a sufficient basis for most small businesses. One basic example can be found here.
The importance of a well-written NDA is just as important as any other contract! I have given a modest overview of what an NDA contract does, but I recommend you to do further reading. A good place to start would be checking out the UK Government's advice. Depending on the value of your confidential stuff, you may want to consider hiring a legal expert to advise too.
Be sure to receive a signed copy back before any discussions take place!