Confidentiality and Non-Disclosure Agreements: what are they, and do I need one?

For the first Jones Law Firm blog article in our “Business Owners’ Series,” we thought it would be best to start simple and discuss something we deal with regularly: Confidentiality and Non-Disclosure Agreements (“NDAs”).  Most of our business clients have dealt with at least one NDA in a range of contexts.  This article will explain when having an NDA is advisable and what is typically included in the NDA.  If you are a business owner, you should consider having a basic form NDA on hand to protect your valuable confidential information.

Most business owners are familiar with NDAs in the context of purchasing or selling a business, and this is certainly a circumstance in which an NDA is appropriate.  When confidential, proprietary, and financial business information is going to be shared with anyone outside your organization, you want to protect that information from public disclosure where your competitors could potentially access it.  However, purchase or sale of a business is not the only time you may want to protect your information.  Any time you enter into a contract with a vendor, subcontractor, or customer that requires disclosure of proprietary information, such as client lists, sales information, intellectual property, marketing strategies, training materials, industry specific methodology, or know-how specific to your business, an NDA is advisable.

Additionally, NDAs are extremely useful in the employment context.  Jones Law Firm regularly prepares NDAs for clients to protect proprietary information from dissemination by employees.  Just as you do not want your confidential and proprietary information getting out through a business transaction, you want to ensure your current and former employees protect this information both during and after their employment with your company.  This ensures that an employee can’t share proprietary information to competitors without clear consequences.

So, what things are covered in a basic NDA?  An NDA begins by listing the parties and describing the confidential or proprietary information that the parties agree not to disclose.  The NDA should provide instruction to the parties as to how to designate the protected information to avoid inadvertent disclosure.  The scope of protection needs to be defined: how will the parties protect the information?  Next, it is important to clearly state what will happen if the information is improperly disclosed.  Many NDAs provide for injunctive relief, allowing the parties to quickly prevent further disclosure and damage to the company, as well as damages for any monetary loss caused by the disclosure.  The NDA also needs to have a term – how long will the confidential information exchanged be protected?  Finally, NDAs will often include other miscellaneous terms such as exceptions to proprietary information, non-solicitation and non-compete clauses, choice of law, assignability, and attorneys’ fees.

If you are a business owner not currently using NDAs or if you are considering selling your business or a portion of your business, Jones Law Firm can help.  Please contact us and we would be happy to discuss your situation and assist you in putting together an NDA tailored to your specific needs.

Jones Law Firm Blog: Business Owners’ Series

The Jones Law Firm Blog seeks to provide short, easy to digest information on timely legal topics.  For 2021, Jones Law Firm’s blog articles will primarily focus on the needs of business owners.  Check back here regularly for informative articles in Jones Law Firm’s “Business Owners’ Series.”  We are excited to provide our clients and potential clients with this additional service!