The Basics of Non-Disclosure Agreements

Non-Disclosure Agreements (NDAs) are an essential tool for business owners. NDAs are legally binding contracts that limit one or more parties from disclosing confidential information about a business. You may also hear NDAs referred to as a confidentiality clause, non-disclosure form, secrecy agreement, or proprietary information agreement. Regardless of what you call it, the essence of the agreement remains.

 

What is a Non-Disclosure Agreement?

Business owners can use non-disclosure agreements to protect their businesses’ assets from theft and maintain a competitive edge similar to how businesses can utilize intellectual property laws. NDAs are frequently used to protect trade secrets and other sensitive internal information such as financial information, strategic plans, and customer lists.

Mutual NDAs restrict what information all parties to the agreement can share.  Unilateral NDAs prohibit only one party from sharing. Non-disclosure agreements, when appropriately executed, are enforceable in court.  Some NDAs specify the penalties for breaching the contract within the terms of the NDA. The terms of the NDA also specify for how long the information subject to nondisclosure has to be kept confidential, and the exceptions thereto.  Some NDAs state that the non-disclosure period is indefinite, meaning parties are perpetually bound to secrecy.

NDAs Maintain Your Business’s Competitive Edge

Assets like intellectual property and proprietary knowledge are paramount to your business’s success; the last thing any business owner wants is this information falling into the hands of its competitors. If you’re sharing your fresh ideas with potential investors or business partners, or just trying to maintain internal secrecy within your company, NDAs are essential to protecting your valuable ideas from theft or misappropriation.

It is paramount that business owners set the expectation with the recipients of this information that it is to be kept private, and only used for the purposes of the present discussions between the parties.  It also can provide a mechanism for all parties to know if the confidential information has to be shared with a third party and how to address that issue.  Lastly, the NDA can set the level of security the sharer of the information expects the recipient to use.

The same is true for a business’s employees. NDAs can give a company assurance that employees will not share proprietary information and customer data with competitors while they work for and after they leave your company. Whether it is a technical blueprint, recipe, or client information, all your secrets can be protected with an NDA.

 

NDAs for Vendors or Third Parties

At some point, your business is going to work with others. Perhaps you hire consultants or outsource some of your services.  At some point, other businesses will be exposed to your confidential information. NDAs can be used to protect information leaks (malicious or accidental) from third parties or vendors. To ensure your business and assets are safe, all third parties that could be or have been exposed to proprietary information should sign an NDA.

 

Non-Disclosure Agreements in Texas

In Texas, there is much controversy over noncompetition agreements, due to their nature of limiting trade and opportunity for workers. However, there is generally little disagreement over the enforcement of non-disclosure agreements because non-disclosure covenants do not necessarily restrict a former employee’s ability to compete with the former employer. Therefore, even though your employees may be able to work for a competitor, an NDA may be able to restrict them from competing against you using your proprietary information and pricing, and your customer information to their advantage.

 

For these reasons, you’ll want a legal expert on your side when drafting and executing an NDA in Texas. The business attorneys at Richards Rodriguez & Skeith have considerable business contracts experience and can ensure your intellectual property is protected with a legally binding NDA. Contact us for more information on NDAs and other essential business contracts.