Why You Need a Non-Disclosure Agreement

A non-disclosure agreement is commonly used to bind the company or person that your company is doing business, or are considering doing business with, to confidentiality concerning your business information.

By Jeffrey Clack, SCORE Accredited Business Counselor

A non-disclosure agreement (NDA) is a legal contract between at least two parties that outlines confidential materials or knowledge the parties wish to share with one another for certain purposes, but wish to restrict access to. It is a contract through which the parties agree not to disclose information covered by the agreement. An NDA creates a confidential relationship between the parties to protect any type of proprietary information or a trade secret.

A non-disclosure agreement is commonly used to bind the company or person that your company is doing business, or are considering doing business with, to confidentiality concerning your business information. This could include your business’s ideas, designs, processes, or any other business matter that is specific to your business and not in the public domain.

Let’s provide a few examples.

  • You hire a friend of a friend to design your company’s website. Your layout and design are unique to your business. You do not want this web designer to provide your design to other clients without your permission.
  • You are interviewing sales managers and you have a unique idea about how to sell your product or service. Disclosing this to a non-employee without having them under a non-disclosure agreement would be very unwise.
  • You have a unique product concept before it is under any patent or copyright protection and you need input from others outside the company to help you create your development plans. Without a non-disclosure agreement, your unique idea might find a path to a competitor before you’re protected.

A non-disclosure agreement, when signed and dated by all parties, prohibits use of your confidential information or material. It is an enforceable document to protect you and your company. Before doing any work with vendors or people outside your company, you should have your company’s version of this document reviewed and signed by the outside party.

Samples of non-disclosure agreements are available by searching the web.(i.e. SCORE's Non Disclosure Agreement, or www.docstoc.com), Find one that is close to your needs and modify it to fit your business. Once you have this first draft, set up an appointment with SCORE for the counselors to review your agreement from a business standpoint. After updating and editing your first draft, your next step would be to take it to a lawyer for a legal review. By having created a draft and gotten SCORE feedback, the cost of the legal review will be less than asking a lawyer to create one from scratch.

It’s difficult to protect your ideas; however, this is a low cost yet effective approach to doing just that. Don’t wait – protect your business now.