Do you need an NDA? - Solivagant Legal


Do you need an NDA?

February 10, 2022

Hope you’re having a great week! The 2022 Legal Road Map webinar went so well last week. If you’re unclear of what legal steps you need to take to protect your business this year, or want to avoid mistakes or issues from last year (clients ghosting, clients requesting early cancellations, scope creep, etc.), grab the replay here.


Back to NDA’s. The term NDA is thrown around all the time, but what actually is an NDA, and who needs one?


NDA stands for non-disclosure agreement. Sometimes it’s also called a confidentiality agreement. In the course of doing business, especially as a business grows and expands, online business owners will often need to discuss sensitive information with other business owners and want to keep that information confidential.


What’s considered confidential information?

What’s confidential information? Anything you wouldn’t want to go public. Think: business methods, trade secrets, client lists, prospective client lists, banking information, marketing methods, product ideas, etc. Especially since ideas are very difficult to protect from an intellectual property standpoint, NDA’s can be critical. A quick refresher on intellectual property in business: trademarks protect a name as it’s used to sell goods and services. Trademarks protect things like your brand name, your logo, your podcast name, your course name, etc. Patents protect inventions. Copyright protects original works of art like songs, books, even your blog and social media posts. Trade secrets are the fourth main type of intellectual property. “Trade secrets” is the term for any information, method, formula or process that gives you and your business a unique competitive advantage. Trade secrets can
be info like product ideas, designs, drawings, client lists, formulas, recipes, algorithms, strategies, etc. KFC’s secret recipe is an example of a trade secret. As opposed to the other forms of intellectual property, however, protection of trade secrets requires non-disclosure agreements. There’s not anything you can file with a government body (like the other types of intellectual property) that protects your IP rights in trade secrets. You have remedies in law if someone reveals a trade secret, but the onus is on you to protect the trade secrets via non-disclosure agreements with anyone who will have access to the trade secrets.


Why might you need an NDA?


Considering a partnership or a collaboration? Thinking about taking on investors, or hiring vendors to build out certain parts of a new product or process (e.g. building a mobile app for a coaching program)? Considering hiring an employee or independent contractor who would have access to your confidential information? Use an NDA.


What does an NDA do?


Besides identifying all the info that could be exchanged between you and the other party that would be considered confidential, an NDA obligates the party receiving your confidential info to keep it secret, and take protective measures to make sure it stays confidential. NDAs mandate that any confidential information shared be only used in the context of the relationship or transaction you and the other party are considering. This means that someone you’re considering doing business with (if they’re under an NDA) can’t take your prospective client list, for example, and try to solicit those clients. Or they can’t decide not to work with you, and then go off and take the ideas or your process you disclosed and partner with another company to sell those ideas or use them to build another product and then sell that product. A good NDA will also prevent the party you’re disclosing info to from soliciting your employees, contractors, or clients.


How is this different from your Independent Contractor Agreement? Doesn’t that come with an NDA?

Our Independent Contractor Agreement has a condensed built-in NDA, so if you’re hiring a contractor for your business and don’t need an NDA for any other purpose, you can stick with the Independent Contractor Agreement. If you’re hiring an employee (in addition to a lawyer-drafted employment agreement), partnering with another business owner, collaborating with another business owner, selling your business, hiring a vendor, or any other activity where you’re disclosing your confidential information, you’ll need an NDA.


A word of caution…


Free NDA templates are rife on the internet. I’ve audited a few and they all had huge gaps. One had a provision in it that would void the whole contract if it ever got to court. 🙈 Another didn’t say anything about what happens when you and the other party stop working together, i.e. didn’t require the other party to return or destroy the confidential information disclosed. I could go on and on. Your confidential information is too important to risk disclosure. Use a high quality NDA template like ours and protect your info ASAP! Our NDA template can be customized in under 2 minutes and comes with a video tutorial walking you through the contract so you know what the important provisions mean, and what your rights and remedies are under the contract. Also, it works throughout the world, so if you’re in the U.S., but you’re considering partnering without someone outside of the U.S., or both parties are outside of the U.S., this NDA works!