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Protect Your Business With Non-
Disclosure Agreements
Every business should protect
proprietary information when dealing with
independent contractors, vendors and other businesses. The best way to
do this is to use a non-
disclosure agreement, often referred to as an
“NDA.”
What is an NDA?
An NDA is an agreement between two parties to protect confidential
information disclosed in a business transaction. The proprietary
information can include business methods, finances, client lists, and
anything that isn’t already readily available in the public arena. If a
party subsequently breaches the NDA, the injured party can sue for
damages, an injunction against further disclosure and attorney’s fees.
Directional NDA
In many situations, only one party requires the
protection provided
by an NDA. If you invent a new product, you are going to need an NDA
from manufacturers, distributors, etc., before you discuss the product
with them. While this may seem like common sense, most businesses fail
to carry the thought through to their daily activities.
Practically every business hires independent contractors, but they
rarely obtain NDAs prior to disclosing information to the contractors.
For example, do you use third parties to create or maintain your
websites? Did you obtain NDAs from any of them? If not, what’s to keep
that party from using your business methods on other sites? A
directional NDA can keep this from occurring.
Mutual NDA
As the name suggest, a mutual NDA allows two parties to protect
confidential information. The mutual NDA is typically used when two
businesses are negotiating a joint venture. Each party must disclose
enough information to make the negotiations viable, but neither wants
that information made public if the negotiations fail. If negotiations
go well, additional non-disclosure information will be incorporated
into the joint venture agreement to protect additional information
revealed during the joint venture.
Refusing to Sign an NDA
Alarms and warning lights should go off if a party refuses to sign
your NDA. Unless they can provide a very compelling reason for the
refusal, you should walk away from the business relationship.
When An NDA isn’t really an NDA
Just because a document is titled, “Non-Disclosure Agreement”, does
not mean it provides you with protection. You should ALWAYS read the
language of an NDA because the document may establish that you are
WAIVING all confidentiality rights. The waiver might be very direct and
read something like, “The disclosure of information pursuant to this
Agreement shall not be considered confidential.” Alternatively, the
language may be more indirect and read, “The parties acknowledge and
agree that all information exchanged pursuant to this agreement has
previously been established in public forums.” Regardless, the “reverse
NDAs” strip you of protection and should not be signed.
Obtaining non-disclosure agreements should be a standard practice
for your business. Don’t exposure your proprietary business secrets to
others without this protection.
About the author:
Richard Chapo is the lead attorney for the law firm http://www.SanDiegoBusinessLawFirm.com-
a firm providing legal advice to California businesses. This article is
for general education purposes and does not address every facet of the
subject matter. Nothing in this article creates an attorney-client
relationship