How to Get a Non-Disclosure Agreement (NDA)

In today’s competitive business landscape, protecting your confidential information is crucial. Whether you’re a startup with innovative ideas or an established company safeguarding trade secrets, a well-crafted Non-Disclosure Agreement (NDA) is essential. This comprehensive guide will walk you through the process of obtaining an NDA that effectively protects your sensitive information.

What is a Non-Disclosure Agreement and When Do You Need One?

A Non-Disclosure Agreement, often referred to as an NDA or confidentiality agreement, is a legally binding contract between two or more parties that outlines confidential information shared between them and restricts its use and disclosure. NDAs are versatile tools used in various business situations to protect sensitive information from being disclosed to unauthorized parties.

You might need an NDA when entering into business relationships that involve sharing proprietary information. Common scenarios include hiring new employees or contractors, discussing potential mergers or acquisitions, seeking investors, or collaborating with other businesses on joint ventures. By having parties sign an NDA, you create a legal obligation for them to keep your confidential information secret, giving you recourse if that trust is breached.

NDA Template vs. Lawyer-Drafted: How to Decide

When it comes to obtaining an NDA, you have two primary options: using a template or having a lawyer draft a custom agreement. Each approach has its own advantages and potential drawbacks.

Pros and Cons of Using an NDA Template

NDA templates can be a quick and cost-effective solution for straightforward situations. They’re readily available online and can be customized to some extent. Templates are often suitable for standard business transactions where the confidential information involved is not highly sensitive or complex.

However, templates may not address all the nuances of your specific situation and could leave gaps in protection. They might not account for industry-specific concerns or unique aspects of your business relationship.

When to Consider Hiring a Lawyer

For complex situations or when dealing with highly sensitive information, it’s advisable to consult with an experienced attorney. A lawyer can craft an NDA tailored to your unique needs, ensuring comprehensive protection and compliance with relevant laws.

Consider hiring a lawyer if you’re dealing with valuable trade secrets, entering into a complicated business relationship, or if the stakes are particularly high. An attorney can also help if you’re unsure about the scope of protection you need or if you’re dealing with international parties where different laws may apply.

Risks of Using a Poorly Drafted NDA

A poorly drafted NDA may not hold up in court, leaving your confidential information vulnerable. It might contain ambiguous language, fail to cover all necessary aspects, or include unenforceable provisions. The cost of using an inadequate NDA can far outweigh the initial savings of using a template.

Risks include having your confidential information fall into the wrong hands without legal recourse, being unable to enforce the agreement, or even facing legal challenges due to overly broad or unreasonable terms. In the long run, a well-drafted NDA is an investment in your business’s security and future.

7 Key Clauses Every NDA Should Include

Regardless of whether you use a template or hire a lawyer, there are several crucial elements that every effective NDA should contain. These include:

Identification of the Parties

Clearly state the full legal names and addresses of all parties involved in the agreement. This includes both the disclosing party (the one sharing the confidential information) and the receiving party (the one agreeing to keep the information confidential).

Definition of Confidential Information

Specify exactly what information is protected under the agreement. Be as specific and comprehensive as possible. Include categories of information (e.g., financial data, customer lists, product designs) and any specific documents or data that are considered confidential.

Exclusions from Confidentiality

Outline exceptions to the confidentiality obligations. Typical exclusions include information that was already known to the recipient, becomes public knowledge through no fault of the recipient, or is independently developed by the recipient without using the confidential information.

Recipient’s Obligations to Protect Information

Detail what the receiving party must do to keep the information confidential. This might include requirements to use the same degree of care they use to protect their own confidential information, restrictions on copying or reproducing the information, and limitations on who within the recipient’s organization can access the information.

Time Period of Confidentiality

Specify how long the confidentiality obligations will last. This could be for a specific number of years or indefinitely, depending on the nature of the information and your business needs.

Consequences of Violating the NDA

Clearly state what will happen if the NDA is breached. This might include monetary damages, injunctive relief, or other remedies. Having spelled-out consequences can serve as a deterrent and provide a clear path for recourse if a violation occurs.

Miscellaneous Provisions

Include important legal clauses such as governing law, jurisdiction for disputes, how the agreement can be terminated or modified, and whether the agreement binds successors and assigns.

Step-by-Step Guide to Drafting an NDA

Follow these steps to create a comprehensive and effective NDA:

Step 1: Outline the NDA’s Purpose

Begin by clearly stating the purpose of the NDA. Are you protecting trade secrets, business strategies, or client information? This sets the tone for the entire agreement and helps frame the context in which confidential information will be shared.

One-Way vs. Mutual NDAs

Decide whether you need a one-way (unilateral) or mutual (bilateral) NDA. A one-way NDA is used when only one party is disclosing confidential information, while a mutual NDA is appropriate when both parties are sharing sensitive data.

Step 2: Identify the Parties and Nature of the Relationship

Clearly state the full legal names and addresses of all parties involved in the agreement. Describe the nature of your relationship – are you potential business partners, employer and employee, or vendor and client?

Step 3: Define the Scope of Confidential Information

Be specific about what information is considered confidential. Vague or overly broad definitions may not be enforceable, so take the time to carefully consider and articulate what needs protection.

Examples of Confidential Information

Provide concrete examples of what constitutes confidential information in your context. This might include financial data, customer lists, manufacturing processes, or software code.

What to Exclude from the Definition

List information that should typically be excluded from confidentiality obligations, such as information that becomes public knowledge through no fault of the receiving party.

Step 4: Specify Recipient’s Obligations and Permitted Uses

Clearly outline what the recipient can and cannot do with the confidential information. Specify who within the recipient’s organization can access the information and under what circumstances.

Step 5: Set the Term of Confidentiality

Determine how long the confidentiality obligations will last. Be realistic – while you may want to protect your information forever, courts generally favor reasonable time limits.

Step 6: Clarify Any Exclusions

List any circumstances under which the recipient would be allowed to disclose the confidential information, such as when required by law or court order.

Step 7: Establish Jurisdiction and Governing Law

Specify which state’s laws will govern the agreement and where any legal disputes will be resolved. This is particularly important if the parties are in different states or countries.

Step 8: Include Other Key Provisions

Address other important aspects such as the return or destruction of confidential information when the agreement ends, remedies for breach, and whether the agreement binds successors and assigns.

5 Tips for Creating an Enforceable NDA

To ensure your NDA stands up to scrutiny, follow these tips:

Tip 1: Be Specific in Defining Confidential Information

The more specific you are in defining what constitutes confidential information, the stronger your NDA will be. Avoid broad, catch-all phrases as they may not be enforceable in court.

Tip 2: Ensure the Scope is Reasonable

Courts may not enforce agreements that are overly restrictive or prevent the recipient from conducting normal business activities. Strike a balance between protecting your interests and allowing the recipient to operate their business.

Tip 3: Set a Realistic Time Period

While some information may warrant indefinite protection, courts generally favor time limits that are reasonable given the nature of the information. Consider how long the information will remain valuable and confidential.

Tip 4: Use Clear, Concise Language

Avoid legal jargon and complex sentences that could be misinterpreted. The clearer your NDA, the more likely it is to be enforced. Use plain language that both parties can easily understand.

Tip 5: Have a Lawyer Review for High-Stakes Situations

For high-stakes situations or when dealing with particularly sensitive information, it’s always wise to have an experienced attorney review your NDA. They can spot potential weaknesses and ensure your agreement provides maximum protection.

What to Do If Your NDA Is Violated

If you suspect your NDA has been violated, take these steps:

Document the Breach

Gather all evidence of the unauthorized disclosure or use of your confidential information. This might include emails, screenshots, witness statements, or any other relevant documentation.

Send a Cease and Desist Letter

This formal notice demands that the violating party stop their infringing behavior immediately. It also serves as written documentation of your attempt to resolve the issue before pursuing legal action.

Pursue Legal Action If Necessary

If the breach continues or has caused significant damage, you may need to file a lawsuit for breach of contract, seeking damages, or requesting an injunction to prevent further disclosure.

Protect Yourself in the Future

Use this experience to strengthen your protection in the future. Review and update your NDA process, consider implementing additional security measures, and be more selective about who you share confidential information with.

Safeguarding Your Business with the Right NDA

In today’s information-driven economy, the right NDA can be a powerful tool in protecting your business’s most valuable assets. By following this guide, you’re well on your way to creating an NDA that safeguards your confidential information effectively.

Remember, while templates can be a good starting point, every business situation is unique. For maximum protection and peace of mind, it’s always advisable to consult with a legal professional who specializes in business law and intellectual property.

At Minc Law, we have extensive experience in drafting, reviewing, and enforcing NDAs across various industries. We understand the nuances of confidentiality agreements and can help ensure your sensitive information receives the protection it deserves.

Don’t leave your business’s valuable information vulnerable. Contact Minc Law today for a consultation on creating a robust NDA tailored to your specific needs. Our team of experienced attorneys is ready to help you safeguard your confidential information and maintain your competitive edge. Protect your business – reach out to Minc Law now.