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How Non-Disclosure Agreements Work

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There’s a lot of competition out there. No matter what type of business you have, there’s always someone looking to steal your ideas and make money off of them. That’s why many companies have non-disclosure agreements (NDAs) in place for employees.

Also known as confidentiality agreements, NDAs are legal documents that keep sensitive information from being leaked out to others. They are used any time that confidential information is disclosed to potential investors, employees, clients, advisors, suppliers, or creditors.

Having an agreement in writing and signed by all parties can help deter theft of intellectual property. The exact nature and details of the confidential information should be spelled out in the NDA. For example, some NDAs will bind a person to secrecy for an indefinite period of time. If there is no signed agreement in place, a person can disclose information accidentally or for malicious purposes.

If you don’t use an NDA, your company may lose potential earnings and future business opportunities from another party profiting from your confidential information. Even though an NDA cannot prevent someone profiting from your ideas, it ensures you will be legally compensated if they do. There are often strict penalties for breaking an NDA. These penalties are outlined in the agreement and may include damages or even criminal charges.

Reasons for an NDA

A company may request an NDA for a variety of reasons such as the following:

  • Staying competitive. An NDA can ensure that intellectual property and trade secrets don’t reach competitors, the media, or the public.
  • Explaining each party’s responsibilities. A confidentiality agreement creates a confidential relationship between two parties and should help clarify what that means in terms of each person’s responsibilities, particularly when it comes to handling information.
  • Setting standards for information. An NDA may set standards for dealing with confidential information, such as limiting access to information or using password-protected files.
  • Protecting information during mergers. When a merger or acquisition is in progress, a confidentiality agreement can protect information about the business and the purchase agreement.

When Not to Use an NDA

There are situations in which using an NDA is not helpful, such as:

  • Protecting certain information. Public knowledge or anything that the other party knows before signing the agreement cannot be protected with an NDA.
  • When you’ll lose more than you’ll gain. This applies to situations such as using investors or getting an employee who has been with the company for many years to sign an NDA.

Learn More About Non-Disclosure and Confidentiality Agreements 

When providing a party with sensitive and proprietary information, companies may be concerned about how this information is used. That is why many use NDAs to protect themselves.

Orlando non-disclosure & confidentiality agreement lawyer B.F. Godfrey from Godfrey Legal can help you address your concerns and draft an agreement that meets your needs. To schedule a consultation with our office, call (407) 890-0023 or fill out the online form.

Source:

investopedia.com/articles/investing/041315/how-ndas-work-and-why-theyre-important.asp#:~:text=Non%2Ddisclosure%20agreements%20are%20an,people%20they%20are%20negotiating%20with.

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