What Does an NDA Do?

Nondisclosure agreements (NDAs) can help protect your company's confidential information when dealing with customers, suppliers, employees, and the press. A typical NDA requires the signer not to divulge trade secrets, patents, or other proprietary information to anyone outside the company. A written

NDA is an important legal tool — if a company can prove that someone intentionally violated the agreement, the company may be entitled to injunctive relief, damages, and even compensation for lost profits.

But nondisclosure agreements are not foolproof. Your ability to enforce an NDA depends on many factors, including the value of the information in question, how and why someone violated the agreement, and whether the information is available from other public sources.

At the very least, the NDA will prove two things: You're serious about protecting your intellectual property rights, and you expect the person signing the agreement to respect your rights.

When you draft an NDA, consider the following questions:

• Determine what is truly valuable to your company. If your NDA covers the wrong items or is too broad, it isn't of much use.
• Make sure that your NDA specifies what the person signing should not disclose. A vague NDA is much more difficult to enforce.
• Make sure your NDA identifies all parties to the agreement, along with the starting date and length of nondisclosure.
• Always have your attorney review an NDA before you use it. For help finding a good attorney, be sure to read Finding the Right Small Business Lawyer.

Don't dismiss an NDA as worthless or unenforceable — a well-crafted NDA can be quite effective. Visit the AllBusiness.com Forms & Agreements section to view a sample Mutual Nondisclosure Agreement online.