You are in business. You have moved yourself from idea to enterprise. Now, you are looking to move to the next step. Whether that next step involves investment, hiring that key employee, or buying or selling a big piece of your business.
Negotiations involve disclosure of stuff you don’t want spread all over the Internet, or, more specifically, falling into the hands of your competition. Or else perhaps you want to engage in negotiations with your competition, and you don’t want them to use the information in any way other than to invest or do a particular deal.
How do you do it? The Nondisclosure Agreement.
A Nondisclosure Agreement (NDA) is a simple contract between two or more parties to keep confidential information secret. This contract is usually entered into in the beginning of an employment relationship, or as a preliminary step when parties consider an investment or a possible transaction.
It is known by many names – NDA, a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement (SA).
It can concern itself with documents, information, plans, anything that you as a business owner or executive might consider confidential. An NDA can protect any type of information that is not generally known. However, an NDA may also contain clauses that will protect the person receiving the information so that if they lawfully obtained the information through other sources they would not be obligated to keep the information secret and protect a person required to disclose information by a court order.
The NDA will protect that information, and carve out the proper remedy should the recipient violate the agreement. However, one size does not fit all.
You want to present a fair, but firm, protective document; you also want it signed with the minimum amount of negotiation and legal time. Spending too much time fighting over an NDA is a bit like arguing over the shape of the table at a peace conference; it may be a sign of choppy waters ahead for parties hoping to enter into a longer-term relationship.
The first step in implementing an NDA is, of course, to present a document tailored to the situation. There are three basic types that we make frequent use of in our practice and we’ll be posting each of them online together with some commentary in the coming weeks.
Practice Point: in New York County, courts have been leaning against enforcing NDAs longer than six months if those NDAs are linked with employment.