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To NDA or not to NDA

When you have a great idea or invention and want to explore business opportunities with another company, you are faced with the main question – to enter into a non-disclosure agreement or not.
June 4, 2022

The key aspects of an Non-Disclosure Agreement are important to understand and implement if you want your company’s confidential information protected.

The importance of an NDA is that it protects both parties involved in any type confidential agreement. It prevents one party from revealing sensitive information to other people without permission, which could cause serious consequences like financial loss or injury.

MAIN POINTS

To protect your sensitive information, you should sign an NDA before disclose or receiving any confidential data that could be compromised by public disclosure. This includes details of potential business opportunities and intellectual property for which you may intend to file a patent application in the future to prevent anything compromising these advantages from leaking out into competitors’ hands.

The terms of your NDA will never expire. If you need to fix a term for an investor or buyer, usually five years is not enough time and can rise due diligence concerns with them instead.

The non-confidence agreements are designed to protect your intellectual property rights. If you have an invention for which a patent application must be filed, any disclosure of that information could potentially compromise those plans and result in no patents being issued or only ones with very limited coverage.

REMARK! Some countries (for example Canada and USA) provide limited patentability after a public disclosure, but most treat it as an absolute barrier.

KEY PROVISIONS

NDAs are typically very simple, only two or three pages long and they have key provisions include:

– a description of the confidential information to be disclosed;

– its purpose for disclosure and permitted uses;

– standard care protecting other party’s proprietary rights when you’re allowed access to their hidden confidential data under these terms.

However, if you’re new to the game and aren’t sure what is right for your company or project then it might be wise invest in getting some professional help.

A great place start would be by looking at sample NDA’s online – usually after some experience with deals like these there isn’t much that needs adjusting anymore.

POTENTIAL INVESTORS

Founders should always ask potential investors to sign an NDA. Some will agree and some won’t, but at least you get the chance of demonstrating your easy-going nature by not raising too much fuss over something that is really just about business.

There is no reason to be concerned about patent theft when working with an angel investor or one-off fund. They have experience in your industry, so it’s likely that they will know how important security measures are for startups and trade secrets can often still get managed through legal counsel if handled correctly from the start.

The advantages don’t stop here. Not only do you save time by eliminating unnecessary costs like attorney fees but also Angel investors tend towards being more caring than other types of investors – which mean less rigorous demands on both sides.

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