• August 2019
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What is an NDA and How does it Protect my Business?

business owner signing contract

Businesses cannot generally remain competitive if their trade secrets are made public. Once imitators within a company’s industry are granted access to privileged information about how a successful competitor does business, that imitator is free to use the innovative competitor’s business strategies, techniques and practices to their advantage. Thankfully, there is a relatively straightforward way that businesses can safeguard access to their trade secrets. They can work with experienced intellectual property attorneys in order to put NDAs in place. What is an NDA? A non-disclosure agreement is a contract that legally binds affected parties to secrecy concerning the trade secrets of a specific company named within that document.

What Is an NDA?

There are four primary kinds of protection used to safeguard intellectual property in the U.S. The first three kinds of intellectual property protection are issued through federal government agencies. Copyrights registered with the U.S. Copyright Office are used to enforce exclusive rights to works of original authorship and artistry. Patents must be applied for through the U.S. Patent and Trademark Office. These protections allow inventors and innovative businesses to maintain control over the use, manufacture and marketing of original products, processes, product designs and specific plant species and hybrids. Enforceable trademark protections, which are applied for through the U.S. Patent and Trademark Office, protect the words, graphics, symbols and other advertising-related expressions used to distinguish a company and/or its goods and services in the marketplace. While copyright protections are created as soon as an original work is completed and must simply be registered in order to become legally enforceable, patent and trademark protections are not created until successfully applied for and approved by the government.

In contrast to the first three primary kinds of intellectual property protection regularly used by U.S. businesses, the fourth primary safeguard is not issued by the federal government. Instead, innovative companies work with experienced intellectual property attorneys in order to put this final form of intellectual property protection into place. What is an NDA? Non-disclosure agreements are specific contracts designed to protect business interests through the safeguard of trade secrets. Trade secrets are generally defined as those business practices, innovations and techniques that allow companies to maintain a competitive edge in the marketplace. Companies therefore work with attorneys to create these agreements and present them to relevant parties for signature. Employees, contractors, vendors, manufacturing partners and anyone else granted access to intellectual property “covered” by the concept of trade secrets may be presented with a non-disclosure agreement.

It is worth noting that non-disclosure agreements are closely related to noncompete agreements, which are also contractual tools used by businesses in order to safeguard their interests. However, noncompete agreements usually only bind employees to limitations on where they can work following employment at the company party to the contract, not necessarily to limitations regarding how they can use the knowledge they have acquired in their current position. Depending on a company’s industry-type and employment marketplace, it may make sense for businesses to work with an attorney in order to draft both non-disclosure agreements and noncompete agreements for many of their employees.

How NDAs Safeguard Business Interests

When competently drafted by experienced intellectual property attorneys, non-disclosure agreements help to protect any trade secrets and privileged information that businesses aims to keep confidential. Parties to these agreements are barred from disclosing any information outlined within the text of a specific contract. If a party to a non-disclosure agreement breaches the terms of the contract in question, the company that supplied the contract can hold that party legally responsible for their behavior. Obviously, the general rules of contract law apply to non-disclosure agreements. Practically speaking, this means that a company cannot coerce a party into signing a non-disclosure agreement or force someone to sign said document under duress. Similarly, the terms of the non-disclosure agreement must be fair, free of fraud and cannot compensate for illegal behavior. For example, if a non-disclosure agreement prohibits an employee from disclosing that the company in question uses illegal child labor at its manufacturing sites, that employee may not generally be held accountable for breaching those illegal terms.

Properly drafted non-disclosure agreements can help to prevent the dissemination of sensitive and/or privileged information to competitors, the media and the general public. These contracts are commonplace, partially because they are necessary for fair competition and partially because they are generally quite effective. Depending on the nature of the trade secrets in question, the terms of an NDA may be enforceable indefinitely. For example, if an employee of the Coca-Cola Corporation signs a non-disclosure agreement before being granted access to the recipe for Coke, that contract will almost certainly insist that the employee in question can never reveal that recipe. If non-disclosure agreements were only enforceable for a certain length of time, no company secrets would remain confidential for long.

Legal Assistance Is Available

If your business is innovative and could benefit from the legal protections afforded by non-disclosure agreements, please consider scheduling a consultation with LawTrades today. Our experienced intellectual property attorneys can tailor contracts to your company’s needs and can help you ensure that your business interests are properly protected as a result. We look forward to speaking with you.