Can you keep a secret? When your company has confidential information that needs to stay in your company, there is a contract that you can use to keep the information under wraps. It’s called a “Non-Disclosure Agreement,” and it’s one of the best ways to protect your trade secrets.
Non-Disclosure Agreements, “NDAs,” or “Confidentiality Agreements” are contracts that legally obligate the signing parties to protect certain confidential information. An NDA can be “mutual,” allowing two parties to exchange confidential information, or “one-way,” meaning only one party makes a disclosure while the other keeps it secret. Tech companies like Google are known to use NDAs to hide information about their products and new developments, but NDAs have many different applications.[1] You should protect any “trade secret” that gives you a competitive edge or safeguards information about your customers. Examples of trade secrets include:
A formula or schematic
A list of customers and their information
Financial information or marketing information
New products or technology
Sales plans
Your manufacturing process
In any situation where you have to share your trade secret with others so that you can execute your plans, you can require the recipient of the information to keep your secret with an NDA. You might use Non-Disclosure Agreements to protect information shared with your employees, independent contractors, investors, prospective buyers, and anyone else with whom you need to share your confidential information. The contract creates a confidential relationship between you and the person or entity that learns your secret for the purpose of work or a business transaction. That person is legally bound to keep your secret. If you’re serious about confidentiality, your NDA must take the form of a written agreement, because oral or implied agreements are more difficult to prove in court.
A Non-Disclosure Agreement must include five important elements.
Definitions
Your agreement must list the types of information that you want to protect. You don’t have to explain the entire trade secret, but give a clear sense of the subject matter, categorizing your information with terms like “programming code” or “financial information.
Exclusions
The contract will also define exceptions to the secrecy rule, listing any information the other party has no legal obligation to protect.[2] One important exclusion could be that publicly available information is not covered by the agreement.
Obligations
Generally, Non-Disclosure Agreements require the receiving party to hold your information in confidence. Specific obligations, like in what form the confidential information will be shared or stored, will be defined in the agreement. Most states have laws that support protection of trade secrets.
Term
All agreements must have a term, or the length of time that it will last. This means that your Non-Disclosure Agreement will have an expiration date. Five years is commonly considered a reasonable term in Florida, but it can be as short as two years or as long as ten years. After this point the receiving party will be released from its legal obligation of confidentiality.
Miscellaneous Terms
Any other contract provisions will be listed at the end of the agreement. They indicate, for instance, what location a dispute will be heard or which state laws will apply, in the event of a breach of the contract situation.
If you really want to protect your information, it is critical to have a Non-Disclosure Agreement that is tailored to your needs. At a minimum, you should have whatever agreement you are using reviewed by an attorney to make sure that it is enforceable. Secondly, you must maintain records carefully so you can access the agreements and the confidential information can be established in a lawsuit.[3] Contact us to make sure you are legally protected.
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