“Why buy the cow when the milk is free? How not to give too much away when you have an NDA”
It’s happened, you’ve had your “Eureka!” moment that you believe will get your startup off the ground and money flowing into your account. Now you’re nervous to share it with anyone from your accountant to your investors to your next-door neighbour.
What can you do? There are two solutions:
– Act like a hermit. The less you disclose, the longer your secret will stay that way. However sometimes it’s impossible, mostly when you have to deal with manufacturers and must disclose some details.
– Sign a Non-Disclosure Agreement (NDA).
What Is An NDA?
Also known as a confidentiality agreement, an NDA is a legal contract in which you share any kind of confidential information with someone else. It can be an investor, a manufacturer, or a partner for instance.
The purpose of the NDA is to ensure that only the parties involved in the contract can have access to this confidential information. They are not allowed to disclose it to a third party. Doing so can results in fines and legal action.
There are three types of NDAs:
- Unilateral NDA: Only one person shares confidential information.
- Bilateral NDA: Both parties share information
- Multilateral NDA: Three or more parties share information.
Since multiple parties can be involved in an NDA, the risk of information leaks is always possible. A dishonest party that receives the information can always breach the NDA for its own interests. That is why you must take precautions.
In this blog, we will explore how not to give out too much information in an NDA when the NDA is your only option.
Keep Your Mouth Shut Until The NDA Signature
As long as your NDA is not signed, you are not protected.
If you don’t want your brilliant idea to be copied or stolen, do not disclose anything.
If you have no choice, for instance when you have to persuade an investor to invest in your company, record the meeting. You also can ask them to sign a document with all the information you have disclosed. You can even do an eSignature if it’s more convenient for you.
Put as many safeguards in place as you deem necessary. You can never be too careful about protecting your ideas and getting an NDA.
Specify, Specify, And Specify Again
This is definitely one of the most important pieces of advice. The most accurate you are in your language, the more protected your information will be. Getting an NDA drafted is one thing, but it needs to be specific as possible without any mistakes at all.
1. Specify as much as you can the purpose of the NDA
Define all the information you want to share when getting an NDA. Try to share only the information that is necessary for the investor or the manufacturer you have signing the NDA. You will be always able to disclose more information later.
2 – Specify the period of time
Some information can be kept private forever. Other information has a limited lifespan, usually around 3-to-5 years. Once this period has ended, the party that has received the information is allowed to disclose it as it desire.
3 – Specify who can have access to this confidential information: Only one person or the whole company?
You must define who can have access to the information from every company that you work with. If your product is made from parts supplied by separate companies that you have to assemble at the end, sign different NDAs with the various manufacturers for just those parts. You should disclose only the information corresponding to their part.
Getting an NDA is an easy way to efficiently protect your project when you need to share confidential information. However the NDA also has its weaknesses, especially when it includes a contain clause. This clause allows the party that has received the information to reveal it if the information has also been obtained lawfully from other sources. Here are 10 key essentials clauses you must include when getting an NDA as specified by Erica Gardner.
To sum up: Keep as much a secret for as long as you can. When you have to reveal information, make sure it’s airtight by contacting a lawyer to help draw it up.
Need Professional Help Getting An NDA?
Would you like to speak with a qualified lawyer about getting an NDA drafted? Then request a free quote today and we’ll put you in touch with brightest legal minds so you can assured you’re getting an NDA that is legally solid.