Is A Non-disclosure Agreement Critical in Protecting Your Competitive Advantage?

non-disclosure agreementA lot of companies established their brands because of their unique products and processes. This may include secret recipes, training materials, schematics for a new product, client information, sales and marketing plans, or a unique manufacturing process.

Sometimes, even if you and a competitor are selling similar products or services, yours may have an edge. As such, they will want to know what makes your business different, what gives you that edge. With this in mind, you naturally will want to protect your competitive advantage, such as your trade secrets, that are crucial in building your business and your legacy.

One of the best ways to do so is through the use of the non-disclosure agreement (“NDA”). This contract creates a legal obligation of confidentiality and compels the other party to keep your confidential information top-secret or secured.

What are the advantages of non-disclosure agreements?

✔ NDAs protect sensitive information. When participants sign an NDA, they promise not to disclose or release information shared with them by the other parties involved. The affected party may claim breach of contract if there is a proven leakage of information.

✔ NDAs can help inventors of new product or concept development to retain their potential patent rights. An early disclosure of an invention may make it difficult or impossible for the inventor to protect the invention with a patent. However, a properly drafted NDA can help the original creator hold onto the rights to a product or idea.

✔ An NDA should specifically identify which information should be protected. This makes sure confidential information is protected. NDAs expressly outline what information is private and what is fair game.

How do I create a non-disclosure agreement for my business?

Consulting an intellectual property attorney or a patent attorney will give you more information on the best way to protect your business interests. The following basic information provides general guidelines, but you should contact an experienced attorney for additional information on drafting a non-disclosure agreement that will work for your business.

  • Find out if a non-disclosure agreement is even necessary.

You do not need to require everybody you hire in the company to sign an NDA. Choose only those who will potentially have access to confidential information. For instance, maintenance personnel like janitors and restroom attendants generally will not be required to sign an NDA unless they have access to sensitive information. However, a management team member, an executive assistant, or a secretary may have more reason to sign an NDA, since they may have access to confidential information.

  • You do not need an NDA if the information you wish to protect is common knowledge or may have been disclosed before the agreement was signed.

You cannot use an NDA if the information you wish to keep secret is widely known or is, in fact, another person’s property. Courts will be hesitant to enforce NDA’s if they are used too broadly or for non-confidential information.

  • You need to specify which information may not be disclosed.

This will make it easier for the other party or parties to comply with an NDA if they are aware of the information they are not at liberty to discuss. Be clear what the confidential or secret information is. Bear in mind that the objective of the NDA is to make sure the trade secrets remain secrets and that employees do not disclose them. The NDA is not meant to generate revenue by suing employees who may have committed a breach of contract. Be as specific as possible. Make sure the agreement is drafted in such a way that your employees understand what they are allowed or not allowed to discuss.

  • You need to find out when and where your employee may actually need to reveal the confidential information.

There are times that an employee may need to share confidential information to outsiders to do his or her job. For instance, your employee may need to provide information about an invention to a manufacturer so that a prototype can be produced.

You must be clear on the exceptions in the agreement and include any steps that must be taken in order to protect the confidential information. For instance, you may require your employee to have the party receiving the information sign its own NDA, prior approval by management, approval of the legal team before the disclosure, or all of the above.

  • You need to clearly identify that you, as the employer own the rights to the confidential information.

While you may share confidential information relating to intellectual property with your employee or contractor, and your employee may even add more information through their services, you should be clear that you retain ownership of that information and any additional information that may come in during the course of the employee’s duties. The employee’s contribution to the product or process generally belongs to the company, and the NDA should clearly state your ownership of the information that pertain to the innovations.

  • You need to find out in advance what actions you will take if an employee or contractor breaches the NDA.

Typically, any NDA will include a provision for monetary damages should the bound party improperly disclose the confidential information. In some cases, this can be actual damages, or it could be liquidated damages. Liquidated damages allow for the recovery of a predetermined amount when a breach of contract happens and the value of the harm caused may be difficult to determine. Be aware though that, in most cases, this payment may not be enough to compensate for the damages brought about by the leak of the confidential information causes.

Contact a Washington, D.C. NDA Lawyer

It will be in your best interest to worth with an experienced patent attorney to help your company both in preparing an NDA and helping you to enforce it should a breach occur. Protect your intellectual property and competitive advantage by getting the services of a trusted IP attorney in Washington DC. Call us at War IP law for a free initial consultation.