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How To Draft An Effective Non-Disclosure Agreement (NDA) In Texas

How To Draft An Effective Non-Disclosure Agreement (NDA) In Texas

Running a successful business involves a lot of moving parts, and skipping a formality could lead to dire consequences. Business owners put their entire lives into their work. Especially for small businesses first starting, there’s a lot of moments with family and friends you miss out on. But, if you put the work in now, it’ll pay off. Right?

We all wish that hard work equaled a pay-off. Unfortunately, we can’t be experts at everything, and missing a key document, or even term in that document can have less than desirable results. Non-disclosure agreements (NDAs) are no exception. Whether you’re on the sending or receiving end of an NDA, it could be worthless without your attorney’s approval. 

Not that an attorney’s sign-off makes it worthy. It’s actually about having your attorney ensure its validity in the state of Texas. All this to say, don’t assume your NDA is valid or worth signing until your attorney says so. 

It might surprise you to learn that NDAs aren’t very easy to uphold in Texas courts. Furthermore, you shouldn’t be so quick to sign one from someone else without truly understanding every word.

What Is The Purpose Of An NDA?

You may have heard the term non-disclosure agreement or NDA- sometimes they’re also called a confidentiality agreement- at some point. But did you know that unless it’s narrowly tailored it may not provide much protection?

The purpose of an NDA is not to protect some million-dollar idea that came to you while ordering coffee. Instead, it’s about keeping your sensitive and confidential information under wraps. 

For instance, if you are negotiating with a possible investor, you may want to share your great ideas. But you need to protect yourself from that proprietary information becoming available to anyone outside of your meeting. Companies and start-ups typically use the legal framework of NDAs to make sure their ideas aren’t stolen by competitors. 

So it would be reasonable to have anyone receiving this information sign an NDA. But what if they tell someone anyway? And are you expecting them to take this data to the grave?

The answers to the what-ifs may surprise you.

Need help determining whether an NDA is right for you? Get in touch with Carson Law to learn more about your best options.

Primary Components Of An NDA

It’s important to realize that NDAs are not one-size-fits-all. Depending on who is receiving the NDA and their subcontractors, the details could be very intricate. 

Who Can A Signer Share The Sensitive Information With?

If someone signs an NDA and has permission to share the information with whoever they want, well, that’s not an NDA. That’s more of a public press release. 

However, depending on the signer’s role and their employees and subcontractors, they may have permission to share information with certain parties. It’s actually common for the signer of an NDA to be able to share it with their employees, subsidiaries, and consultants (ahem, lawyers).

Who you don’t want to share this sensitive information with are third party consultants whose involvement is for a completely different reason. If the information isn’t relevant to a person’s role in the business, they don’t need access. 

What it comes down to is determining who can share what information and why. 

For instance, if you have a business consultant sign an NDA and then share proprietary information with them, it’s safe to assume they can share with their own subcontractors. 

However, if your situation includes an equity purchase, you probably don’t want to share sensitive data with an equity finance firm. This of course requires your and your attorney’s consent. 

Do NDAs Last Forever?

The short answer is, usually not. Depending on the nature of the NDA, you should establish a timeframe. A never-ending NDA could be too vague of a timeframe and therefore not valid. It’s important to stipulate how long the NDA needs to be effective and whether there may be a reason for an extension.

A good question to start with is, how long do you want the information in question to remain confidential? NDAs can be effective for 6 months, 2 years, or really any length of time. But what’s important is to keep it reasonable. Don’t expect people to take your trade secrets to the grave when a few months will do. The more forthright you are with the reality of your situation, the better things will work out in the long run.

On the other hand, if you’re considering signing an NDA, you should ask questions yourself. Think long and hard about how long you will be under the obligation to keep things confidential. 

  • Will that affect other parts of your life, either personally or professionally? 
  • Are you able to keep information to yourself? 
  • Will confidentiality stress you out to the point of making you sick? 

If you tend to be a blabbermouth, it’s better to come to terms with self-awareness now rather than a lawsuit later on. 

All this to say, you don’t want to be on the signer side of an NDA that has an indefinite timeline that could go on forever. Consider 5, 10, 20, or even 50 years from now having to go to court over an NDA.

As a signer, when the time comes, have stipulations in place for NDA-protected information to be certified to be destroyed. Afterward, send out an official notice that it’s been destroyed. 

Should NDAs Call For Protocols?

Simply put, yes. 

To keep an NDA effective, there needs to be reporting in place. 

Additionally, you need excellent IT protocols. By this, I mean professional, expert IT protocols to keep your computer and data safe. Your computer-savvy neighbor, grandchild, or friend won’t cut it in this case. 

Blue Meteor IT is a fantastic company that can help you and your company put together, as well as execute, compliance protocols. This isn’t advice to skip over. Imagine if your easy-to-guess password is compromised and that results in a data breach. 

While this is just one example of the literal thousands of IT problems that can occur, you will be solely responsible for the data leak. If you’re under the governance of an NDA and experience a data breach, it’s time to get your lawyer on the phone.

Are you unsure if your NDA will hold up in court? Contact Carson Law today to have an expert attorney review your NDA so you can confidently move forward.

Why Would An NDA Be Ineffective?

When drafting an NDA, an attorney worth their law degree will carefully scrutinize the details. If they don’t, then you won’t have much to take to court to uphold your end of the deal. 

While each NDA is different, there are things that you should know to avoid an ineffective NDA. 

For instance, a contract covering everything under the sun may seem overboard. The NDA needs to be specific and clear about what must remain confidential. Otherwise, a judge (or jury) may see your overreach in the initial NDA as problematic.

Circling back to reasonable timeframes, a never-ending NDA may also be ineffective – especially if they lack an expiration date seems unreasonable for the nature of the NDA. 

Furthermore, if other areas are vague, you can expect to encounter more problems. Both you and the signers need to have a clear understanding of what information must be confidential. If that’s not clear, then don’t expect your NDA to stand up in court.

Moreover, if NDAs start bringing in other stipulations like non-competition and non-solicitation, it may further complicate validity. To avoid losing protection, you must make sure that everything is done appropriately. 

How Do You Ensure An Effective & Valid NDA?

The only way to know that your NDA is both effective and valid is to work with an attorney. Of course, the contract must be signed and dated. Anyone who falls under the rule of the NDA must sign it themselves. Simply sending someone an NDA does not mean they are under the obligation of confidentiality. 

Moreover, there are confidentiality clauses in almost every contract. It is important to realize that the confidentiality of an employment contract is not the same as a stand-alone NDA. They are two different agreements that must be handled separately. 

If you do wish to include an NDA in an employment contract, then know that it must be handled very carefully, and always through an attorney.

Need To Draft An NDA That Will Hold Up In Texas Court?

Then you need a Texas attorney who understands both your business and the law. Carson Law is bridging the gap to make legal counsel accessible to small businesses. 

Whether you are a one-person business or have several employees, it’s important to know and protect your rights. Schedule a consultation with Carson Law to ensure you, your business and your rights are protected.