Answers to Common Questions About Non-Disclosure Agreements
Your intellectual property is vital to the operation of your business. Non-disclosure agreements will help to protect that property while you are developing and marketing your product and growing your company. In this article, San Jose non-disclosure agreement lawyer, Marc Freed, answers common questions about this important business tool.
WHAT ARE NON-DISCLOSURE AGREEMENTS?
A non-disclosure agreement is an agreement to keep information concerning a party’s business and business operations secret and confidential. It is a promise to not disclose the information to third parties and to use it only in connection with the work the parties are doing with each other.
WHAT DOES A NON-DISCLOSURE AGREEMENT PROTECT?
A non-disclosure agreement is meant to protect the proprietary information on which a corporation builds its business. The agreement can protect any aspect of your business that you do not want to be disclosed to your competitors or anyone else. Thus, a non-disclosure agreement can be drafted to protect your unique method of doing business; the list of clients you have cultivated over the years; and the technology you have developed that is at the heart of the successful operation of your business. Even if the price you charge for your services is the only bit of confidential information you have, it needs to be protected by a non-disclosure agreement.
WHEN SHOULD NON-DISCLOSURE AGREEMENTS BE IN PLACE?
Certainly, once you are involved in a working business relationship with another entity, that relationship should be governed, in part, by a non-disclosure agreement. It should be noted, however, that a non-disclosure agreement should be in place even when you are initially discussing a future business relationship. Your confidential information is no less important and no less confidential during this preliminary period than when the relationship formally exists.
WHAT SHOULD A NON-DISCLOSURE AGREEMENT INCLUDE?
Your non-disclosure agreement should include these key provisions:
- A description of the information that is deemed “confidential.” This may be stated in very specific terms, identifying technology, business plans, customer lists, and pricing and business methods. Conversely, it may be stated generally, as in, “Everything disclosed by one party to the other is to be considered confidential and subject to the non-disclosure agreement.” Most non-disclosure agreements include both general and specific language so as not to miss anything.
- A clear statement that the information will not be disclosed to anyone without the written permission of the party seeking to protect the information.
- Exceptions to the confidential nature of the information, if any. Any exceptions should be stated clearly. For example, if one party’s information is given to the other party, but is in the public domain, there is no expectation of confidentiality.
- A provision for the return of the confidential information once the business relationship has come to a conclusion or within a stated period of time thereafter. If the information is in an electronic form, the agreement should provide that it be destroyed or deleted with a certificate that it has been done.
- A provision for disclosure of the confidential information in limited and specific circumstances. For example, the agreement might provide: “If a court or governmental agency for some reason requires you to produce the private information, you must tell the disclosing party immediately.”
- A provision that the confidential information always remains the property of the discloser of the information.
- Remedies. Most non-disclosure agreements contain remedies for a party whose confidential information has been unlawfully disclosed. This often includes the right to obtain an immediate injunction to forbid further release once a violation occurs as well as any money damages that have resulted from the illegal disclosure. There is often language in the non-disclosure agreement providing for remedies even when one party feels that there is a threatened disclosure of its confidential information.
WHAT SHOULD NON-DISCLOSURE AGREEMENTS NOT INCLUDE?
There are often occasions when one party will attempt to sneak an unrelated topic into a non-disclosure agreement. The most frequent such topic is a non-solicitation clause. If your company is providing services to another party that other party may attempt to require that you do not do any work for other companies in the same field. While the other party may be afraid that you will share confidential information with a rival, the whole point of the non-disclosure agreement is to prevent you from doing so. Your ability to do business should not be impacted by a provision hidden within the non-disclosure agreement. A non-disclosure agreement lawyer should inspect and review the proposed agreement thoroughly, to avoid a situation in which you commit to something about which you might not be aware.
If you have questions about protecting your intellectual property and confidential information, a smart non-disclosure agreement lawyer will have the answers. To talk with Marc Freed about your situation, submit the contact form on this page or call our office.