You can never be too careful about protecting your valuable business ideas. When discussing confidential business ideas with investors, customers, or other parties, you may want to protect the details of the discussion from exploitation outside of your office. A confidentiality agreement, sometimes known as a non-disclosure agreement, can help guarantee that your business secrets stay just that: secret.
Here are some typical situations where you may want to use a confidentiality agreement:
- Presenting an invention or business idea to a potential partner, investor, or distributor
- Sharing financial, marketing, and other information with a prospective buyer of your business
- Showing a new product or technology to a prospective buyer or licensee
- Receiving services from a company or individual who may have access to some sensitive information in providing those services
- Allowing employees access to confidential and proprietary information of your business in the course of their job
Confidentiality agreements may be presented to new employees or used when companies are working on a joint business deal or a merger in which one company will be privy to the process or procedures used by the other. From software programs to “secret” recipes, most businesses will typically have some confidential material that needs to be protected.
Such an agreement, drawn up with help from your attorney, will include: What material needs to be kept confidential; under what circumstances and in what manner any confidential information may be used; your right to seek an injunction should the other party violate the agreement; how any such dispute regarding the agreement will be settled; a specific time frame including when the agreement begins and how long after your business interaction ends the recipient is obligated to keep all information confidential.
The party receiving the confidential information then signs the agreement and is legally bound not to disclose your information.
Many new businesses, particularly in the planning and development stages, are very diligent about making everyone associated with the company as an employee or independent contractor signs such an agreement.
Confidentiality agreements can play a key role in your ability to maintain valuable intellectual property rights. Too often, inventors have been burned by disclosing an idea to a potential business partner or investor without taking the time to draw up such an agreement.
There is an unlimited range of material that can be deemed confidential. It is your decision, as the business owner to determine what information, in the hands of another business or individual, could prove detrimental to your business or to you personally in any manner. You can also determine, in which situations the material is confidential and where it may be used. It is then equally important to determine which individuals could, intentionally or unintentionally, use such confidential information for self gain or to secure an edge in competing with your business. These are the people you most want to sign and date the agreements. You will then keep them on file.