One of the most valuable assets owned by a business is the concept or idea that sets them apart from their competitors. Whether it is a new product or a unique service, it can be worth a small fortune, especially if it meets a need that is not being met by anyone else. Thus, it is imperative that your business takes the steps necessary to protect this type of trade secret.
A simple and effective way to safeguard your company’s private information is to require all employees, independent contractors, vendors and other third-parties that have access to your trade secrets to execute a non-disclosure agreement (NDA).
This type of contract is also commonly referred to as a “confidentiality agreement,” and it legally prevents the other party from improperly disclosing the confidential or non-public information protected by it. The NDA provides that if the party breaches the agreement, your business is entitled to recoup its damages as well as other remedies available under the law.
This confidentiality provision can be built into other agreements your employees, vendors or other third-parties are signing in the course of doing business with you, and does not need to be a stand-alone document.
Each NDA should be drafted to address the unique needs of your business and the applicable industry, but below are a few general provisions that should be included to protect your confidential information:
- You should clearly outline and identify the specific trade secrets that are protected by the NDA. It is important that there is no confusion regarding what types of information or data is considered private and protected from being disclosed.
- All circumstances where disclosures are allowed should be identified. You should also identify the parties with whom such disclosures are allowed. For example, permitted disclosures often include the sharing of protected information with attorneys, accountants, insurance agents and other similar professionals.
- The NDA should outline the remedies that will be available to your business if a breach of the contract occurs.
- Since the NDA is a contract, it should contain some of the general clauses that other contracts include. For example, you should include provisions that identify what state law will govern the contract, how disputes will be handled (including whether mediation or arbitration is required), and other similar types of clauses.
Having third parties sign a non-disclosure agreement is an effective way to safeguard your business and its trade secrets. Without this type of contract, your company is in jeopardy of having one of its most valuable assets made public and accessible to your competitors.
Your business ideas and brand are important property worth protecting. If you are interested in learning more about intellectual property protection strategies, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.