Want to Know My Secrets? Non-Disclosure Agreements

Non disclosure agreements are essential to keep the lid on confidential information you don’t want shared with others.
Non-disclosure agreements (NDAs) ideally are the most potent when the
parties who are contemplating a potential business relationship agree
in advance to keep each other’s confidential information confidential.
Not doing this right up front may end up with the other party telling
others your secrets, using them for their own economic benefit, and
exposing valuable intellectual property rights for use by anyone.
John, the innovative entrepreneur noted for his unique approach to
doing business in a way that made him a roaring success, decided to
partner on his newest venture with an employee he thought had the moxy
to become successful. John was almost paranoid about locking sensitive
files in the safe every night and taking the time to encrypt all his
e-files. He didn’t give much thought to the information he shared daily
with his protégé.
John didn’t mention a NDA when he first proposed his business idea to
his employee, Tyler. In fact, he didn’t really think he’d need one.
After all, they chatted daily and he felt Tyler was an upstanding young
man.
John’s business idea of launching an online MLM that taught people how
to get out of debt and make money at the same time had real potential
in today’s dire economy. Tyler appeared to share his enthusiasm about
the launch and how to set up the business.
John was understandably shocked when he discovered a few months later
that there was a new site on the Internet that offered to teach people
the tools to get out of debt and then recruited them into the business
of selling the ‘get out of debt information’ to others. He called his
business attorney, Arnold, to find out what he could do about this
distressing state of affairs when he found out Tyler was behind the new
website.
Arnold regretfully informed John that it was typically recommended that
a NDA be entered prior to doing any negotiations, interviews or
anything else that related to a proposed new venture where confidential
information or material is shared. The fact that the cat was out of the
bag was unfortunate, but there was not much anyone could do about that
in the absence of a NDA.
Typically, a non-disclosure agreement clearly spells out conditions
between party A and B, specifically dealing with sharing and using
confidential information and materials. It usually makes reference to
the parties keeping highly sensitive information confidential, details
solutions for violating the agreement, and suggests arbitration for
disputes over violations if necessary.
Sadly, in John’s case the NDA would have been essential to keep his
brainchild MLM idea protected and it should have been put into place
prior to any discussions taking place or material changing hands.
There are many examples in which a NDA is considered a critical tool.
One instance involves software or other network solutions or the
sharing of intellectual property (such as John’s online MLM idea.) In
many instances the NDA is specific to the business being contemplated –
tailored to cover each different case. So borrowing someone’s NDA won’t
cut it, as it might not be enforceable later.
Generally speaking the vast majority of NDAs contain information about
who the parties are, various clauses that may need to be incorporated,
and most importantly, what information should be kept confidential. If
either party violates the agreement, legal action can be taken. Having
said that though, the whole idea of having a NDA in the first place, is
to avoid litigation.
If you’re about to set up business with another person, call a business
attorney and discuss the value of drafting a non-disclosure agreement.
It will save you a lot of grief later. As for John, he had to kibosh
his idea and move on to opening a business towing wrecks rather than
make money online, while his former employee became rather wealthy from
John’s original idea. If John had taken precautions up front to get a
NDA in place, these roles might have been reversed….at least that is
what this lawyer thinks.

Roni Balint writes for the Law Office of Alan M. Insul. The content
contained within this feature is not intended as legal advice and does
not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.