Introduction

Whether you are an entrepreneur starting a new venture or running a well-established business, your success often hinges on safeguarding innovative ideas and confidential information that give you an edge over competitors. If you have spent years perfecting a secret recipe for your bakery's doughnuts or developing a customer list for your insurance agency, it is crucial to take steps to prevent former employees, business partners, or third parties from using that proprietary information against you. A well-drafted nondisclosure agreement (NDA) is an essential tool to protect your valuable confidential business information.

What Is a Nondisclosure Agreement?

A nondisclosure agreement (NDA) contractually binds a party to maintain the confidentiality of certain proprietary information or processes. Each NDA varies depending on the unique goals of the business owner, but typically includes:

• Identification of parties bound by the agreement
• Specification of the confidential information being protected
• Permissible uses of the confidential information
• Remedies in case of a breach of the agreement
• Term and scope of the agreement

NDAs cover a wide range of information, including customer lists, marketing and sales strategies, details about new products, pricing information, proprietary processes and inventions, financial statements, and trade secrets.

When Is a Nondisclosure Agreement Needed?

There are several situations where a business owner should use an NDA, including:

New Employees or Partners

When a new employee or partner joins a company, an NDA ensures that they do not disclose or misuse confidential information. This agreement typically allows the business to recover damages or seek an injunction in case of a breach.

Business Sales

When selling a business, potential buyers or brokers often need access to confidential information. An NDA prohibits them from sharing this information with third parties and may even prevent them from disclosing the sale or contacting employees, customers, vendors, or other parties.

Independent Contractors or Vendors

Hiring independent contractors or vendors who need access to confidential information to complete a project necessitates an NDA. This agreement prevents them from disclosing the information and may require them to return or destroy any copies at the end of the relationship.

Investors

Potential investors may require access to sensitive information before deciding to invest. An NDA allows them to review this information while preventing them from sharing it with third parties or using it in ways that could harm the business.

Is a Nondisclosure Agreement Enforceable?

For an NDA to be enforceable, it must protect legitimate business interests—information that is confidential and not publicly known. It should not be unreasonably broad or burdensome in terms of time or geographic scope. The agreement must also be specific enough for the parties to clearly understand what information it protects.

Certain situations may render an NDA unenforceable, such as:

• The 2022 Speak Out Act, which prohibits enforcing NDAs entered before a dispute involving sexual misconduct.
• State laws in Washington, Maine, and Oregon prohibiting NDAs in cases of employment discrimination.

However, a reasonable and well-drafted NDA designed to protect valuable business information is generally enforceable.

Conclusion

Starting and expanding a business requires a significant investment of both time and money. Protecting your proprietary information from disclosure to competitors or unauthorized third parties is crucial. Contact us today to set up an appointment to discuss creating an NDA tailored to your business needs, ensuring it is safeguarded from unnecessary and preventable harm.

Call to Action

Give us a call today to protect your business with a comprehensive nondisclosure agreement!