How Do Non-Disclosure Agreements Work?
Some professions, such as doctors and lawyers, have a legal obligation to maintain confidentiality for their clients or patients. But in most jobs, there is no such automatic requirement. Non-disclosure agreements (NDAs) help protect your company’s processes and intellectual property. But how do non-disclosure agreements work? Excellent question.
Understanding how to protect what you create is crucial to your company’s success and integrity. At Angie Avard Turner Law, LLC, I help you do just that. Reserve your time today to learn how I can serve you.
What Is an NDA?
A non-disclosure agreement, also called a confidentiality agreement (CA), is a legally binding document. It outlines what the parties can and cannot share, disclose, or reveal to anyone outside of the agreement. Often it is a clause within a larger contract.
Every NDA should be a written document, not an oral agreement. Even with friends and family, a verbal understanding is not enough. Consulting an attorney who specializes in intellectual property (IP) will ensure you have a legally sufficient NDA.
Non-disclosure agreements set clear boundaries and expectations around the following:
Who is part of the agreement, both individuals and business entities
What specific intellectual property the NDA protects
How long the NDA will be in effect
Which legal ramifications may occur if a party breaks the NDA
No business is “too small” for confidentiality agreements. Every company, from sole proprietorships to multi-national corporations, can benefit from an NDA. If you are sharing proprietary information with anyone in your business, you probably need a non-disclosure agreement in place.
The thing that makes your business special is what makes it worth protecting.
How Do Non-Disclosure Agreements Work To Protect You?
Many situations call for the use of NDAs. Any time you need to disclose confidential information to someone, there should be an NDA. This document helps build trust among everyone involved and serves to protect intellectual property from theft. It also protects sensitive information such as client lists or financial statements.
It’s common to require a confidentiality agreement from any of the following parties:
The job of an NDA is to protect what you or your company created. Intellectual property is any creation of the mind, and it encompasses a significant range of things. Many small business owners are surprised to learn just how much IP they have.
All of the following are examples of intellectual property:
Designs: logos, wallpaper design, greeting cards, for example
Artistic and Musical Works
Photos and Videos
New Manufacturing Process
Given the broad swath that IP covers, it’s likely that your business has needed or will need to utilize a non-disclosure agreement. They are often relatively straightforward for your attorney to create, but they provide tremendous protection and peace of mind.
Types of NDAs
As you may expect from anything in the legal world, NDAs are not cookie-cutter documents. There are two main types of confidentiality agreements. Which one you need will depend on how the information will be flowing between the parties.
The first type is a unilateral NDA and is something that you likely sign as an employee or contractor. This agreement goes one way only. The employee, contractor, or other named party agrees not to divulge any protected information about this company. Basically, one party is sworn to secrecy.
The other type of NDA is a mutual non-disclosure agreement. As the name indicates, confidentiality flows both ways with this document. A mutual NDA is necessary when parties share information back and forth, such as two businesses working toward a merger.
Do Non-Disclosure Agreements Cover Everything?
While you might wish you could dump everything under the sun into your NDA, you can’t. Some things do not fall under that type of protection.
Public information such as a business address or SEC filings cannot be part of an NDA. Well, I suppose technically they could be in the document, but it wouldn’t hold up in court.
Additionally, protected information that comes out through legal proceedings may not count as a breach of contract. For example, a witness testifying under oath after receiving a subpoena may have a legal obligation that supersedes the NDA. In this situation, they may not suffer any legal repercussions for breaking confidentiality.
Does an NDA Protect You Against Infringement?
It’s important to understand that a confidentiality agreement is not the same as legal IP protection. Generally speaking, business owners can formally protect their intellectual property through four legal categories:
Confidentiality agreements help protect all of your IP. They help significantly! But they are not the same as legally registering a trademark or copyright, for example. Be sure to talk with an attorney regarding all the levels of protection that are appropriate for your situation.
How Do You Know When You Need an NDA?
If you own a business, you’re probably going to need this document at some point. Any relationship in which you’re sharing sensitive information requires a confidentiality agreement.
For small businesses, here are common situations where an NDA is necessary:
When hiring a contractor, such as a virtual assistant or social media manager
When talking with potential investors, even if they are family or friends
When hiring employees
When bringing on a partner or partners
When collaborating with other businesses for classes, giveaways, etc.
Here is one of the most important things to remember about non-disclosure agreements. You should have them in place before you share any information that you don’t want public. Drafting and signing confidentiality agreements should be your first steps in any business relationship.
Asking someone to sign an NDA doesn’t mean that you don’t trust them. Likewise, if someone expects you to sign one, it's not an indication that they don't trust you. Many small business owners worry about this perception.
Instead, this step signals a willingness to work together and build a trusting business relationship. An NDA shows that you value your work and theirs enough to protect it.
Creations Deserve Protection
Whether you have one original drawing or a fully-developed software program, your work has value. My joy as an IP attorney is helping creators protect their creations from my office here in Georgia. With contracts, copyrights, trademarks, and more, I make sure my clients have the coverage they need.
No matter where you are in your business, I can help you feel confident and protected. Schedule your time to talk today.