Non-disclosure Agreements, commonly referred to as an “NDA”, is an extremely important Contract to have available and to execute with third parties during all stages of business development and operation(s). Initially, when a business owner has a business idea, that business idea is not automatically protected in any way from theft or use by third parties. For example, if a business owner meets with a third party and discloses any details related to his or her idea, then such third party who hears the idea can take what they heard and use it for themselves to compete with the business owner immediately. An NDA or Non-disclosure Agreement would prevent or at least deter this behavior. Of course, that third party can try to take the idea, however, the Non-disclosure Agreement should provide for certain remedies that the business owner can pursue in such event, including an injunction and other damages.
Non-disclosure Agreements are important throughout the entire cycle of a business, including the start-up phase, during operations and during growth and/or expansion. For example, a business entity should execute Non-disclosure Agreements with all employees and independent contractors working for the business. Any such employees should also sign proper documents for non-competition to ensure that the business owner’s interests are protected. Further, an NDA can be used for something as simple as protecting the procurement of future clients. For example, in a business meeting, a business owner may consult or discuss their “idea” to approach or procure a particular client. Without a Non-disclosure Agreement or with a weak NDA, such third party may approach a prospective client themselves and pitch the idea, which could leave the business owner losing thousands of dollars.
Further, some ideas may lead to Trademark, Copyright and/or Patents legal protection. During such time that the business owner is applying for such formal legal protection(s) (“Interim Period”), the Non-disclosure Agreement protects the business owner’s idea until such idea is formally protected by State and Federal Law and such protection is evidenced in the public record.
Finally, the best way to implement NDA’s is to make sure that the Agreement is as strong as possible and to have consistency in procedures for presenting an NDA for execution by third parties. Always inform any third parties, employees, independent contractors and the like that this document is a strict formality of your business and everyone signs it. Never make any exceptions and if an individual does not agree to sign the Agreement, then do not give them any information that you would not want to become public knowledge.