subject: Non-disclosure Business One Way You Can Protect Your Business [print this page] When dealing with independent contractors, vendors, and other businesses, every business should protect proprietary information. Often referred to as NDA is non-disclosure agreement and this is considered the best way to do this.
What exactly is NDA?
An NDA is an agreement between two parties to protect confidential information disclosed in a business transaction. The proprietary information can include business methods, finances, client lists, and anything that isn't already readily available in the public arena. The injured party can sue for damages, an injunction against further disclosure and attorney's fees if a party subsequently breaches the NDA.
Directional NDA
In many situations, only one party requires the protection provided by an NDA. If you invent a new product, you are going to need an NDA from manufacturers, distributors, etc., before you discuss the product with them. While this may seem like common sense, most businesses fail to carry the thought through to their daily activities.
Independent contractors are practically hired by every business but they rarely obtain NDAs prior to disclosing information to the contractors. For example, do you use third parties to create or maintain your websites? Perhaps you obtained NDAs from any of them? If not, what's to keep that party from using your business methods on other sites? With a directional NDA, this can be prevented from occurring.
Mutual NDA
As the name suggests, allowing two party to protect confidential information is a mutual NDA. Typically, the mutual NDA is used when two businesses are negotiating a joint venture. Neither wants that information to be made public if the negotiations fail but each party must disclose enough information to make the negotiations viable. If negotiations go well, additional non-disclosure information will be incorporated into the joint venture agreement to protect additional information revealed during the joint venture.
When there's refusal to sign an NDA
If a party refuses to sign your NDA, then alarms and warning lights should go off. If they cannot provide you with a very compelling reason for the refusal, then you should walk away from the business relationship.
When An NDA isn't really an NDA
A document does not necessarily provide you with protection just because it is titled 'Non-Disclosure Agreement.' Because the document may establish that you are WAIVING all confidentiality rights, you should always read the language of an NDA. The waiver being very direct is possible and it could read something like "The disclosure of information pursuant to this Agreement shall not be considered confidential." The language may also be more indirect and read "The parties acknowledge and agree that all information exchanged pursuant to this agreement has previously been established in public forums." Regardless, the "reverse NDAs" strip you of protection and should not be signed.
Obtaining non-disclosure agreements should be a standard practice for your business. Unless you have this protection, you should not expose your proprietary business secrets to others.
